Great news for Honolulu real estate!

Honolulu is the #31 City in the World and #1 in America for quality of living!   Vienna has the top spot for the world’s best quality of living, according to the Mercer 2010 Quality of Living Survey. Zurich and Geneva follow in second and third position.

Mercer conducts the ranking to help governments and multi-national companies compensate employees fairly when placing them on international assignments. The rankings are based on a point-scoring index, which sees Vienna score 108.6 and Baghdad 14.7. Cities are ranked against New York as the base city, with an index score of 100.

How does your city rank?

See the top 30 here

This morning there was an interesting article in our local paper about the market. While the Honolulu Board of Realtors says prices are going up, a Federal agency says they have been going down.

The Federal Housing Finance Agency yesterday reported that O'ahu single-family home values in the first quarter were down 4.5 percent compared with the same quarter last year. The figure compares with a 4.4 percent rise in the median price for O'ahu single-family homes sold in the first quarter as reported by the Honolulu Board of Realtors.

One measures median price, the other measures the repeat sale price on individual homes. I think they are both wrong, and posted an article on my blog in response. I would appreciate your thoughts on this as Realtors. How do you measure your market?

I do it all the time.  I talk people out of buying houses.  No it's not because of the market, or rates, or because I don't like to sell homes.  I love to sell them of course! 

But one of the reasons that I'm a Top 100 Realtor in Hawaii is that once in a while, I talk my clients out of making bad decisions.  Yesterday, a client of mine was considering buying a brand new house from a developer in Ewa Beach.  Pictured here are the homes being built.

The problem was, my client wasn't ready. The lease on her rental isn't up until April.  Her loan hasn't been fully approved yet.  The house was smaller than she wanted, and had only 3 bedrooms instead of the 4 she hoped for. She had been looking through Hawaii real estate listings online, and it seemed hopeless because the number of homes for sale is so low in Hawaii right now.

But the thing is, it was brand new, and ready to be moved into.  The house was beautiful, I'll give her that.  It was a very nice one story home with a lot of nice upgrades.  But it wasn't the right home for her.  She was obviously stressed out about the decision, but for some reason really felt the desire to buy it.  So I said 'No.'  

"Should I buy this house Tony?  What do you think?"  she asked with a confused look on her face.

"No."  You should be patient, and wait for the right house to come along. You should wait to see what gets listed in January.  You should buy the right house at the right time, for the right price. 

She was releived, happy, and calm. And she trusts me more now, I'm sure.

 I used to be a full time lender, but for the last several years I've been selling Hawaii real estate.  Right now, I couldn't be more thankful for that.  Because of my past lender affiliations,  I still get email updates on the changing laws and practices in lender, which recently has become so overwhelming that it's hard to believe anybody can keep up.

 This morning I got email with the new Good Faith Estimate laws, and it's just ridiculous. Some bureaucrat somewhere made up a bunch of new rules, and changed a bunch of old ones, in such a radical way that the end result is the borrowers are going to get hurt through delays and paperwork problems. The 3 day re-issuing of a Good Faith Estimate whenever the costs change is particularly problematic, as fees almost always change a little bit for various reasons.  This means last minute delays and excess time needed to issue these new GFE's.  Congratulations government, you screwed up again.

Here is a summary of what has changed:

* The GFE disclosure, HUD-1 and HUD-1A are revised under the new rule and must be used by all lenders. No other versions of these disclosures may be used.  It is now 3 pages instead of 1.

* RESPA limits the collection of upfront fees to the cost of a credit report.

* Title agents may use a new average cost pricing method for disclosing costs.

* A new provision allowing E-Sign documents. (This is good)

* A revised Servicing Disclosure Statement and new timing rules for the disclosure.

The New Good Faith Estimate:

The new GFE is 3 pages; page 1 is the most critical. Essential loan terms and costs with the loan must be disclosed and must remain in effect for at least 10 business days. The

New GFE must show:

* Initial loan amount, term, interest rate.

* Initial monthly payment amount.

* Whether the interest rate can increase.

* Whether the loan allows for negative amortization, provides for a pre-payment penalty or a balloon payment.

* Total origination charges and charges for other settlement services.

Under the New Rule, the consumer is given 10 days to shop - during which the "offer" provided on the GFE must remain open and "fixed" within prescribed tolerances, unless there are "changed circumstances."

* If the consumer accepts the offer, the terms and costs are then fixed through the closing, again within the same prescribed tolerances and absent "changed circumstances."

* Page 2 of the new GFE discloses the lender's origination charges and charges for other settlement services. The charges are grouped into categories (versus itemized.)

