PROVIDENCE, R.I. (WPRI) — Rhode Islanders have faced a roller coaster when trying to buy a home this year, especially in recent months as rising interest rates have complicated the math behind affordability.
Now, some experts estimate someone looking to buy a home in the capital city would need to earn six figures to cover the monthly payments comfortably.
The median price of a home in Providence is $453,000, according to most recent estimates. With a 30-year fixed mortgage at a 5.82% interest rate, a homeowner would have to pay $2,660 per month to cover the cost associated with paying for that home, according to data published by HSH .
That means the homebuyer would need a salary of $114,018 to afford a median price home in Providence assuming they would spend about 30% of their income on housing costs.
Rocco Quattrocchi, a broker at Realty Quarters in Providence, highlighted that home sales have been falling in recent months and attributed part of that to the recent rise of interest rates.
“The market is a little slower as far as residential goes,” Quattrocchi said, although he noted that commercial sales have been relatively OK.
He said some people have been surprised that home prices haven’t fallen as much as expected — a dynamic that can come with rising interest rates — and the state is in short supply of homes with only a month and a half of inventory.
The current market conditions represent a massive change from the spring and summer months when people were trying to outbid each other.
“People were getting outbid 20 to 50 thousand dollars over asking price when the rate was at 3%,” Quattrocchi explained.
For people looking to buy a home in the current market, he added, they might need to lower their standards to better reflect the type of property they can now afford.
“You have to shop down, and a lot of people don’t want to shop down, but you can still find some good deals lower,” he said.
Interest rates are hovering around 6.5%, Quattrocci said, adding that’s not too bad compared to other times in recent history.
“The normal is 4.5% to 5% and that’s where we were in 2010-2011, up until the pandemic,” he said. “That’s when we really started to see the drops to the 3%, and we might not see that again for a while.”
If you’re looking to buy a home, check out this calculator that breaks down how much “house” you can afford.