RealtyOutlook.com

Rhode Island is currently caught up in one of its worst budget shortfalls. The state which relies on banking, health services, tourism and insurance is on the verge of a financial freefall. For example, the mortgage setbacks of large corporations such as Bank of American and Citizens Financial Group have weaker demand. The only sector that remains unscathed by the recession is the health services industry as it takes a good grip of its work force.

The state’s real estate sector is even in a worse condition. Subprime mortgages are melting down the market with loan holders facing looming ARM resets this year. Foreclosures are on the rise and home values are taking a bruising as a result. The Ocean State is indeed drowning in hot financial waters.

Home sales are taking a backward shift in Rhode Island’s capital. Providence was once a strong home market until the crisis hit the industry and paralyzed home values. The aftermath is a tragic downfall of prices that will take a longer time to recover. As homeowners now owe more than what they have paid for their properties, foreclosures are driving the economy up the wall.

This year, RealtyOutlook.com forecasts Providence’s housing market to hold back and suffer a 10 percent depreciation. It’s a tough call for the city that has to contend with the slowdown in its manufacturing industries.

Portsmouth is a combination of commercial and residential properties. Some businesses located in the area are renting at an average of $4,000 per month. But the credit crisis made a downbeat housing market. Residential sales are at a snail’s pace and this year will even put a slump in the buying. RealtyOutlook.com predicts an 11 percent fall in home values.

Warwick, the second largest city, is experiencing a downturn in its real estate market. The city is a contrast to Newport’s luxurious market but that doesn’t keep its lower-priced real estate from plunging as well. Single-family houses are now experiencing deflated values mainly due to the rising supply brought by foreclosures. RealtyOutlook.com forecasts a 10 percent drop in values this year.

Newport’s seaside area is charmer among investors during the real estate boom. Home to the United States Naval War College and other universities, the city prides itself as a destination for the affluent homeowners who frequent exclusive beaches in Ocean Drive. Newly constructed homes were valued at $700,000 at the median.

But even the high-end market cannot escape the pressures of a recession. Since discretionary sales are one of the first to take a step back during a crisis, the Newport real estate market is already in a downturn. Weak home sales and high inventory are depreciating general home values. This 2009, expect Newport’s home prices to go down by 11.5 percent.