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What Is Really Happening In the Hawaii Real Estate Market - November 2006

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Aloha All!

This month's article is a little different from past statistical analysis as I need to get you timely information on the happenings of the Hawaii Real Estate Market and at the same time be in Tahiti while submitting this article to the Editor. (You should see property values in Tahiti... if you think Hawaii is High!)

It is Important to understand that if you have any questions you would like answered, please feel free to contact me at Mikeg@hawaii.rr.com.

The Public perception of Realtors unfortunately, is not the best! I think the last time I checked we were rated as 'below' those who sold transportation. No one wants to be 'pursued' by a Realtor and that is why I will tell you now, that if you have questions, please feel free to submit them as you will ONLY receive an answer and nothing more. No unsolicited emails or contact. That is not what I am here for. Of course, it would be nice to help more people and have you as clients, but that is entirely Up To You!

"Why is there All This Inventory For Sale?" "What is Happening?"

These are two of the most common questions I receive from folks that visit my Open Houses every Sunday. Let me try to answer these questions in general.

First Off, the Market was 'Boiling Hot' for so long that supply could not keep up with demand. In December of '05 the Market finally did Turn. It turned from a Seller's Market to a Buyer's Market. Everyone knew it was going to happen, but nobody really knew when.


This is me... when I had hair... and teeth! I just passed the Broker's Exam and am waiting licensing. As a result I will have to have a New Photo taken showing my Gray Hair... or what's left of it!

The Market turned... really, like a light switch... but nobody who was Selling their property really understood that... things are different now! In fact, there are many Sellers still out there under the false impression that 'what the heck I can still get what ever I need for my place.' Nope. Not anymore.

Soooo... you now see the tremendous Inventory Build Up as depicted in the Graphs below. Gee, that's a lot of For Sales! So, for starters, there are a Ton of Sellers who still think they can almost get anything they want for their Homes.




Then there was... INTEREST RATES! Those 'incredible' Low, Low Interest Rates!!! Money was on 'ON SALE!' In fact Money is Still On Sale, even NOW! So, although there is a Massive Inventory Build Up, there is also a very, very Strong demand for Homes! Sales are Good! Very Good! Not like when it was a Seller's Market, but pretty darned Good! But... Not enough to abate the continuing Inventory Build Up.

Finally, around Sept. of this year, a great many Sellers are now 'seeing the light.' They are now lowering their For Sale prices to get the darn thing SOLD. In many cases that is what it takes to Sell and... in some cases it still will not help. But... Lower For Sale Prices are now keeping the Market Selling... ALONG WITH LOW INTEREST RATES... For Now!

% ???

What is going to happen when the Interest Rates start going back up? You know they will go back up! When? I think it's anybody's guess. My best guess is it will be right after the Election. Let's Face It! The Economy really isn't in all that great of shape and the $ has been loosing a lot of ground on the World Market. INTEREST RATES ARE GOING TO GO BACK UP!

So what is going to happen when interest rates rise? First off, those of you who are Buyers are going to find yourselves 'locked out' of what was once known to you as an 'affordable' price range because when the interest rates go back up... guess what... your Monthly Mortgage Note is going to go Up Too!

Along with the interest rate rise will be further decline in Home For Sale Prices because now that there are that many more Buyers who CANNOT AFFORD to buy now. In order for a Seller to sell their property they will have to sell their property at an 'attractive' price to 'Re-Qualify' those Buyers.

IMPORTANT

I long thought that the first area where For Sale Prices were going to go down was going to be Single Family Homes. I guess it was 'Wishful Thinking.' My best guess is now we are going to see Price Reductions in the Condo/ Town Home Markets... FIRST!

At the end of September I noticed that rate of sale for Condo/Town Homes had dropped by -19% from the rate of sale of August figures. If this continues and I think it will, it means that Condo/Town Home Inventory is still going to go up coupled this time with a declining demand. This will result in 'more fuel to the fire' to Lower For Sale Prices. Over a yet undetermined future time span, this will result in a 'Downward Pressure' on Single Family Home Prices. Then you will have in UNISON both a downward pressure on ALL Inventory For Sale.

To sum up, there are TWO things I would keep track of whether or not you are Buyer or Seller and First Off are Condo/Town Home Stats. Second, you need to keep track of Interest Rates. Now, this is NOT going to happen Overnight! This is going to take time! You might want to NOT drive yourself Crazy and check these Every Day! You might just want to check Once/Month or Once/Quarter.

Of course ... if you are IN the Market Now ... I'd check it at least Once/Week!

New Homes Building ?... New Luxury Condos Building?

We have all seen the Ads or News Articles in the paper telling us about an all brand new Single Family Home development(s) are going to be built in the Western part of the Island of Oahu. 'Bigger than Ewa and Kapolei Combined.'

I Don't Think So!

I wonder where the demand is going to come from with a Rising Resale Market for Homes Inventory, Higher Interest Rates and Lower demand? Only Time will Tell!

Now let's talk about those Luxury Condos where the entry level price point is about $700,000. I see it Happening! All through out '05 most of the Buyers were NOT from Hawaii. They were for the most part World Wide Investors, Military who were being stationed here with plenty of Home Allowance to spend and folks who were moving here for either retirement or New Job Transfers.

Let's face it... Hawaii is a very, very Wonderful Place! Who the heck wouldn't want to live here... if they could AFFORD IT! Well, whether or not you or I can afford it... there is a WORLD out there who can! They ARE going to buy these Luxury Condos and are Already!

I hope this helps 'clear up' 'What is Really Happening in the Hawaii Real Estate Market'

Aloha,
Mike Gallagher (R)

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