Everyone Wants a Lower Price, But What About the Impact of Interest Rates?
When shopping for a home, the natural tendency of any buyer is to want to pay the lowest price possible. It's important to keep in mind, however, that the sales price is not the only factor that determines what the monthly payment will be. In fact, the impact of higher interest rates can easily nullify any benefit of waiting for a lower price.
Why Should I Rush to Buy?
While you may have heard discussions in the media about the decline of property values in many markets, the rate of decline appears to be stabilizing, and the rate of decline in Honolulu's Real Estate Market is far less than many areas of the Mainland United States.
That being said, it would not be unreasonable for buyers to want to hold out for an additional decline of 10%, hoping to capture the best possible price. However, as property values have declined in many areas to 2003 levels or lower, waiting longer to pull the trigger could be a mistake. Many Hawaii communities are reporting that lower property values have been bringing out investors and the result has been multiple offers on many properties. Properties priced correctly are not declining and, in fact, are creating a lot of interest.
Remember to think of any specific community in Hawaii's Real Estate market as a giant funnel. The flow out the bottom are the properties that have sold, Just listed properties go into the top. Watch the Level Inside The Funnel! If it is going up, then that area is a Buyers Market. If the level is Going Down, meaning the properties are selling faster than new properties are being listed, then that community is a Buyers Market.
Interest Rate Complacency
The problem is that many home buyers have been lulled into a sense of complacency because of extremely low interest rates. Since the Federal Reserve initiated its program of buying mortgage-backed securities, which control the rates people pay for their home loans, rates had been range bound, bouncing between 4.50% to 5.00% for a 30-year fixed-rate loan.
But buyers shouldn't be confused by this. These rates are artificially low! Historically, interest rates have been above 6.00%. And any rate obtained below this number is a great deal, especially on homes with price tags from 2003!
Markets are Unforgiving
The last two weeks of May showed just how unforgiving the markets can be for people who choose to
procrastinate. In just five days, interest rates from many lenders increased anywhere from .50% to 1.00% as fixed-income investors demanded more for their money.
For anyone who was waiting for prices to drop even more, a 1.00% increase in interest rate would bring a higher monthly principal and interest payment on a home, even if the price of that same home had fallen an additional 10% in value.
If you are waiting for Hawaii Real Estate Prices to fall even lower, be aware that while holding out for a lower price may help you win the battle, you could lose the war in terms of monthly payments and overall affordability. With the Federal Reserve scheduled to end its buying of mortgage-backed securities this year, rates only stand to go higher for those that wait. In fact, interest rates are already on the rise and could go higher from here.
Clock is Ticking on Free Money
If you are planning on purchasing your first home this year, be sure to remember that you will need to take possession before 12/01/2009 to be eligible for a tax credit of up to $8,000. In a survey conducted in March by Move.com, nearly 50% of home buyers are currently unaware that this free money exists in the marketplace. And since over 50% of all buyers are first-timers in today's market, this will impact a lot of home buyers.
About Us...
Hawaii Realty Group is based on Oahu, the most populated island in the Hawaiian chain. Honolulu is the state's largest city and Honolulu County makes up entire Island of Oahu. Like any large city, Honolulu is made up of smaller towns and sub divisions.
Here is a list of most of the communities you will find on Oahu. We can help you buy or sell single family homes or condominiums anywhere in the state but these are the areas we specialize in.
