Providence, RI Historical (Un)Appreciation

9 Replies

* Data from:

If you bought a multi-family in 1988, you were flat if you sold in 2013. You'd really hope you'd seen some good rental income in the meantime!

Would love to hear from folks as to why the next 25 years might be similar or different to the past 25.

As a brand new member looking into the Providence multifamily market this is exactly the information I was looking for tonight. I'll be following this thread in hopes to gather insight from some experienced investors in the Providence area. 

I am not sure if above data is true. Late last year I made an offer on a 8-plex in Pawtucket where owner brought it in 1997. I did not get the property due to multiple offers. The final price is more than 7x than original price owner paid in 1997.

@Edward Liu it's possible the #s are inflation adjusted, not sure as I went to the source page but couldn't find that specific chart there to check.

In general, I have always told people, if you have your pick of areas of the country, I would not recommend Rhode Island. It's generally not too business friendly and I just don't see many drivers of growth or demographic/employment trends running in its favor, compared to other parts of the country.

I do think if you're already here in RI, for whatever reason, you can do OK in real estate. But so much depends on when you buy and sell, a fact that's only reinforced by charts like that - inflation adjusted or not.

I think 2013 was still a bad time for the RI real estate market. It was still in recovery mode. The median MF sales in providence in 2018 is now 225k. Are we at the peak? I dont know.  

I think as outside investors continue to chase higher yields, they will look at RI as a potential investment and continue to keep the prices up. But as housing becomes less affordable, rent increases will stabilize and therefore prices will too.  

I think investors will continue to see low returns with low cap rates and higher interest rates with little movement in market prices.

I went to the source page and Fan is right. Providence Multi Families in 1988 and 2013 both had a median sales price of 105k.  But now in March 2018, it is 225k.  

I also dont think history repeats itself.  2008 crash was an anomaly. The real drivers are what will happen to RI's economy and is there a better place to invest your money. Stocks are still high, boston cap rates are around a 7 cap and 10% cash on cash deals in RI doesnt look so bad for the passive investor. 

@Anthony Thompson @Jason Li

Thanks for the comments. I plotted the chart myself based on the data from RI Association of Realtors, should've said that in the original post. It is not inflation-adjusted.

As you've both stated, a lot of it is based on timing, e.g. if you buy in Providence (and most places) in 2009, you're a genius. Same if you buy in 1995 and sell in 2006. I was just surprised to see specifically, non-inflation adjusted, that through the 90s it was so flat and that it still hasn't surpassed the 2006 peak.

When I moved to Providence in 2012, the first thing I noticed was the rent to price ratio in Providence was too high. Other than the fact there are just so many multi-families and also a lot of landlords with many units in Providence, I couldn't really see a reason for this. This is why with the first bit of money saved up from my first job I bought a multi in Providence. Now the price is spiking up and the ratio in good areas are catching up to some secondary and maybe even primary markets. There are still some areas  where the ratio is high. However, Providence is historically fast on the decline but slow on the incline so with where we are in the market cycle, be careful of investing in areas with the ratio that seem too good to be true because they are typically the first ones to fall and last to get back up.