Christine Camp, President and CEO of Avalon Group, was recently a guest on Think Tech Hawaii. During her interview, Christine discussed the importance of building all types of housing. The purpose of this is to allow people to move up the housing ladder.
For example, you are a college student renting a 1-bed apartment. Then, after graduating and establishing your career, you purchase a 2-bedroom condo in metro Honolulu. Finally, you sell the 2-bedroom condo taking the proceeds to purchase your forever home -- happily married with children.
With the median home prices gradually increasing, moving up the housing ladder might seem challenging. One way to solve this is to increase supply, i.e. build more homes.
Going back to Christine's interview, she mentioned how a developer needs to "have huge vision". Here are my bold ideas to create more housing on Oahu:
Ala Wai Golf Course
I might get a lot of hate for this, especially since I come from a golfing family. Although Ala Wai Golf Course is one of the most played municipal courses in the United States, the land could be better used for residential and mix use. Let's think about this for a moment.
Per the public records, Ala Wai Golf Course consists of over 6 million land square feet. Most importantly, the land is flat and it is located right in the heart of town. A developer can create all types of housing, like detached single-family homes, high rises, and rental apartments. With homelessness on the rise, one can even include social services for those in need too.
Kakaako Makai & Halawa
We should put the new Aloha Stadium in Kaka'ako Makai so we can turn the old Aloha Stadium location (Halawa) into 100% housing. Due to the revitalization of Kakaako, Kaka'ako Makai is a better location for Aloha Stadium since it's a walkable and mixed use community.
By moving the stadium into the urban core, the Halawa location can be be converted into housing. What would you build if you had nearly 4 million square feet of land?
Here is one thing to consider. Other cities have built their sports stadiums/arenas in the city. If it works for them, why cannot it work for us?
Building land, especially in metro Honolulu, is very scarce. This is one of the reasons why developers are forced to build high-rises. In order to create more housing, the City & County of Honolulu can assist developers by up zoning.
This can be turning apartment zone land (AMX) into business mixed use (BMX). To my understanding, BMX zoned land allows a developer to create more units.
Kuilei Place could be an example of this. This new project will have over 1,000 units. If I am not mistaken, this could be the first new development in decades in the Moiliili and Kapiolani neighborhoods. Most importantly, over 50% of the units are income restricted. This condo is for the local people.
When there is a new housing project being built, there are two main housing types. First, market homes are not subject to the buyer's income. These types of homes have very few striations. A prospective buyer gets qualified by a mortgage lender and the buyer submits an application to the sales team. If the buyer is selected, the buyer can select his or her unit.
The second housing type is income restricted. This basically means the buyer cannot earn over a certain dollar amount in order to quality for the home purchase. This is when you will hear terms like "affordable", "reserved", or "work force." In addition, affordable/reserved/work force housing are usually subject to shared equity or shared appreciation, buyback clauses, and live-in requirements.
Having unnecessary restrictions can prevent a homeowner from moving up the housing ladder. When you buy a market unit, pending any live-in requirement, you can sell your home for a profit as a soon as you become the owner. The same is when you buy a home on the open market. Most importantly, when you do sell, there is no shared appreciation or shared equity.
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APRIL MARKET STATS
In late February and early March, mortgage rates spiked up to 7%. Thankfully, I was able to help a first time homebuyer local a rate in low 6% range before this happened.
According to a recent report by UHERO, Hawaii could have a soft landing. Our state economy is slowing, but we are currently not in a recession. Per the report, due to fight on inflation, Hawaii's economy is expected to contract later this year and into 2024.
It will be interesting to see where mortgage rates go as we head into summer.
Oahu's housing market is cooling due to rising mortgage rates. UHERO reported that home mortgage originations was down 43% in January, compared to the same month in 2021. In addition, during the same period, the number of single-family sales fell 45% in Hawaii. Also, the Oahu median single-family home sale price has decreased below $1 million. Matter of fact, UHERO said:
The contraction in sales volume is dramatic by historical standards and will contribute to additional resale price declines. The 46% year-over-year drop in single-family home sales on Oahu is larger than any month on record since 1991. The current contraction in sales volume is already larger than what was experienced during the subprime mortgage crisis that begin in 2007.
With less people buying and with prices declining, now is the time to buy. Just a few years ago, it was common to see a line out the door if you attended an open house. More so, many sellers were accepting offers well above list price too.
Yes -- for a lack of a better word -- it does suck that mortgage rates are in the 6% range. The days of 3-4% are long gone. One of the best things you can do is to lock in a fixed rate now so you can hedge against inflation. If rates do decline, you can always refinance. If you wait, rates could go up and it will cost you more money to buy the same house.
Stay safe and healthy.