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Business :: Real Estate :: Understanding the Hawaii Real Estate Market :: Should I Buy or Wait?

Should I Buy or Wait?

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Decisions, decisions, decisions…we all have to make them. Some of us dislike making decisions, especially important ones, so much that we just choose to make the decision to…not make a decision.

However, when it comes to an important decision such as when should you make that certain real estate investment you have to have the facts to go with your gut instinct.

If you are like a lot of us who have to invest in a home in Hawaii right now because you just moved here or simply have to get out of that home you’ve been in for years and into something that will match your needs and current life style better, then it’s time to read this article and be armed with the facts.

Real estate sales are like the tide, high and low and everything in cycles. All year long sales of homes will rise and fall just like the tide and what causes this is not the moon but demand. Demand is extremely important to how high sales can go and how low they can go. It is also very important to pricing. How much a home sells for is directly and critically linked to demand for homes.

So, when are the high and low periods for demand in Hawaii Homes?

Almost always, the lowest demand for homes comes in the months of December and January of each year. The highest demand for homes occurs during the months of May through September. At the same time as the demand for homes is rising and falling the inventory for sale is doing the same thing…rising and falling.

Inventory is at it’s lowest during the months of May through September. This is also the same time that demand and sales are at their highest during the year.

Inventory is at it’s highest during December and January, this is the same time that demand and sales are their lowest.

What are prices doing during the year? Prices are at their lowest during the same months there is high inventory and low demand which is December and January.

Prices are at their highest at the same time that demand is high and inventory is low during the months of May through September.

If you are more inclined to buy at the lowest price you might say that time would be December and January which is the same time that inventory is at its highest because of low demand. Negotiate away and be armed with these statistics with your agent so that he or she can help you relay this vital information to the seller’s agent. Do not assume all agents know this stuff. They don’t. If you are going to negotiate for a lower price and or better terms then be armed with the correct information and present your case logically. Most sellers will listen to logic. There are few that don’t…do not deal with them, walk away…but do not forget about them as time passes these same not so logical sellers are now more apt to listen to logic when their home still hasn’t sold and they are now wondering why.

The one exception here however is where you finally decide on buying. Each and every Neighborhood Market is different and each and every Condo building or Town Home complex is different. They all follow the general trends to a certain extent as I have outlined above, but they all differ in certain ways we will see here in this article.

Let’s first take a look at Inventory…

As you can see from the graph above this is the general trend in Inventory accumulation as well as inventory loss during the 12 months of the year. This may graph may sometimes begin and end the inventory cycle at slightly different times during the year but generally this is a good rule of thumb to follow when wanting to know the high and low of the inventory cycle.

Now we can look at the same graphs shown together in one graph and see the trends almost exactly match in the rise and fall of inventory.


 Now let’s take a look at a specific Neighborhood…

The above graph is not the same is it? In fact you can see clearly there are two inventory cycles here during the 12 months.

Now let’s look at demand or sales…

Combined…

Now we know what the general trends are when it comes to inventory and demand/sales for overall Oahu SFH’s and Condos and we now we also know there are exceptions or variations to this overall trend by neighborhood.

Now let's look at sold prices...

As you can see from the graphs above there is a similarity between the high’s and lows when you compare the Single Family Sold Price to the Single Family Sales. The same is true of the condos.

You may want to know why this is…

Now here is the Mililani Condo Sales and Inventory on one graph…

Can you see the opposites in these cycles? When inventory is low sales are high; inventory high and the sales are low.

Now look at this again…


 
At the same time as the inventory & sales are rising and falling the highest For Sale Asking Prices are at their highest during the sales are at their highest and the inventory is at its lowest.

Now you have been educated on the nuances of the Inventory, Asking Price and Sales cycles of the Island and a couple of neighborhoods. You just have to remember that the Oahu graphs are strictly the “Main Highway” sort to speak and the Neighborhoods are “Side Roads” often running ‘almost’ parallel the Main Highway. They are different and you need to remember this when deciding when the best times are to buy.

The same is true in a reverse fashion for when you have decided to sell your home. There are good times and bad times to come onto the Market. It is opposite of when the buyers best times are, after all you both want two different things. The buyer wants a low price and the seller wants a high price.

Now for Sellers here is the best time to sell your home…

The highest Median For Sale Price or Asking Price period was in March ’07.

The highest number of sales was in August but February's highest asking price turned into large sales in March, April and May. 


 
While we see the highest Asking Price and highest Sales early in the year during February, March and April time frames, we now see that the inventory is its lowest point during these same times.

This is when the smart Seller will Sell and sell quickly at the highest price.

One last thing to consider is available inventory in the price range you can afford. If there isn’t any or it’s very low the buyer is going to pay higher and the seller is going to sell higher. So be aware of inventory For Sale vs. Sold in your neighborhood or Condo complex at all times.

In Closing…

Well I sure hope this helps explain the cycles that occur during the year. I take pride in my knowledge of the market and this is how I like to buy and sell for my clients. There is no room for guess work. No room for misconceptions.

Real Estate Sales is emotional no matter how often you have bought or sold. It’s fraught with frustrations and possible legal issues, but if you stick to the data it makes buying and selling a whole lot easier. It also reduces the risk of law suits.

Many agents do not know this data. Please remember this. Find the data or agent that does or call me and I will help you.

Knowing this data will also go a long way towards being able to understand what is happening in your neighborhood you either want to buy in or sell in. When you are informed then Comparables or Comps will be better understood by you.

It is extremely important that an agent as well as buyers and sellers understand Comparables and how to figure them out before selling or buying. Many agents do not have the knowledge and experience to do this correctly and it makes all the difference in the World in whether you pay too much or leave “Money on the Table” when selling. A future issue will be dedicated to this subject.

Until then…

Please feel free to contact me at mikeg@hawaii.rr.com or visit my website for more information on what is really happening all of over the Oahu Real Estate Market at http://www.hawaiirealestatestatistics.com/

Much Aloha to All
Mike Gallagher, Broker In Charge, RE/MAX Honolulu


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