Posted by Scott Inamine Hawaii, often referred to as the "Gem of the Pacific " presents a delightful combination of landscapes, rich cultural heritage, and an indulgent way of life. So certainly, the allure of owning real estate and a more affordable condo comes to mind. Mortgage Rates a Consideration?Experts are speculating about the future of mortgage rates, although there is no indication that rates will decline for a protracted period, especially with the Federal Reserve adopting a “higher for longer” stance recently. Potential buyers cannot accurately plan how long mortgage rates will stay high before re-financing at a lower rate makes sense. Buyers need to factor in current mortgage rates into their decision. Demand for CondosThe devastating fires on Maui, and particularly Lahaina, means a lot of homeowners will be displaced for more than a year, which should fuel increased demand for condos and keeping prices high. Realistically there has never been an ideal entry point, pricewise into the condo market on Oahu, but prices have stabilized. According to Honolulu Board of REALTORS® (HBOR), Year over Year condo pricing from July 2022 to July 2023 shows a 0% increase in price at a median price of $500,000. HBOR also indicates that Year over Year Number of resales dropped -18.5%. HBOR goes on to state: The real estate market also saw a decrease in the number of newly listed properties, with a significant 28.8% drop for single family homes and a 15.4% decline for condos compared to the previous year. However, the number of available properties for both single family homes and condos remained relatively stable, showing only a slight increase of 2.6% in active listings for single family homes and 9.9% for condos compared to the previous year. So, with pricing stabilized for now, now might be the best time to consider a condo before demand may cause prices to rise inexorably again. Factor In Homeowners’ Association Fees (HOA)Homeowners’ association (HOA) fees, in Oahu can vary significantly ranging from low as $9 to high as $3,000 per month. The actual cost depends on the range of services and amenities provided. In Honolulu HOA fees typically range from $0.60 to $1.50 per foot translating to $350 to $1,000 per month based on the size of the condominium. As of 2022, according to Cinch Home Services the average monthly HOA fee across Hawaii was recorded at $762. Which is only second to New York in HOA fees. In comparison the average HOA fee across the United States stood at $286 during that period. The reason for HOA fees in Hawaii can be attributed to the increased costs associated with repairing buildings, maintaining amenities, and managing shared spaces on the islands. These fees are necessary to cover these elevated maintenance expenses. Whether a Buyer’s or Seller’s Market. Oahu’s Long Term Pricing Appreciation is SignificantReal estate on Oahu has historically shown growth. According to data from the Honolulu Board of Realtors the median sales price of both single-family homes and condos on Oahu has experienced increases over the years. From 1985 to 2022 the median sales price of a single-family home rose by 596.7% while condos saw a growth of 467.9%. The House Price Index by the Federal Housing Finance Agency also confirms these trends in single family home values nationwide.
Based on their data single family homes have appreciated by 56.1% over a five-year period. Have seen an appreciation of 286% since 1991. These figures clearly indicate that investing in estate in Hawaii can be highly rewarding especially if you hold onto your property for a period. The limited availability of land in Hawaii combined with demand creates a significant supply and demand gap. As more people seek housing unit prices, for properties increase naturally. This presents an opportunity for investors to make returns by purchasing and holding onto their properties. |
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