Transactions in: Honolulu, Waikiki, Windward, Leeward, Honolulu Metro, Diamond Head, Hawaii Kai, Kailua, Kaneohe, North Shore, Central Oahu, Pearl City, Waipahu, Makakilo, Ewa, Leeward Coast, Maui, Big Island, Kauai Neighborhood Transactions in: Ag/indl/navy, Ag/preserve, Ahuimanu Area, Ahuimanu Hills, Ahuimanu Knolls, Aiea Area, Aiea Heights, Aikahi Park, Aina Haina Area, Aina Haina Beach, Ala Moana, Alewa Heights, Aliamanu, Alii Bluffs, Alii Shores, Anchorage, Bay View Garden, Bay View Golf Course, Beach Parks, Beachside, Black Point, Bluestone, Campbell Industrial Park, Castle Hill, Chinatown, Club View Estate, Country Club Knoll, Coconut Grove, Country Club, Crestview, Diamond Head, Dillingham, Downtown, Dowsett, Enchanted Lake, Ewa, Ewa Beach, Ewa Gen, Ewa Gen Alii Court, Ewa Gen Alii Cove, Ewa Gen Carriages, Ewa Gen Cortebella, Ewa Gen Cypress Point, Ewa Gen Fiesta/del Verde, Ewa Gen Haleakea, Ewa Gen Haleakea Ii, Ewa Gen Kula Lei, Ewa Gen Las Brisas, Ewa Gen Latitudes, Ewa Gen Lofts, Ewa Gen Lombard Way, Ewa Gen Meridian, Ewa Gen Montecito/Tuscany, Ewa Gen Prescott, Ewa Gen Soda Creek, Ewa Gen Sonoma, Ewa Gen Summerhill, Ewa Gen Sun Terra, Ewa Gen Sun Terra On The Park, Ewa Gen Sun Terra South, Ewa Gen Terrazza, Ewa Gen Tiburon, Ewa Gen Trovare, Ewa Gen Tuscany Ii, Ewa Gen, Woodbridge, Ewa Villages, Foster Village, Government, Govt/ag, Hahaione-lower, Hahaione-upper, Haiku Knolls, Haiku Park, Haiku Plantation, Haiku Village, Hakipuu, Halawa, Halawa Heights, Hale Kou, Hale Lumi, Haleiwa, Halekauwila, Halepuu, Harbor View, Hauula, Hauula, Hawaii Loa Ridge, Heeia View, Hillcrest, Hoakalei-ka Makana, Holiday Mart, Huelani, Judd Hllside, Kaaawa, Kaalaea, Kahala Area, Kahala Kua, Kahaluu Town, Kahanahou, Kahuhipa Indstrl, Kahuku, Kailua Bluffs, Kailua Estates, Kailua Town, Kaimalino, Kaimuki, Kakaako, Kalaheo Hillside, Kalama Tract, Kalama Valley, Kalama/Coconut Grove, Kalani Iki, Kalihi Area, Kalihi Uka, Kalihi Valley, Kalihi-lower, Kalihi-upper, Kam Heights, Kam Hwy Makai, Kamehame Ridge, Kamilo Nui, Kamiloiki, Kamooalii, Kaneohe Bay, Kaneohe Town, Kaopa, Kapahulu, Kapalama, Kapio/kinau/ward, Kapiolani, Kapolei, Kapolei Knolls, Kapolei-Aeloa, Kapolei-Iwalani, Kapolei-Kai, Kapolei-Kekuilani, Kapolei-Malanai, Kapuna Hala, Kawailoa, Kawela Bay, Keaahala, Kealaula Kai, Keapuka, Keolu Hills, Ko Olina, Koko Head Terrace, Koko Kai, Koko Villas, Kokokahi, Koolaupoku, Kuakini, Kualoa Beach, Kuilima, Kukanono, Kukilakila, Kuliouou, Kuulei Tract, Laie, Lanikai, Laulima, Leeward Estates, Liliha, Lilipuna, Lualualei, Lulani Ocean, Luna Kai, Mahalani, Mahinui, Maili, Makaha, Makakilo-anuhea, Makakilo-highlands, Makakilo-highpointe, Makakilo-kumulani, Makakilo-lower, Makakilo-palehua Hgts, Makakilo-royal Ridge, Makakilo-starsedge, Makakilo-upper, Makakilo-wai Kaloi, Makakilo-west Hills, Makiki, Makiki Area, Makiki Heights, Malaekahana, Manana, Manoa Area, Manoa-lower, Manoa-upper, Marina West, Mariners Cove, Mariners Ridge, Mariners Valley, Matson Point, Maunalani Heights, Maunawili, Mccully, Metcalf Acres, Mikiola, Mililani Area, Mililani Mauka, Military, Miomio, Moanalua Gardens, Moanalua Valley, Moiliili, Mokuleia, Momilani, Nanakai Gardens, Nanakuli, Napali Haweo, Napua Point, Navy/federal, Newtown, Niu Beach, Niu Valley, Nuuanu Area, Nuuanu-lower, Ocean Pointe, Old Pali, Olomana, Paalaakai, Pacific Heights, Pacific Palisades, Paiko Lagoon, Palama, Palolo, Parkway, Pauoa Valley, Pawaa, Pearl City-lower, Pearl City-upper, Pearlridge, Pikoiloa, Pohakupu, Portlock, Preserve, Punahou, Punaluu, Punchbowl Area, Punchbowl-lower, Puohala Village, Pupukea, Puualii, Puunui, Puupanini, Queens Gate, Renaissance, Robinson Heights, Royal Kunia, Royal Summit, Salt Lake, Sand Island, School, Seaview, Spinnaker Isle, St. Louis Heights, Sunset Area, Sunset/velzy, Temple Valley, Triangle, Ualakaa, University, Valley Estates, Village Park, Wahiawa Area, Wahiawa Heights, Waialae G/c, Waialae Iki, Waialae Nui Rdge, Waialae Nui Vly, Waialae Nui-lwr, Waialua, Waianae, Waiau, Waihee, Waihole, Waikalua, Waikele, Waikiki, Wailuna, Wailupe Area, Waimalu, Waimanalo, Waimea, Waipahu Estates, Waipahu Gardens, Waipahu Triangle, Waipahu-lower, Waipio Gentry, West Marina, Westloch Estates, Westloch Fairway, Whitmore Village, Wilhelmina Rise, Wilikina, Windward Estates, Windward Mall and Woodlawn.
If you are thinking of buying a home in any of these areas and would like to receive Concierge Level Service from professionals that know what service means, give us a call at (808) 630-1828. AND if you are thinking of a transaction in an area that is not on our list, PLEASE drop me a line at Mike@GreatHawaiianHomes.com. We pride ourselves on knowing every nook and cranny of this island!
Warm Regards-
Mike
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