These are surprising figures so far for September, but we have to keep in mind it isn't over till it's over and these numbers can change significantly by the end of the month.
What is constant though is the ACS%. Currently the ACS for all Oahu Single Family Homes is at 19%. This number has dropped significantly since Mid-Year. Demand for housing typically starts falling off late October, but not this year! Demand is significantly dropping off now and I fear that by the end of October it will be even slower.
The Average Price in Escrow is $967,260 which is primarily the upper end of the market going into escrow. The Average Sold Price is $791,086 which indicates the higher end of the market is primarily selling.
Sales to date are off significantly by -31% from same first two weeks of August for Single Family Homes.
As you can see demand is falling off -20% in August and current SFH ACS% is 19%
Another important aspect we need to pay attention to are the number of Expired and Withdrawn listings on the market. These are indicators of price adjustments downwards and sellers who have simply given up and pulled their properties from the market.
Typically, if I have listings for sale in October and if I am not getting the proper number of showings each week leading to offers I will advise my clients to pull their property from the Market and put it back on the market in late March or early April the following year.
Of course if you are not a seller you may be a buyer and if you are looking for that perfect home deal, your best time to purchase is going to be between now and the end of Feb.'08. This is when all the sellers that are still on the market are going to be the most willing to negotiate on price and terms. They are serious sellers to be in a market when demand is at a yearly low and doing so during the Holiday Season.
Do not wait for the prices to 'fall out of the sky' as this is not going to happen. You just can't run around thinking that this is going to happen based upon sensational news that sells papers and advertising on the Mainland that their disaster is going to happen here. It is not going to happen.
Do not be of the mind that 'I'll just wait till the prices come down. I don't want to buy high and loose.'
There is no good time or bad time to buy. If you are going to be an investor, act like one. Get into the market and hold your investment for at least 5 years. You are going to make money. If you are in the Real Estate Market for the short term or are one of those 'bargain hunter' who is hoping to make the 'big killing' on Foreclosuresthis is not going to happen either. Foreclosure rates in Hawaii are low, low, low. Most buyers in Hawaii are in the market for the long term and proportionately borrowed money on a fixed, 30 year term and will hold this same mortgage typically for 10 years.
We simply have not had these 'Exotic Loan' like Variable Rate Mortgages taken place in Hawaii anywhere near in numbers like lenders sold to buyers in the Mainland. This is why you see the foreclosure rates in the Mainland skyrocketing.
Condos
We saw a slight dip in inventory for Condos so far this month. Sales have slipped too by -3% month to date. This is not as bad as the -31% drop in sales for SFH's but a slow down never the less.
What we have here is declining demand, declining sales, and declining inventory for Condos. The Condo market would be in real trouble if this was a trend and if it was coupled with rising inventory.
When you look at the Avg. Price in Escrow at $425,196 and the Average Price Sold of $382,466 we can see that these two figures are relatively close. This I believe indicates a 'smoothing out' of price reductions for Sellers and that the prices for condos are stabilizing.
This is not true of Single Family Homes. Inventory increased slightly, sales have fallen off the face of the Earth at -31% so far and it's primarily the higher end that is on the market.
The Condo Market too is experiencing large numbers of Expired and Withdrawn Listings. Particularly hard hit are sellers of condos who cannot financially sell their properties for less that are being forced to pull them off of the market in hopes of renting the units.
Unfortunately this is happening in no small numbers. This has resulted in a large inventory of empty condos who's owners live as out of state investors paying monthly mortgages and hoping to rent for as little negative loss as possible. Consequently in many Oahu Neighborhoods we see a large rental inventory and a downward pressure on rental rates. Who wants an income producing property producing no income?
I think this end of the month number for Expired and Withdrawn Listings is going to be shocking!
Other Neighborhood Stats
Today's Mortgage Market
There is a lot of news concerning the demise of the Mortgage industry and it definitely effects us all here in Hawaii as well.
Basically stated, it is now harder to qualify for a Mortgage Loan under the standards being set by besieged Mortgage Lenders. The available programs to buyers are now fewer. There are now less loan programs available to all borrowers and especially the higher risk borrowers. Some lenders have completely dropped what is termed Sub Prime Loans. These were the loans available to the higher risk borrowers.
One of the worst outcomes of the Mortgage fallout and what concerns me most is the complete absence of Second Mortgages being offered by major mortgage lenders. Many of lenders have simply discontinued offering them altogether. This will have a major impact on the market.
Also hard hit now are our typical Local and Mainland Investors who want to invest in properties to produce income via rents and long term appreciation. These investors who typically are purchasing their second or more property for their portfolios now are faced with not qualifying for a loan when just a month ago they could due to less stringent standards.
I am concerned for these Investor/Landlords who are not going to be able to qualify now. Out the last 5 escrows I have had in the past two months two of the purchasers were these Investor/Landlords. I asked my Loan guy, Mr. Young Hong at Platinum Mortgage Partners, 808-220-1311 to qualify again my closed escrows involving these Investor/Landlords under the new available loans and terms. Two of the 5 Investor/Landlords will not qualify for a loan under today's available programs and terms.
There is no telling how much damage there is going to be done by not having these typical investors in Hawaii anymore. Both of my Investor/Landlords are multi purchasers and they have invested in different Condos and Town homes around the Island over the past 5 years.
From what I understand today, to qualify for a loan as an Investor/Landlord your Credit Score (F.I.C.O. score) must be over 720 and a minimum of 25% down is required. Full Documentation of Income is going to be required as well. The 30 year interest rate will typically be 1 full point above that offered to Primary Residencies Loan Shoppers.
