2023 RI Real Estate: Layoffs at Compass, Apartment Prices Down, and Predictions

Friday, January 06, 2023

GoLocalProv Business Team

 

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Rhode Island’s real estate market starts 2023 with near-record high prices, record-low inventory, and a number of unknowns.

The median price of a single-family home is now $411,000. There are less than 900 homes for sale in the entire state — a little over a month’s supply. A balanced market has six months of supply. In contrast, coming out of the Great Recession a decade ago there was a year's worth of supply.

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GoLocal talked to Ben Scungio of Mott & Chace Sotheby’s International about his predictions for 2023.

"I got into the business thirteen years ago, so to go from that kind of market [high inventory and foreclosures] to this kind of market is certainly interesting," said Scungio.

He says that the rest of the country discovered Rhode Island during the pandemic and that, in part, has kept demand high.

"I truly believe in 2020, Rhode Island was found and not just found by people in Boston but people all over the country," said Scungio.

On pricing, Scungio sees stability in the Rhode Island market. "I don't see our prices plummeting. I really don't. Could it happen in other parts of the country? Certainly, but I think we're going to, we will stay pretty strong with our median family price."

Of the homes on the market now in Rhode Island, prices range from a $25,000 structure in Glocester to a $ 17 million mansion in Newport.

 

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Third round of layoffs at Compass in a year. PHOTO: File

Compass Announces Third Round of Layoffs in Less than a Year

Compass, the troubled national real estate firm which has been expanding in Rhode Island announced another round of layoffs Thursday.

The company said it is the last wave of staff cutbacks it will need to undertake to reduce its expenses to a point where it can be cash-flow positive by mid-2023.

But the company laid off 450 last January and hundreds more in September.

“The company believes its actions allow for a path to achieve positive free cash flow in 2023 accounting for market scenarios that are worse than Fannie Mae’s negative 22.6% estimate for residential real estate transaction volume (price and units) in 2023,” Compass said in an SEC filing, in which it noted its target yearly expenses are between $850 million and $950 million.

According to the Real Deal, "The brokerage did not say how many employees are affected in the latest round. The filing announcing the reductions said the move would incur $10 million to $12 million in severance costs, just under the $15 million to $16 million incurred when it laid off 450 employees last June."

"Compass said it lost $154 million in the third quarter of last year, up from $101 million in quarter two, along with an increased cash-burn rate. Investors initially responded well to information in the earnings report and the stock rose 90 percent the following day, though it was still down more than 60 percent since the start of 2022," according to the Real Deal.

 

Rents Dip Slightly

Apartment List reports that there is some, albeit minimal, relief in Providence rents.

In its announcement released on Thursday, the firm reported:

- Rents in Providence decreased 0.6% month-over-month in December, compared to a 0.8% decrease nationally.

- Year-over-year rent growth in Providence currently stands at -1.2%, compared to -1.5% at this time last year. Rents in Providence are up by 16.7% since the start of the pandemic in March 2020.

- Median rents in Providence currently stand at $1041 for a 1-bedroom apartment and $1378 for a two-bedroom.

 

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