* Page 3 of the GFE gives general information to consumers on how to use the form,

including a "tradeoff table" on which the LO may present two loan options:

-One that describes a loan for which the consumer would pay a higher Interest rate but less in settlement charges and another that describes a loan for which the consumer would pay a lower

Interest rate but more in settlement charges

It is not necessary to complete all columns, but the loan originator must complete the left column based on the loan covered by the GFE. The loan originator does not have to complete the other two columns.

 GFE Timing Requirements:

A GFE must be provided no later than 3 business days after the lender either receives an application, or obtains information sufficient to complete an application. In addition, when a changed circumstance has occurred, the lender MUST issue a revised GFE within 3 business days of receipt of information that triggered a changed circumstance that allows the issuance of a revised GFE. A lender is NOT required to provide a GFE if prior to the end of the 3rd business day the lender denies the application request
or the applicant withdraws their application request. RESPA defines "business day" as a day on which the office of the business entity are open to the public for carrying on substantially all of the entity's business functions. This does NOT include Saturday, Sunday or any federal legal public holidays.

In the case of new construction where the settlement is anticipated to occur more than  60 calendar days from the time the GFE is provided, the Loan Originator may provide the borrower with the GFE Construction Loan Disclosure stating that at any time up until 60 days prior to closing the Loan Originator may issue a revised GFE. The revised GFE is only allowed if a separate construction loan disclosure was provided to the
borrower. New construction is defined as a purchase transaction not having a certificate of occupancy issued at time of generation of the GFE.

Binding GFE:

Upon the issuing of a GFE to a customer the lender is bound to the fees, charges and tolerances provided in the GFE unless there is a documented changed circumstance. If the lender provides a revised GFE based on a changed circumstance the documentation for the changed circumstance must be retained in the loan file for at least three years after settlement. A lender is not required to provide a GFE to a customer if
the loan program requested is not available.

 Tolerances:

The first "Fixed" tolerance is zero percent. This tolerance applies to all lender and mortgage broker origination fees, transfer taxes and if the interest rate has been locked any discount points or Yield Spread Premiums. None of these items may exceed the amount disclosed on the GFE by any amount.

The second tolerance is 10 percent. This tolerance applies to the total of:

* All lender-required settlement services paid to providers selected by the lender

* All lender-required settlement services paid to providers selected by the borrower from lender-provided lists

* Premiums for optional owners' title insurance selected by the borrower from lenderprovided lists

* Government recording fees

This means the sum of the actual charges cannot exceed the sum of the charges disclosed on the GFE for these items by 10%.  The third tolerance is for fees that may change at settlement (no tolerances
apply):

* Required services the borrower shops for,

* Title services and lender's title insurance not identified by the lender;

* Owner's title insurance not identified by the lender;

* The initial deposit for an escrow account;

* Daily interest charges; and

* Homeowners Insurance.

Changed Circumstances:

The Loan Originator is bound to GFE tolerances unless a new GFE is provided; ONLY changed circumstances allow re-disclosure of certain terms on a GFE. The New  Rule defines "changed circumstances" as:

1) acts of God, war, disaster or other emergencies;

2) application information that the lender relied on in providing the GFE but subsequently changes or is found to be inaccurate;

3) information on the borrower's credit report obtained before providing the GFE that subsequently changes;

4) new information particular to the borrower or the transaction (excluding any of the terms of financial information that at minimum are deemed to constitute an "application") that was not relied on by the lender in providing the GFE; and

5) Other circumstances particular to the borrower or the transaction, such as boundary disputes, the need for flood insurance and environmental problems.

If there is a "changed circumstance" the Loan Originator must issue a revised GFE within three business days of receiving the information sufficient to establish changed circumstances. Documentation to support the changed circumstance must be retained in the loan file for 3 years after the date of settlement.

Here is a picture of a gigantic

wave I took on Monday. If you just estimate based on the surfer's height, the wave is around 35 feet on the face.

Every year surfers, photographers, corporate sponsors, and the media, come to Oahu because of these giant waves, and some of them buy Oahu real estate.

This is just another reason that Oahu real estate has been stronger than just about anywhere in the US. We're not just another state. It's paradise, and for many, owning a piece of our island is a dream come true.

Just stay out of the water when it's this big. Trust me, you will die. 

It's taken me more than 10 years to learn this lesson, and I hope I'll remember next year that December is always busy in Hawaii real estate. At least 4 sellers have asked me whether they should wait until January to list their house, thinking that there are just no buyers out there due to the holidays.

The numbers show something completely different.  Over the last 5 years, December has always had just as many closings as the previous 3 months, if not more.  In 2004, 2006, and 2008, December had MORE closings than November. Why?

Possibly because there are sellers and buyers out there looking to close a deal before the year ends.  Possibly because real estate agents like me want to close out the year and not have escrow lingering into the new year.  You can bet that if I write a contract anytime in November, I'm going to put a Dec 30th close date rather than some silly date like Jan 5th.

