Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Freckles, since all of your 22 posts on City-Data have to do with the high cost of housing, and since I don't really think that you are interested in buying in Hawaii, I have to assume that you would like to buy a house somewhere but are currently being priced out. And I think that you've found City-Data forums as a way to vent your frustrations.
What's amusing is that you think that it's our civic and moral duty to complain about something that is market driven. Yes, housing prices are high all over the country. I would be interested in hearing your suggestion as to what kind of action you are proposing to take. Are you going to complain to the National Association of Realtors and try to convince them that they need to be advertising properties for lower prices? Do you suggest that people organize and complain to sellers to try to get them to lower their asking prices?
By the way, the definition of "civic duty" is to insure that the democratic values written into the Constitution and Bill of Rights are upheld. How does complaining about the price of housing become a civic duty?
Your assumptions show you clearly have little understanding of things. You make them based on your own narrow experience of the world. That may not be your fault. Perhaps you aren’t curious, or ambitious, or maybe you just aren’t genetically predisposed towards those qualities. Nevertheless, nothing from what I have said could lead anyone to the conclusions you make, except perhaps a confused mind struggling to comprehend the world. In fact, the arguments I have made on these and other forums are based on years of experience and qualifications and have led many (based on feedback) to the opposite conclusion.
In the interests of disclosure, I live in Hawaii. I own a house in Hawaii. I am a successful real estate investor with a portfolio across multiple states and countries consisting of SFHs, apartments, private equity, lending, and publicly traded trusts. I have studied finance at post graduate level and have written extensively on real estate and finance, including a book with a whole chapter dedicated to real estate. However, that doesn’t mean I should not care, even if it goes against my personal interests. It also doesn’t mean I know all there is to know. The opposite is true.
Now, if you care to look around you, assuming you actually live in Hawaii, what do you notice about Hawaii that stands out apart from the obvious geographical accoutrements? It’s the cost of living, especially the cost of real estate. While there may be some merit in the land scarcity argument attributable to small desirable islands, the cost to borrow has driven prices more than anything to high levels all over the world. There is a direct relationship between interest rates and asset values. One goes up the other goes down. It’s not quite as straight forward as that, but probably enough for you to chew on for the time being. So lets keep it simple and take it one step further.
A very extended period of declining rates leads to excessive valuations. We now have high inflation and the weapon of choice is interest rates. High inflation means high interest rates, which leads to declining asset values. What happen when high asset values get too high and start to wobble? People sell them. Other people seeing this then also start to sell for fear of losing out, and so the downward spiral continues. To put it another way, the bubble bursts.
Now, there’s one more aspect to this, which is unique to our current dilemma. It’s the supply of homes for sale, or severe lack thereof. It may have escaped your notice, but there have been very few homes for sale, and what there are have been met with fierce competition, much of it from Wall Street, and some of it from uninformed retail buyers. Nobody is sure exactly where it (inventory) all went, but it seems to be largely explained by behavioral traits. That’s for another time. For now it’s important to understand the effect of a lack of supply, especially where demand is artificially stimulated by the very low cost to borrow. You got it. It pushes up prices even more. It creates an upward spiral. When upward spirals accelerate, they eventually lead to downward spirals as discussed above. Now, we’re not full cycle yet, but we’re heading in that direction. Nothing is certain, but the signs are clear.
In the interests of disclosure, I live in Hawaii. I own a house in Hawaii. I am a successful real estate investor with a portfolio across multiple states and countries consisting of SFHs, apartments, private equity, lending, and publicly traded trusts. I have studied finance at post graduate level and have written extensively on real estate and finance, including a
Trying to find data on housing in Hawaii is like trying to tie a knot with water. It’s both elusive and illusive. How conveniently inconvenient. I did manage to dig up some dirt that is a bit lagging but puts some flesh on the bones. There are a couple of caveats about reliability of some data, which I will allude to.
The median price of a single family home in Honolulu is $1,400,000, up 50% from 2020. The average salary is thought to be around $80,000, meaning nearly 100% of an average salary would be consumed by the mortgage payments of a median priced home. The household would need to earn $280,000, that is 3.5 times the average to be able to afford the median priced home. Condos are clearly an option, but not everyone wants to live in a condo. The picture for the island as a whole is not much better.
List to sales ratio (%) is very high at 99.7%. I’ve seen 102% in other sources, which means homes are selling at or above asking price. That is a national trend. However, it has been suggested there is some manipulation in this number that has to do with how listed homes are treated during the various stages of a sale. Given the national trend I don’t see any reason to believe homes aren’t selling for asking or above.
