In almost any conversation I have with people who are interested in Real Estate, the question always comes up as to whether we are at the bottom of, nearing the end or expecting to continue the current declining market. It is a question that I don't know the answer to. The data that I read seems to indicate that in our local market, that we are closer to the end of the downturn than the beginning, but I think it would be premature to say that we are in the rebound stage.
Hawaii in general and Oahu in particular seems to have been uniquely positioned to better weather the financial storm that descended into the real estate market over the past few years. Factors benefiting Oahu seem to be the combination of employment, supply versus demand of housing and a lower than average of number of subprime mortgages. That said, in the latest analysis of subprime mortgages in Hawaii shows that 10.87% of the mortgages in Hawaii were subprime mortgages as compared to other state averages from 16% (Florida and California) to 4-5% in states like North Dakota, Montana and South Dakota. So, that sounds promising.
Unfortunately, of those 10.87% subprime mortgages in Hawaii, 19.22% of them are seriously delinquent as of the 4th quarter 2008. As a state, Hawaii falls into the middle of the pack with the highs in Florida at 36,4%, Nevada at 31.4%, California at 28.9% and Arizona at 27.3%. Those are the top for states with "serious delinquencies", and while we are way below Florida, we are not nearly as far below Arizona for instance as I would like to be. With 20% of 10.87% of the subprime mortgages heading toward foreclosure, that would carry through to 2.2 % of the entire mortgage market in Hawaii. Add to that the simple fact that VA, FHA and Conventional mortgages are not immune to foreclosure and that translates to a continuing large portion of the marketplace being made up of distressed sales which traditional places downward pressure on prices.
For a great nationwide analysis of the Real Estate market follow this link to The PMI research site and review one of the best analysis's available of the downside analysis.
As to Oahu, my favorite subject, April had continuing declines in the Median Price range and the number of sales in both the single family and condominium categories as compared to April 08:
Single Family Median Price -8% Units sold -32%
Condo/Townhouses Median Price -7.3% Units sold -42%
As always, these numbers reflect the closed transactions. What I am hearing and seeing in my travels of showings, conversations with agents and experiencing on my own listings is that Buyers have reappeared and there is much more activity than there was a few months ago. Multiple offers on well priced listings, lower "Days on Market" and higher numbers of "Active Continue to Show on the MLS listings and it seems that buyers are coming back into the market and that our market is more robust than it has been for a while.
My favorite stat that the Board of Realtors provides is the months of inventory remaining. Since December '08, here are the numbers:
Month Months of Inventory Months of Inventory
Single Family Condo/Townhouses
December 08 12.0 13.1
January 09 9.8 10.3
February 09 15.8 15.8
March 09 14.7 16.1
April 09 9.7 10.1
April had a very significant drop. These numbers reflect the relationship between the number of active listings in a given month and the number of closings for that given month. The lower the number, the higher the odds are that a listed home will sell in a given month. A Hot seller's market has numbers like 2 and 1 which we say in 2004 and 2005. A pure buyer's market has numbers over 20 months like we saw in 1995 to 1998. Most of 2008 was in the 7's and 8's. During that time, with approximately 6,670 closings and 14,700 listings (single family and condos combined) the odds of selling your home if you listed it were 44%. It will be interesting to see how 2009's odds begin to develop.
The Oahu market had not crossed 10 months until the fall of 2008. The last time the inventory had been in the 10 month area had been the spring of 1999. How long we stay in the 10 month area, whether we trend higher or lower over the next several months will all begin to tell the story of that original question... "Where is the market going".
The short answer is this. There are a lot of properties on the market that are currently priced below the current market value. There are a lot of properties that are currently priced at market value. I am a believer that this is not the best time to pay retail for a house. Determine the type of home you are looking for and watch the available listings until a well priced distress sale property becomes avaliable that meets your needs and be ready to make your offer. That would include having a preapproval in hand, being familiar with the current and past sales of the area you are looking at and being mentally prepared to act if what you are looking for becomes available. If you are able to purchase a property for 10 to 15% below market, you have the advantage of taking advantage of todays interest rates and having some cushion in the event the market continues to adjust. The question isn't really "Is this a good time to buy?" I believe the question continues to be "Is this a good house to buy at this price?"
For the full Honolulu Board of REALTORs April 2009 statistical analysis which was the source of some of this data, Click Here
As always, if you would like to contact me, I may be reached at Contact Michael