How Much is Your Home Worth Now?

After a decade of skyrocketing prices, Hawaii’s real estate market has finally slowed down. What can we expect next?


Published:

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Photo: Rae Huo

EWA PLAIN

6 bedrooms / 2 bathrooms
2,848 sq.-ft. interior / 6,112 sq.-ft. lot
Sale Price History
Price adjusted to 2009 Dollars
1948:     $7,876 (fs)
1949:     $4,000 (fs)
1978:     $60,800 (fs)
1987:     $202,000 (fs)
$69,514
$35,749
$198,354
$378,233
2009:     Offered for $675,000 (fs)
 


Photo: Rae Huo

HAWAII KAI

3 bedrooms / 2 bathrooms
1,252 sq.-ft. interior / 5,995 sq.-ft. lot
Sale Price History
Price adjusted to 2009 Dollars
1968:    $40,700 (lh)
1983:     $140,000 (lh)
1989:     $228,000 (lh)
1989:    $53,102 (fee purchase)
1992:     $395,000 (fs)
2001:    $325,000 (fs)
$248,772
$298,999
$391,110
$91,091
 
$598,860
$390,347
2009:     Offered for $599,000 (fs)
 

 
Photo: Rae Huo

MILILANI

3 bedrooms / 2 bathrooms 1,596 square foot interior / 7,164  sq.-ft. lot
Sale Price History
Price adjusted to 2009 Dollars
1969:     $36,200 (fs)
1971:     $50,400 (fs)
1980:     $139,500 (fs)
1985:     $171,500 (fs)
1989:     $261,000 (fs)
2004:     $475,000 (fs)
$209,811
$264,704
$360,108
$339,030
$447,718
$534,869
2009:     Offered for $499,000 (fs)

Home sellers may be relieved to learn that most of the sales slump has been in the high-end luxury segment of the market. In March, 75 percent of the single-family homes sold were in the $400,000 to $799,000 price range. Similarly, 76 percent of condos sold were under $400,000. “What we’re looking at is a basic, local market—homes being bought by people who need shelter, who are having lifestyle changes,” says Ishii. “Take a look at the remaining months of inventory for houses over $1 million. There is 66.4 remaining months of inventory. That’s over five years’ worth. But when you look at homes in the $500,000 range, those inventory levels are similar to previous years.”

Not only are average-size homes somewhat protected from the shrinking demand, but neighborhoods in the city have maintained their value better than those in West Oahu and over the Pali. “Local neighborhoods closer to downtown Honolulu remain very stable, both in price and sales volume,” Ishii points out.

“Nuuanu, Manoa, Aina Haina. Being in town is always going to be in demand.”
 

Buyers’ Paradise

If home sellers are feeling the pain, home buyers who are ready to shop are reaping the benefits. It’s tempting to postpone a house purchase for six months or a year, in anticipation of even better bargains in the pipeline, but there may not be much to gain by waiting.

Shapiro calls this the best time to buy a house that he’s seen in at least a decade, noting that while prices might get lower over the coming year, they’re not going to drop dramatically. “I hear people trying to predict prices, and I think they’d be better off gambling in Vegas,” he says. “If you can get within 10 percent of a peak or a trough, you’re doing much better than the general public. If people are thinking that we’re going to see a return to the prices of 2000? Forget it; it’s not going to happen.”

Almost more important than the raw sale prices are the unprecedented interest rates, which had dipped as low as 4.25 percent for a 30-year, fixed-rate mortgage as we went to press.

The big caveat here is it’s become harder to qualify for a mortgage, and more likely that you’ll have to pony up a hefty down payment—as much as 25 percent down in many cases.

Steve Teruya, president of Finance Factors, says the days of lenient, creative lending are over. “The fallout from what happened in the subprime market has imposed stricter underwriting criteria by the big lenders, Freddie Mac, Fannie Mae. Basically, it’s gone back to the way it used to be, where you’ve got to provide all your documentation. Those low-doc and no-doc mortgages, the 100-percent financing, they’re all gone.”

FICO credit-score requirements, always a crucial element of qualifying for a loan, have also been upped. “In the past, as long as you had a credit score of 680, you would qualify for the low rate. You may still qualify, but it won’t be for that low, advertised rate,” says Ishii. “Those rates you’re seeing advertised tend to be for highly qualified applicants, with credit scores around 740.”

Scores impact not only interest rates, but loan-to-value ratios (the amount of a home’s cost covered by the mortgage loan). Pushing your score above 700 might well be the difference between a 20 percent and a 25 percent down payment.
 

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