Honolulu the least affordable housing market in US (Hilo: sales, real estate)
OahuIncludes Honolulu
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Not that it's likely to be a surprise to anyone, but from today's Honolulu Star-Advertiser...
Quote:
The average Honolulu home costs 8.92 years of a household’s pre-tax income, making it the least affordable housing market in the U.S., according to a financial literacy website.
That makes it about 6 times as expensive, in years of income required to purchase a home, as South Bend, Indiana.
What I like about this way of looking at it is that it takes into account both the price of homes AND the earning power of people in their respective markets. That's the hidden "gotcha" for many working people who only look at price comparisons when considering a move to Honolulu.
Honolulu has the 6th highest income on the list of the 20 least affordable places to buy a home, and is 2nd on the same list in terms of the highest home sales price. Are prices too high, incomes too low, or a combination?
I know that Honolulu has the highest population of any Hawaiian city. On average, does Honolulu have the most expensive housing? What about income - does Honolulu have the highest median household income?
I've been browsing the Hawaii C-D forums for a while now, and there have been countless posts and threads cautioning would-be residents of Hawaii that Hawaii is *expensive* and that people really need to have a very good income to be able to afford to live there. So how in the hell do the people of Honolulu, where the average home costs $625,800 and the median household income is just $70,166, afford to live there???
The report states:
Quote:
NerdWallet took a look at over 100 U.S. metro areas to determine where homeownership is feasible for the average consumer.
I wonder how those 100 U.S. metro areas were chosen - better yet, how they were defined. The most affordable list has 11 individual cities; the least affordable has only 4 individual cities -- they are Honolulu; Barnstable Town, MA; Atlantic City, NJ; and Gainesville, FL.
Barnstable Town? Really?
What would the results be if one of those U.S. metro areas was New York City, rather than "New York-Wayne-White Plains, NY-NJ" and "New York-Northern New Jersey-Long Island, NY-NJ-PA", or San Francisco rather than "San Francisco-Oakland-Fremont, CA?"
Honolulu has the 6th highest income on the list of the 20 least affordable places to buy a home, and is 2nd on the same list in terms of the highest home sales price. Are prices too high, incomes too low, or a combination?
I know that Honolulu has the highest population of any Hawaiian city. On average, does Honolulu have the most expensive housing? What about income - does Honolulu have the highest median household income?
I've been browsing the Hawaii C-D forums for a while now, and there have been countless posts and threads cautioning would-be residents of Hawaii that Hawaii is *expensive* and that people really need to have a very good income to be able to afford to live there. So how in the hell do the people of Honolulu, where the average home costs $625,800 and the median household income is just $70,166, afford to live there???
Prices are high because Oahu is a small island - approximately 40 miles by 20 miles - with much of that area not able to support housing (mountains) - you can only build so much and it has a large population. So, limited inventory. Incomes are low in comparison to lets say - the San Francisco Bay Area. You'll often make 30-50% less for a comparable job in Honolulu versus San Francisco. But, you can't really compare the two areas - San Francisco's median home price is over $1,000,000 - and one can say the same thing, how do people afford to live there - and they can because of the tech economy and stock options. Also high dual income couples with childless homes (San Francisco is known to have the least amount of children per couple for a large city in the US)
In Hawaii - Oahu has the highest income and the highest housing prices.
People afford to live here by renting - living with family - and living in tiny places. But, many worked on the mainland and came back with money. Many houses get passed down to the next generation. Some inherent money - some bought a long time ago and the houses have appreciated to where they are today.
When I first visited Hawaii with my wife-to-be in 2001, the median home price in Portland, OR (where we live) was about $150,000, vs. about $300,000 on Oahu. Now the median price in Portland is $242,000, vs. $630,000 on Oahu. With our combined mainland incomes back then, an Oahu house would have almost been within reach. Now we both make a lot more money, but we couldn't touch an Oahu house. In contrast, Hilo homes are now the same relative to Portland homes as they were in 2001, after climbing into the stratosphere during the housing bubble.
What I like about this way of looking at it is that it takes into account both the price of homes AND the earning power of people in their respective markets. That's the hidden "gotcha" for many working people who only look at price comparisons when considering a move to Honolulu.
Unfortunately, that particular "way of looking at it" is somewhat misleading and statistically meaningless.
The average of these household incomes is $80,166, but the median is $70,166.
Using the "average house price" instead of the "median house price" inflates it. Similarly, using the "median household income" instead of the "average household income" reduces it.
Now, using the author's "back of the envelope" strategy of dividing housing price by income, one can come up with four different numbers to "show" how many years' income it will take to purchase a home. Using the numbers in the example above, one can do the following...
Average house price/average household income = $625,800/$80,166 = 7.81 years
Median house price/median household income = $425,800/$70,166 = 6.07 years
Median house price/average household income = $425,800/$80,166 = 5.31 years
Average house price/median household income = $625,800/$70,166 = 8.92 years
Of course, the author liked the "average house price/median household income" ratio, which "proves" that Honolulu is the "least affordable place" to buy a home.
Furthermore, as GreenGene pointed out, there's a major problem with the sample size and distribution. The bulk of the "Honolulu" house price data might be heavily weighted towards East Oʻahu (where housing prices tend to be among the highest on the island), instead of Central Oʻahu and West Oʻahu, while the bulk of the "San Francisco-Oakland-Fremont" house price data might be weighted more towards Hayward (where housing prices tend to be lower than surrounding areas).
