Confused about real estate headlines? That's not surprising, considering all the various opinions that come from looking at the same numbers.
It's usually a mistake to make decisions or draw sweeping conclusions from media reports. Would you make plans for or against heart surgery from a newspaper article on the subject? I hope not! Let's take a closer look at the latest real estate statistics and try to understand what trends effect your real estate decisions.
As of mid-January 2007, the year-end data for the entire year has finally been calculated and crunched. The interpretations and predictions from guys who get paid to give advice to the rest of us*. I added my perspective from 20 years as a Hawaii REALTOR and several up-and-down cycles. You may want to click on the charts and graphs here to enlarge the data for legibility.
While the Oahu data is more extensive, I have also included Neighbor Island statistics where available.
Here are some important trends to consider:
1. Home prices have peaked for this cycle. While 2006 median prices for Oahu are higher than 2005, the 4th quarter 2006 shows that prices have leveled off. No big price decreases have been are revealed - so far. It's the number of sales that has gone down dramatically and dominated the headlines.
Monthly Oahu Sales Prices
2. The housing supply remains tight in Hawaii. There are many geographic and regulatory restrictions on building new homes. Also, the inventory of homes for sale has not gone up, as expected. Compared to most other urban areas, Honolulu home prices and supply have less "elasticity" than all but one of the tracked areas. (chart courtesy of Bank of Hawaii). Basically, there is no land here to "stretch" into unlike Dallas or Phoenix with vast undeveloped tracts just outside the urban areas.
3. Neighborhood Trends Vary! This creates a bit of confusion, so remember that it's the long term trends that need to be watched. Don't get mental from month-to-month over slight ups and downs in home sales and prices -it's like stressing out over daily Wall Street fluctuations! Minor ups and downs have no little or no effect on property values. It takes months for trends to be visible in the statistics.
The year-end numbers for Oahu show respectable price increases over 2005. But a look at the 4th quarter of 2006 reveals some interesting new trends to watch in many neighborhoods:
OAHU AREA PRICES - 4TH QTR 2006
S. FAMILY HOMES
As you can see, some areas are still showing price gains, while others have fallen. Individual home values can't be determined with a calculator. The mix of homes that sold could skew the results, for example. Some areas have too few sales per month to create meaningful statistics. The Leeward area has by far the greatest number of home sales. In fact the number of homes sold in that area totals more than the entire rest of the island combined.
REALTORs who work in the neighborhoods sense what is happening long before. They are arranging showings, seeing buyer response, making offers and counter offers, and negotiating offers, long before any sales actually close and become statistics. Consult with an experienced professional if you want to know more about your property or you are considering investing in an area. You may email me at email@example.com if you have a question about your neighborhood.
NUMBER OF HOME SALES
Neighbor Island Home Prices Lead the Pack Maui and Big Isle home price trends started the ball rolling, with 2006 ending with prices higher than 2005 but fewer home sales. Kauai however reversed this trend with 2006 condo prices lower and sales numbers up compared to 2005 (chart courtesy of Title Guaranty Escrow Services).
More Fun Facts about Hawaii Real Estate Trends:
Interest rates are expected to be less volatile than in previous cycles
We share some similarities to other high priced areas particularly on the West Coast, and roughly follow their price curve which has already flattened out or even dropped (chart courtesy of Bank of Hawaii).
Fortune Magazine (Dec. 25, 2006) shows Honolulu as #6 in their list of markets that are still expected to be hot in 2007 - after Albuquerque, Salt Lake City, Tacoma, Seattle, and Portland - and ahead of San Francisco, Denver, and San Jose!
Hawaii still has some of the highest -priced housing markets in the nation.
Home ownership rates have gone up an astounding 10%, so that now around 60% of residents owns their own home - go figure!
There are buying and selling opportunities in every market. Your own personal timing is more important than the market timing to achieve your long term real estate goals.
* Many thanks to Harvey Shapiro of the Honolulu Board of Realtors and Paul Brewbaker, Bank of Hawaii, for the data and charts used here.
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