Sales for single family home are down year-on-year 17% to February 2022. I expect that number has now jumped significantly, if national trends apply here. For the same period new listings are down 28%, DOMs (days on market) are down 11% (103 days), months supply is down 25% to 1.8 months (very low), and the affordability index is down 16% to 43, meaning homes have gone from being the most unaffordable in the country to being even more so. According to sources, developers sometimes dump sold homes all at once on the MLS, which distorts median prices and DOMs. I don’t know how widespread that it is, but it’s clearly a big problem. (Sources: Redfin, Managecasa, NAR)
A report by Wolf Street recently highlighted a big drop in sales and large increases in inventory for median priced new homes sales across the US. This is important because it shows the relationship between interest rates, demand, and supply and could very well be a leading indicator for what is coming to the market as a whole. As the monthly nut increases, demand drops off because people can’t afford their budget price. Supply increases because sellers fear a fall in prices. As buyers see sales and listing prices being reduced they delay buying in anticipation of prices falling further, and so on.
At the macro level, we know with almost certainty the Fed will increase the Fed Funds Rate to fight inflation. The futures market predicts 10 such raises. We can therefore expect mortgages to continue going up. The 10 year treasury predicts inflation will be around 3% for the duration, and the yield curve is flattening indicating markets believe the Fed will tame inflation. The big ‘if’ is whether a recession will occur. The yield curve has inverted and raising rates to tame inflation usually underscores a recession. A looser labor market doesn’t bode well for the economy, or housing that is already at or past its inflection point. In other words, the increasing cost to borrow and its concomitant effects on supply, demand, and values would be exacerbated.
Nothing is certain, but the stars seem to be lining up for a reversion of some kind.
In the interests of disclosure, I live in Hawaii. I own a house in Hawaii. I am a successful real estate investor with a portfolio across multiple states and countries consisting of SFHs, apartments, private equity, lending, and publicly traded trusts. I have studied finance at post graduate level and have written extensively on real estate and finance, including a book with a whole chapter dedicated to real estate. However, that doesn’t mean I should not care, even if it goes against my personal interests. It also doesn’t mean I know all there is to know. The opposite is true.
The Hawaii forum clearly isn’t a forum to discuss these matters. The subject is alive and well in other City-Data forums (eg CA), if anyone wants to follow up on any of this. Apathy and denial is very symptomatic of why this problem is so bad, and then when things go pear-shaped nobody wants to take responsibility for their part.
The Hawaii forum clearly isn’t a forum to discuss these matters. The subject is alive and well in other City-Data forums (eg CA), if anyone wants to follow up on any of this. Apathy and denial is very symptomatic of why this problem is so bad, and then when things go pear-shaped nobody wants to take responsibility for their part.
I think everyone knows limited supply pushes up prices. I think everyone knows rising interest rates increase costs and can lower demand.
In all your posts, you keep referencing a problem, but I do not see where you have offered a single "solution" to the problem you claim ... other than to get angry.
I'm not sure who you feel we should be angry at, or why we should be angry. Should we be angry at the people who decided to buy homes ? Should we now bail them out for the decisions they make if the housing market drops ?
Should we be angry at the people who decided to bid up the price to secure their purchase ?
Should we demand the government start building so many houses that they vastly exceed demand in order to provide everyone in the country a house at a specific price-point ?
I'm not outraged because I believe people can make their own decisions.
I think there is no outrage here because many of the posters in this forum have been around the block a few times and are not in the habit of demanding "someone" else take responsibility for their decisions.
Last edited by WaikikiBoy; 06-06-2022 at 09:00 AM..
I think everyone knows limited supply pushes up prices. I think everyone knows rising interest rates increase costs and can lower demand.
In all your posts, you keep referencing a problem, but I do not see where you have offered a single "solution" to the problem you claim ... other than to get angry.
Yep - no solutions offered.
It should be noted - higher interest rates should lower demand - but, will likely lower supply also as sellers hold onto homes rather than moving as they aren't interested in higher interest rates either. Higher interest rates likely won't cause a bubble.
The bubble will burst when the economy implodes - with the last implosion being the great recession. The great recession brought massive foreclosures on the Big Island - and on Oahu it was hit especially hard on the West Side. Essentially - the cheaper areas get hit the hardest where people bought starter homes or lived paycheck to paycheck. Affluent areas tend to get hit the least as they can ride it out.
As far as solutions - well, moving to fee simple versus leasehold certainly drove up home prices as often the most valuable part of the transaction was the land. When you peruse Hawaii newspapers in the 50's when practically everything was leasehold - housing was dirt cheap compared to income - but leasehold doesn't build wealth.
The solutions come down to:
1) Move
2) The economy implodes - drives foreclosures - puts out massive supply and lower demand - hence 2008
3) Almost to late for this - but on Oahu, remove height limits on new towers. The low height limits have created one of the most boring skylines in the world with every building now built to the height limit and hence no variety in the skyline. Create more units/supply with higher towers.
At the end of the day - even if housing takes a 20% hit - people will still complain about affordability and completely forget they live on small islands.
Is the real estate bubble in Hawaii going to crash? Well, bubbles usually do. ..
You're assuming a "bubble" is in place. I'm not so sure this is the case.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