For the typical Primary Residence Mortgage Loan shopper the same guidelines are in place for the F.I.C.O. score requirement as well as the Full Documentation of income. The amount of down payment can be much less than 20% but if it is you may be required to pay a higher rate for the loan as well as P.M.I., Mortgage Insurance Premium. Both of which drive up the cost of your monthly mortgage considerably.
If you can find a lender still offering Second Mortgages and you can qualify, jump on it.
I don't think anyone has a crystal ball when it comes to figuring out how much damage has been done to the Economy and the Real Estate Market or how long the current Credit Crunch is going to last. Only time will tell.
The Fed.'s have now stepped in are not only making it mandatory for lenders to follow the previous existing guidelines that were always in place the whole time for qualifying borrowers, but are now passing legislature to protect further damage by 'Exotic Loans' and Undocumented Income Loans.
This is really a typical case of the fire department arriving after the home as burned down. But in years to come the new legislature will be very helpful for certain borrowers.
One case in point is a recent proposal being discussed to make it mandatory for lenders of our infamous A.R.M. Loans to not only qualify correctly and honestly a borrower for such a loan at the onset but to also make sure they qualify again for when the loan rate rises as per the terms of the loan. If the borrower does not qualify in both instances the loan is denied to them. Good.
More news on a positive note
If the Fed.'s continue to cut rates and I believe they will, borrowers of these A.R.M. loans will definitely get a break when the Fed.'s lower the rates, as the A.R.M.'s that are tied into the Fed. rates will lower the jump in borrowers monthly mortgages for A.R.M. loans.
This however will not effect all borrowers with A.R.M.'s as some borrowers have signed contractually with lenders that there will be a minimum jump of 3 Points. Ouch!
There is also some discussion going in the Banking and Finance committees to totally prohibit early payment penalties on mortgages.
For Appraisers, much stiffer guidelines and reviews of appraisals are now in place and we will see it common for initial appraisals to go to review for a second or third opinion before being submitted to the underwriter for loan approval.
Mike's Hot Button
Currently in Hawaii it is o.k. for a Real Estate Agent to not only sell a buyer a property but they can also act as your Loan Officer.
I am of the opinion that this should not be allowed. I will be working towards this goal with the appropriate officials who can make a difference in this area.
There is just too much that can go against a non suspecting buyer if he or she purchases their financing and home through one source, one person. The question or possibility of 'steering' can come up and often this is exactly what has happened in the Mainland to unsuspecting buyers who end up with high cost loans and terms not to their benefit.
This does not happen frequently in Hawaii but there are several Real Estate Brokerages here that do both sides of the fence. They literally own the real estate portion of the business as well as the financing loan side of the business. I do not recommend a buyer do this.
Almost all of the large box companies in Hawaii are 'affiliated' with a Loan Company, but only affiliated, not owned by the same real estate company. This is o.k. to check out but these companies are bound by law to provide you with a Affiliated Business Disclosure informing you who the real estate company is affiliated with and any other names under which the real estate company goes by.
The Affiliated Disclosure Statement is a very important document that you should check thoroughly before agreeing to acquire your loan from the affiliated company of the real estate brokerage your are doing business with to buy a home through. You must remember the reason for this affiliation in the first place that exists between the Lending Co. and the Real Estate Company is not there as much to facilitate the one stop shopping experience and provide convenience for the buyer, but to generate sales and profits between the real estate Co. and the Lending Co through their affiliation with each other.
This can be a good thing or it can be a bad thing. Just remember that when shopping for a loan, shop and investigate several lenders and their terms, compare and then make a decision. Not to do so can lead to your signing for a loan that is not in your best interests.
When interviewing a lending company always ask for a Good Faith Estimate which is required by law. It is a simple one page document completely spelling out your costs, terms, and what your monthly mortgage amount is, in securing a mortgage for a certain loan amount. This one page document costs you nothing. You do not have to start a loan application to get one. You simply pick up the phone and talk to a lender for about 10 minutes answering questions and they can shoot this Good Faith Estimate over to you immediately. Now you can compare each of these Good Faith Estimates with each other and pick the best one for your needs.
Shopping around for a loan does not lower your F.I.C.O. score. I would shop at least three lenders.
Disclaimer
I hope you all have enjoyed this report and found it beneficial in your research of Hawaii Real Estate. As always, please remember to check as many resources that you personally trust to properly arrive at an overall evaluation of this subject matter. All buyers and sellers should draw their own conclusions and conduct their own investigations.
Final Notes
In evaluating Hawaii Real Estate investments you should conduct your research on the data, interview agents and brokerages and consult mortgage lenders. By all means feel free to contact me for your personal questions you may have. I can be reached via the below information:
Mike Gallagher Realtor/Broker/Broker in Charge
RE/Max Honolulu
808-951-3200 Office
My Cell: 808-384-9015
My Email: Mikeg@hawaii.rr.com
Neighborhood Reports and a wealth of Hawaii Real Estate subject matter can be found also at: Hawaiirealestatestatistics.com
I wish you all my Aloha and 'Good Luck' in your investigations!
Much Aloha,
Mike Gallagher
P.S.: If your viewing this report on the internet please see the New Monthly Feature:
The Honolulu Board of Realtors Statistical Report
An Outstanding Resource for all.
M.G.
If your property is listed, please disregard. It is not our intention to solicit the offerings of other Brokers. We will cooperate fully. This publication is neither endorsed by RE/Max or RE/Max Honolulu. The opinions and information are only those opinions of the author. Statistics are from the Honolulu Board of Realtors. All material is deemed reliable but not guaranteed. Any copying or distribution of this material herein is STRICTLY UNAUTHORIZED without express written permission from the Author.
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