The problem is "outside money". My wife works in real estate and hasn't closed on a property bought by a local in more than two years. The buyers are mostly from the Mainland and Asia. All of my life I never thought Oahu would turn into what it has. It's become one great big chit hole. Too many outsiders, cars and concrete. It's safe to say I'm moving my family away from Oahu in the coming years. Our home doesn't feel like home any more. We'll move to one of the neighbor islands or somewhere else warm. We've had it!
Honolulu has the 6th highest income on the list of the 20 least affordable places to buy a home, and is 2nd on the same list in terms of the highest home sales price. Are prices too high, incomes too low, or a combination?
I know that Honolulu has the highest population of any Hawaiian city. On average, does Honolulu have the most expensive housing? What about income - does Honolulu have the highest median household income?
I've been browsing the Hawaii C-D forums for a while now, and there have been countless posts and threads cautioning would-be residents of Hawaii that Hawaii is *expensive* and that people really need to have a very good income to be able to afford to live there. So how in the hell do the people of Honolulu, where the average home costs $625,800 and the median household income is just $70,166, afford to live there???
The report states:
I wonder how those 100 U.S. metro areas were chosen - better yet, how they were defined. The most affordable list has 11 individual cities; the least affordable has only 4 individual cities -- they are Honolulu; Barnstable Town, MA; Atlantic City, NJ; and Gainesville, FL.
Barnstable Town? Really?
What would the results be if one of those U.S. metro areas was New York City, rather than "New York-Wayne-White Plains, NY-NJ" and "New York-Northern New Jersey-Long Island, NY-NJ-PA", or San Francisco rather than "San Francisco-Oakland-Fremont, CA?"
GreenGene,
I fall into one of these catigory of a yearly income of $78,000 on one income. How do people people over come the difference. You don't take very many vacations to the Mainland USA, myself None. You don't go out to dinner/movie very often, maybe once a month. Maybe you get roommates, rent out one of your bedrooms. I Rent which is expensive, staring at $1500+ a month depending on # of bedrooms and where you live. Sometimes entire famlies live at home and all have jobs contributing to the payment of the loan. A lot of times you work two jobs, sometimes three jobs. It varies greatly but people get by and do it painfully sometimes. There is a large homelss population living here, due to those factors. This does not get into medical expenses but that adds up also. I also know i will not be able to retire here will move back to the Main Land maybe in the PNW, which also has challenges.
Hope that helps a little bit.
Scott
Last edited by ScottStielow; 06-18-2013 at 10:25 PM..
Reason: Added information.
The problem is "outside money". My wife works in real estate and hasn't closed on a property bought by a local in more than two years. The buyers are mostly from the Mainland and Asia. All of my life I never thought Oahu would turn into what it has. It's become one great big chit hole. Too many outsiders, cars and concrete. It's safe to say I'm moving my family away from Oahu in the coming years. Our home doesn't feel like home any more. We'll move to one of the neighbor islands or somewhere else warm. We've had it!
Outside money (foreign usually) affected S Florida home prices a lot, and many folks have departed, as it became overly congested. I lived across from the beach and the Diplomat Resort , for many years , and left some years ago for the reasons you stated. Many have moved to Costa Rica for much lower living costs, but, good news travels fast, and as will happen before long in Cuenca, Equador, prices climbed along with other over crowed issues. Same for Belize but fewer are there. Costa Rica will feel the impact of China "desires" to build a new canal across the southern border of Nicaragua from the lake there, to the Caribbean Sea, and cross the north border of Costa Rica too. Why? The new canal will accommodate the huge container ships being built by China (2014) that will carry 18,000 containers each, versus the 4,500 on a typical ship using the Panama Canal now. Panama Canal is underway retro enlarging, but, it will not be large enough. The USA mainland has about 55 ports, of which 10 are prime for that ship size. However, fees that are supposed to routinely been going to maintain ports have been diverted, a long time by Congress.
The China backed canal will ripple affect the central latin countries and things may get very different.
One of the many reasons that Florida became so different, was the constant flow of new residents and
all that changed with more folks living in the greater Miami to Palm Beach areas. Underground water aquifers became/are becoming emptier and concrete above ground, stops natural water replenishment; streets, and all, that clutter concrete going with new homes/buildings. The results are salt water encroachment into aquifers from beach areas, and need for newer filtration plants at a large cost.
Seems that any "nice' location will change after it becomes popular. My desire for Hawaii -Oahu
changed after so much became apparent about the level of growth versus 40x20 mile size and nonstop flow of cars into the area on limited roads to handle them. Long term vision is necessary to mitigate
issues due to growth, but, often money may replace practicality, at a loss to future generations. We see it all around us, if we avoid living in that zip code for "denial".
My desire for Hawaii -Oahu changed after so much became apparent about the level of growth versus 40x20 mile size and nonstop flow of cars into the area on limited roads to handle them.
Growth is an interesting concept on Oahu. For several years, including 2013 - Honolulu is experiencing a net loss in population due to migration - and its population growth is due to more births than deaths.
The reason it seems like there is so much more traffic and people is: Record tourism - 2012 shattered all the records and 2013 will shatter that record for tourism - the tourist drive cars. And, people migrating to West Oahu for cheaper housing and not fully understanding the drive time implications to get downtown from Kapolei - Kapolei is trying hard to be its own urban center - but with mixed results.
Here is a net migration loss chart for 2013 - snapped on my pc as it is an over 100 page pdf. if I remember correctly - Oahu has had a net migration loss of people per year for over 10 years. It seems like a lot more people - but it isn't from people moving here.
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