The renovation included sanding the hardwood floors in the first-floor apartment.

The Providence Journal / Kathy Borchers

When Yves and Max Dumont began rehabilitation work on a two-family house at 15-17 Applegate Lane in South Providence, kitchen equipment in both units had been ripped out, along with the heating system and every pipe in the building.

The brothers had bought the foreclosed house for $42,500, and Yves Dumont said it will cost even more than that — about $50,000 — to fix it up, but he hopes it will sell for upwards of $200,000 when it goes back on the market in a few weeks. Before the foreclosure, the house was last sold in June 2006 for $260,000.

Yves, a former loan officer, and Max, who has sold real estate, have years of experience working with contractors. They have also bought and sold foreclosed property before.

“We know what we’re getting ourselves into,” Max Dumont said.

Affordable-housing advocates who are concerned that some people buying foreclosed property may not know what they’re getting into are holding a pilot education class on the subject on Saturday. The foreclosure-purchase education class offered by the Housing Network and Stop Wasting Abandoned Property will be held from 10 a.m. to noon at 459 Pine St. in Providence. The public is invited to attend.

“Distressed” property sales accounted for a large chunk of real estate sales in Rhode Island last year. In the third quarter — July through September — about 70 percent of the multifamily sales in the state, and more than 27 percent of single-family house sales, were distressed, according to the Rhode Island Association of Realtors.

Aware that the foreclosure crisis was exerting a downward pressure on home prices, the association began tracking the number of distressed sales last spring. Distressed properties include foreclosures and short sales. (In short sales, sellers have mortgages in excess of the current value of their property; because lender approval is required to close the deals, these transactions often involve many weeks of delays.)

According to the Realtors association, inventory of unsold houses was down across the board in Rhode Island as of Dec. 24, compared with the same time period last year. The single-family inventory was 5,492, compared with 5,870 last year; multifamily inventory was 1,322, compared with 1,717 last year, and even condominiums, which have seen steeper drops in sales, had a drop in inventory, down to 1,542 from 1,639 last year.

A decrease in inventory is a positive sign. Still, the recession will continue to exact its toll on the state’s housing market this year, according to University of Rhode Island economist Leonard Lardaro.

“2009 is probably not going to be as bad, from top to bottom, as 2008, but it’s not going to be very good,” he said.

“Clearly, I see our recession at least going through the third quarter of 2009.”

Lardaro said the state’s high unemployment rate “is still going to be problematic,” but it’s unlikely, as some feared, that the current 9.3 percent unemployment rate will “blow right past 10 percent” this year because of pending changes in the way the rate is calculated.

“I don’t see housing prices stabilizing for a while,” he said. “Foreclosures are a lagging indicator,” he said, but this year he expects Rhode Island’s foreclosure rate will “probably” continue to lead New England.

“You can’t divorce the housing market … from the rest of the economy,” Lardaro added. “Essentially we rely on tourism, health services and not-for-profits as our performance drivers.” Combined with the state’s “failure in technology and growth areas,” he said, it means that “… we lead in down, we lag in up. That’s called a nightmare.”

Lardaro said that because the federal government “has been working very hard to lower mortgage rates, people who can get credit may be able to refinance at rates “around 4 percent.”

And Lardaro said that the fact that new home construction is “way down” to about 75 single-unit permits a month, statewide, “is a good thing, because we have to sell off that inventory.”

“It’s one of those things where people are going to have to tough it out until at least mid year,” he said.

“The good news,” Lardaro said in an interview Wednesday, “is 2008 ends today.”

cdunn@projo.com