THE CONVERSATION
The value of your home, less than any liens (mortgage), can be defined as your home equity. It is important to remember that your home value can fluctuate up or down.
During the height 2008 financial crisis, Core Logic reported that nearly one in four homeowners were "underwater" with your mortgage. That is, these homeowners had negative equity. Underwater mortgages were caused by the sharp decline in housing prices. The catalyst that caused prices to fall was loose lending requirements to subprime borrowers.
Interestingly, things are different. Due to the recent housing boom caused by low interest rates in 2020 and 2021, Core Logic recently reported that home equity has increased and negative home equity has declined. More so, 15 states higher annual home equity gains than the U.S. average.
The top 5 states from highest to lowest are Hawaii, California, Florida, Arizona, Nevada and Washington.
How can you build your equity? First, it starts with what you buy and how much you pay. In 2020 and 2021, there was a lot of overbidding. At the time, I guess that was considered "normal". The market has shifted there is less competition. With that being said, if you are the only person overbidding by a large amount, and the other listings are dropping their prices, you could run the risk of having negative equity.
Second, once you are a homeowner, always pay your mortgage on time. Also, some people will make extra mortgage payments. Depending on how many extra mortgage payments you make per year, you could save yourself thousands of dollars over the life of the loan.
Third, remodeling your home usually increases the value. This can range from a nice coat of paint, new fixtures, better appliances, and quality flooring.
Why does your home equity matter? The answer is simple: homeownership is the path of wealth. My great grand parents were dirt poor. Over the course of their lives, they slowly purchased real estate on Oahu and now these properties are now worth millions of dollars.
Personally, my wife and I purchased our first condo for $415,000. Two years later, we sold for $450,000. We then rolled our proceeds of $75,000 into a fixer-upper 2-bedroom condo for $500,000. Due to the low rates, we leveraged by only putting 10% down. Our downpayment and remodel cost were approximately $85,000 total. That means our total of pocket expense during our homeownership journey was only $10,000. I know people who are paying over $2,000/month in rent. Just let that sink.
Just remember when you rent, you are paying down someone else's mortgage. When you are a homeowner, you gain equity and building your wealth.
TIDBITS
When you buy or sell real estate, the deed is one of the documents you have to sign at your escrow signing. The deed is a legal instrument that transfer real property from one party (grantor) to another party (grantee). In addition, the deed will have the legal description of the property and it will list all of the encumbrances.
On the day of your closing, the deed gets recorded at the Bureau Of Conveyances. Depending on the property, the deed can be recorded in land court, regular system, or dual systems (both land court and regular system).
If you own real estate, it is important you keep a copy of the recorded deed in your records because this document will show that you are the owner. After you buy or sell a house, Forward Realty will send you all of your transaction documents. If you misplaced these documents, especially the recorded deed, please let me know so we can re-send it.
HOME MAINTENANCE
Every homeowner should own a multi-tool. Here are my top reasons:
Multi-tools are affordable. A $100 can buy you Leatherman's top of the line multi-tool.
Multi-tools are easy to use and can great for everyday tasks. Just the other day, I used screw driver on my multi-tool to tighten a few screws.
Multi-tools eliminate the need to purchase other tools.
Multi-tools are easy to store. Matter of fact, many people will include a multi-tool as part of their everyday carry (EDC).
I'm looking to purchase the Leatherman Signal. What is your favorite multi-tool?
DECEMBER STATS
Here is December's historic median sales price from 2018 to 2022. The data was pulled from the MLS. We are still waiting for the Honolulu Board of REALTORS to release last month's statistics. Will prices continue to increase?
| 2018 | 2019 | 2020 | 2021 | 2022 |
December | $788,000 | $820,000 | $870,000 | $1,050,000 | TBD |
OPPORTUNITIES
Royal Palm is a condo located in Waipio Gentry. I am very familiar with the development since I have helped four different clients purchase units there.
Currently, there is only one active listing available. Pulling data from the MLS, the median sales price for a 2-bed unit in the past 180 days is $495,000.
The subject property caught my attention because the subject property has been on the market for almost 80 days. Interestingly, units tend to sell quickly at Royal Palm. In addition, the subject property features new appliances, new cabinets and counter tops and flooring. This could be the perfect purchase or a buyer since the unit is turnkey.
Stay safe and healthy.
-Ryan