The worst may be over for the island’s housing market
Prudential Locations just released a special 2011 real estate report to assess the state of the industry and what it means for realtors and their clients, which is cautiously optimistic, but optimistic nonetheless.
“The worst may be over for Oahu’s housing market,” said Bill Chee, CEO of Prudential Locations. “While consumers are still reeling from pay cuts and job losses, statistics indicate a more optimistic economic outlook for our local real estate market.
“We believe sellers on Oahu will benefit this year by the lack of inventory available. Unlike the last economic slump and the one before that, there is not a backlog of new construction inventory waiting to be sold. New building codes and stricter lending have made it increasingly difficult for developers to obtain financing and meet requirements to get new projects launched. The lack of excess inventory puts sellers in an advantageous position,” Chee added.
The report outlines market conditions to keep an eye on this year as consumers consider their real estate transactions:
Interest rates. Interest rates are the lowest they’ve been in 40 years. Smart buyers know that interest rates have a bigger impact on a home’s affordability than the actual price does. Meet with a loan officer to help you crunch the numbers to compare and contrast price versus interest rates and exactly what you can get in this market. But don’t wait too long, Chee cautions, as interest rates have already started to rise.
Unemployment. The 6.3 percent unemployment rate in Hawaii is better than the 9 percent national figure, and both are improving.
“For Hawaii, the unemployment rate has begun to work its way down,” said Paul Brewbaker, principal and economics consultant at TZ. “The resistance in new hiring is a typical attribute of a slow moving recovery such as the one we have here in Hawaii.”
Subprime. Michael Sklarz, president and CEO of real estate consulting firm Collateral Analytics, researched subprime loans that were securitized since 2000 in 11 U.S. cities, including Honolulu. He found Oahu’s subprime lending to be relatively low, since we didn’t have a huge boom like other metropolitan markets.
In Las Vegas, Phoenix, and Miami, for example, there was a huge amount of low-quality, subprime lending, which has led to a lot of foreclosures and depressed prices in those markets. While foreclosures due to subprime lending are the main cause of the housing meltdown, the relatively small percentage of Hawaii homes affected will have less of an effect on our local market.
Tourism. This is the only wild card and needs to be watched in the coming months. Until the earthquake/tsunami disaster in Japan, visitor numbers here had worked their way back up to where they were before Aloha Airlines and ATA shut down. The outlook for 2011, based on this, showed more jobs and stable incomes, which would then boost the activity in real estate. The economic impact this disaster will have around the world is still being evaluated. Stay tuned.
Historically, real estate trends have moved in 10-year cycles and at the end of each one, prices double from the previous cycle. Each time, after the prices spike, there is a period of sideways movement. The report says that we are currently in the stabilizing phase of the cycle and will likely remain in this state for a couple of years.
To see the rest of the report, click here.