Danielle Hale, Realtor.com’s chief economist, predicts U.S. home prices will slow down in 2022. Locally, the median price for a single family home is over a $1 million. Although our housing market is at an all time high, could rising mortgage rates could damper things?
Just a few months ago, rates were in the sub 3% and 3% range. For buyers who decided to wait, they will now be paying more in interest to borrow the same amount of money. Matter of fact, some buyers could be priced out of the market since they could have lost purchasing power since rates are now in the 4% range.
Rising mortgage rates can negatively affect buyers. Higher rates means a higher payment. In addition, the same money would have borrowed now costs over. Overall the life of the loan, this will cost you thousands of dollars more, especially in interest. In addition to higher rates, inventory is still low. According to the Honolulu Board of Realtor's March market press release, "Active inventory of single-family homes is down 5.0% from a year ago, while active inventory for condos fell even further in recent months, dipping 26.9% compared to March 2021."
On the flip side, higher mortgage rates could be the silver lining for the housing market. Rising rates could make the housing market look more normal. Historically, when interest rates rise, home price growth slows down. Second, there could be less competition. Unfortunately, some buyers might get priced out of the market. This is bad news for some buyers, but it can be good news for well qualified buyers. Lastly, if demand slows, listings could be on the market longer. Currently, it is common for sellers to receive multiple, above-asking price offers within a few days of being on the market.
Although we have no control over what the Fed does, you can still be prepared. If you are a seller it basically boils down to one thing: you want to screen offers carefully. If you select an offer that is subject to financing, you want to know if the buyer is qualified to close the deal.
If you are a buyer, you should be prequalified with a mortgage lender before you start looking at properties. It is critical you, your Realtor, and your lender analyze the best game plan for your home purchase. For example, let's say you are prequalified for a max purchase price of $575,000 with 15% down ($86,250) at a monthly maintenance fee of $500/month. One strategy is to buy at the top of your prequalified range. Another strategy is to buyer at a lower range so your offer can be more competitive. That is, you could buy something in the $400,000 range, put down 15%, and use the balance of your cash as an appraisal clause (if you overbid).
Austin and I recently closed on a 3-bedroom condo purchase at 801 South Street. This is our third resale transaction at this popular condo. Our buyers were actively looking and their offer was finally accepted! The 3-bedroom layouts at 801 South Street are popular since they consist of over 1,200 living square feet. In addition, the maintenance fee is approximately 36 cents per living square foot. Unlike other condos in Kakaako, 801 South Street does not have any luxury amenities. Rather, the association generates revenue from renting out parking stalls. This keeps the maintenance fee low.
Austin and I are prepping for an upcoming fee-simple Punchbowl condo listing. Our clients fully remolded the unit a few years ago. This included interior paint, new flooring, and new appliances. The 718 square feet unit features 2-bedroom/1-bathroom and a full size, uncovered parking stall. The seller is still determine the price, but we could be listing in the $400,000 range. Please contact us for more information.
I have remodeled two condos and one of the first upgrades is installing a quality ceiling fan. There are many benefits to installing a ceiling fan:
Distribute air throughout the room, especially if you are using a window or portable air conditioning unit.
Many ceiling fans are designed to be energy efficient.
Brings an aesthetic look to the room.
The Honolulu Star Advertiser reported the first tenants of West Loch Modular Housing in Ewa Beach were able to move into their affordable rentals in April 2022. West Loch Modular Housing is for people at or below 50% of the area median income. When COVID-19 cases spiked late last year, West Lock Modular Housing was used as quarantine facility for people who had no where to stay. This affordable housing rental project is a City & County of Honolulu housing project.
KITV 4 recently reported that local developer, Peter Savio, closed on the sale of 283 acres of agricultural land on the North Shore. According to the article, Savio is planning to divide the land into smaller parcels and he has already lined up buyers.
As we know, the State of Hawaii heavily relies on tourism for our economy. When the pandemic started, travel came to a halt. Many local people said it might be wise for the state to diversify our economy, especially into agriculture.
A Diamond Head property sold earlier this year for $19,600,000. This 4-bedroom/4.5-bathroom home consisted of 4,009 living square feet. Property was beachfront and it sat on over 36,000 square feet of land. According to the MLS, the home was originally built in 1932 and it was renovated in 2003. The home previous sold in 2001 for $890,000. The property was listed by Coldwell Banker Realty.
Although the pandemic is not over, tourism is rebounding. According to the State of Hawaii Department of Business, Economic Development and Tourism (DBEDT), "total spending by visitors who came to the islands in February 2022 was $1.31 billion, compared to $397.1 million (+229.9%) spent in February 2021." As more people visit Hawaii, will this help our local commercial real estate market?
Stay safe and healthy.