In Hawaii, things are always a little different than the rest of the country! However, like everywhere else no one can ever predicts correctly when the market will change and by how much. The only certainty is that it will change. Over the last few years there were many unexpected factors which created massive change in our real estate market. In 2007, the mortgage crisis jumped up and bit us with the elimination of loan products and tightening of guidelines because of the fall of the sub-prime market. In 2008, Lehman Brothers folded and the stock market plummeted. In 2009, the economic stimulus package caused buyers to get off the fence and purchase property. What will happen in 2010? Here are a few events which may occur and will have an enormous effect on our market.
1). Extension of the Buyer Tax Credit - There is current legislation in Washington which would extend the Buyer's tax credit past the December 1, 2009 deadline. If it passes, we will continue to see first-time buyers take advantage of an $8,000 credit which they can put in their pockets spurring on the home sale market.
2). Interest Rates May Rise - The Federal Reserve has hinted that they are going to ease pressure on rates allowing them to increase as early as December of this year. Higher interest rates will reduce the number of qualified buyers and reduce their buying power. They may not be able to purchase the home they are looking for.
3). The Affluent Return to the Market - The fall of the stock market late last year obliterated the Luxury Home Sale Market because buyers were unwilling to take their losses in securities and move them into real estate. As the stock market recovers, losses will be minimized and the wealthy may be willing to purchase second homes or move money out of securities to invest in real estate and ride the appreciation wave of the next growth cycle.
4). International Markets and the Strength of their Currency - This new "World Economy" experienced a "World Recession." However, Asian countries like Japan have bounced back and their consumer confidence is rising. They may be ready to jump back into the Hawaii Real Estate Market. Especially, since the yen continues to strengthen and the dollar continues to weaken. Canadian and Australian buyers are also pleased with the strength of their dollar and are beginning to reap the rewards. If this continues and the dollar weakens further, they could begin buying and affect the demand in the Hawaii Real Estate Market.
5). ARM Adjustments, Foreclosures and Short Sales - Even though the Mortgage Crisis began more than 2 years ago, it still plays a big part in the real estate industry. Foreclosures in the State of Hawaii continue to rise to record levels with up to 990 notices of foreclosure every month. As these foreclosures or pre-foreclosures hit the resale market they drive prices down in a neighborhood. However, low prices will also spur on demand for buyers looking for a deal. Many prognosticators believe that the next round of ARM (Adjustable Rate Mortgage) resets coming up in the next few years will push even more owners into foreclosure. If rates rise and their mortgage adjusts, they could be paying hundreds or even thousands of dollars more each month just to keep their home.
No one knows which will come to fruition and have the largest affect on our real estate market. However, we know something will happen and change will occur.