It could also be that even though there are fewer buyers out there, the ones that are buying are pretty serious. They take time out of their holiday schedule to go out home shopping - because they are motivated and ready to go. This house pictured is one I'll be closing in late December for $700k.

But there is one other reason that may be unique to Hawaii - Vacation.  As of this week I have 3 buyers flying to Hawaii over Thanksgiving (just 2 weeks from now) with the specific purpse of shopping for a Hawaii vacation home.  One client wants a 5 bedroom house up to $1mil.  Another wants a 2 bedroom condo with an ocean view for the same price.  A third would like a small house with a view of tropical rain forests. 

Couple that with some buyers who are motivated to get a house on their taxes for this year, and December is going to be a very busy month.  Should you wait to list your house until January?  NO WAY!  Get ahead of other sellers who are waiting and let those holiday time buyers come look at your house.  Why not show off your Christmas decorations and let them smell the sugar cookies? 

Want a nice Christmas present?  How about a house!?

I have about 10 clients looking for homes in Oahu right now. Most of them have very realistic goals, with prices between $600k and $1.2million for homes in Kailua, Hawaii Kai, and Honolulu.  While those numbers might sound high to people not in Hawaii, those are just average prices here in the Island State, the state of Paradise.

While the rest of the country and much of the world has been hit hard by falling prices, foreclosures, high inventories, and long market times, the island of Oahu has experienced a rather innocuous market drop over the last 4 years.

This month we hit an amazing 4 year low in inventory, with under 1289 homes for sale as of November 1st.  That's less than 50% of the inventory we had a couple years ago, and with 244 home sales a month, we're looking at about 6 months of total inventory.  However that's not the whole story. Most of that inventory is homes well over $1million, homes that don't sell to regular people like you and me. 

If you take the inventory of homes under $1million, there are less than 4 months of homes available! That's a seller's market no matter what are you're in.  This has been more than apparent in the past 30 days, as I've been out showing properties to my clients desperately searching for a decent house under $1million.  Many of the homes we wanted get were snapped up after just a few days on market, often well over asking price. My sellers have also been getting multiple offers on my listings in a short time, some as high as $80k over asking price.

Back in 2008 I thought this year would be slow, like a forced vacation, but as it turns out I'm busier now than I was last year.  I've been saying it for years- the best thing in America to buy and hold is Hawaii real estate.

A loan officer had told me that my buyer had a debt ratio too high to qualify for the Hawaii homes they were looking at. I asked the buyer what debt they had, and he mentioned that he had a car with $500 payments. I asked the lender if removing that $500 from their DTI would allow them to qualify.

She said yes, so I wrote the contract with $8k of seller paid costs, which I knew would include part of the car loan balance. Yes, only part of it.  Most lenders allow you to ignore any debt with less than 10 payments remaining (not including credit cards) so all I had to do was get the balance down to $5000, and the rest of the seller credit would go toward other closing costs.

So my buyer has now been approved, thanks to the VA loan.  Conventional and FHA don't allow this. Also I have done deals that included credit cards being paid through closing by seller costs. 

I don't know if VA will allow the brokers to pay off anything for the buyer or not. I think only the seller can do it.

It's easy to make a case for Oahu real estate being the last place that sellers are still in control.  While most mainland areas are declining or flattening, prices of Oahu homes are still going up in most areas. Our inventory is down from last year, and the average home sells in only 44 days.  Condos sell in 37 days!

While there is some slowing in the very low and very high end markets here, the average home, which is about $800k, is still selling very quickly.  In fact some of my buyers have a hard time finding something to buy!

It's probably because a)everyone wants to live in Hawaii and b)we have tons of military who move in and out every year.  7000 military families will be coming to Hawaiin in December, and that's just one of several times this year that we will get a big rush of movers.

Also, considering all the baby boomers retiring in the next several years, Hawaii may be one of the best investments in the country.  We have a tiny island here in Oahu, and everyone wants to live in it. 

On the other hand, why are Maui, Kauai, and the Big Island markets going down so fast right now? Their collective market is down about 20% in price, and 50% in sales over the last 2 years.  WHY?

For one thing, all the military bases are on Oahu.  And most of the sales on the outer islands are 2nd homes and rentals. That market is all but dead everywhere in the US.  Oahu is the only island that has a continual inflow and outflow of people who actually have jobs. We have great health care. If you live on Maui and you have a serious health problem, you have to FLY to Oahu to be treated. It could be the difference between life and death! 

If you want to invest now, Oahu real estate is the best place in America in my opinion. We have limited land and tons of resources, and everyone is moving here.