Home sales cool but prices still rising
The cost of a loan is $1,500 a month more than a year ago
Monica Lampano, a 24-year-old Air Force pharmacy technician, has been looking for a one-bedroom condominium since she moved to Hawaii from Los Angeles seven months ago.
Like many other buyers braving Honolulu's frenetic housing market, Lampano has been a day late and a dollar short time and again. The national housing market has begun showing signs of a slowdown -- even in regions like Los Angeles, where home prices had skyrocketed in recent times. But while home sales have cooled in Honolulu, the rate of home-price increases has yet to ease.
Before and After
What will it take now to get into a median-priced property?
» If you had bought a condominium at the median price of $229,300 last year, put 20 percent down and financed the rest with a conventional 30-year, 5.5 percent fixed-interest rate, you would have paid $1,040 per month for principal and interest.
This year, it would cost you $1,524 a month to pay for the same condominium because the median price has risen to $305,000 and the interest rate has gone up to 6 percent.
» If you had bought a median-priced, single-family home of $490,000 last year, put 20 percent down and financed the rest with a conventional 30-year, 5.5 percent fixed-interest rate, you would have paid $2,782 per month for principal and interest.
This year, it would cost you $3,249 a month to pay for the same single-family home because the median price has risen to $640,500 and the interest rate has gone up to 6 percent.
The Oahu housing market continued to set records last month as the price of both single-family homes and condominiums jumped to $640,500 and $305,000, respectively. When combined with rising interest rates, the increases might require buyers to come up with about $1,500 more in monthly income to qualify for the same loans that they sought last year.
"That's going to be a challenge to many buyers," said Randy Rasmussen, vice president at Castle & Cooke Mortgage. "Who do you know that got a $1,500-a-month raise this year?"
As a rule of thumb, lenders often want borrowers to show three times the income as the amount of their monthly mortgage.
An enlisted military member, Lampano said she did not get that kind of raise, but she had developed patience watching the Los Angeles market take off.
"I still haven't given up hope, but the people with the bigger money might eat me," Lampano said.
The market has been such that buyers with larger down payments, the ability to buy properties sight unseen and the flexibility to go above asking prices have beaten Lampano to closing. However, if current market conditions prevail, experts have said that the tide could soon turn.
"In recent months it appears that the housing market on Oahu may be taking a breather after a run of more than eight years of expansion," said Harvey Shapiro, research economist for the Honolulu Board of Realtors.
Oahu's total home and condominium sales, which have been declining since August, decreased again in November, according to statistics released yesterday by the Honolulu Board of Realtors.
A total of 366 single-family homes changed hands last month, down 2.4 percent from the 375 sold a year earlier. Condominium sales, which totaled 614 in November, decreased 2.2 percent, although they are still outpacing single-family home sales almost 2-to-1.
"There are plenty of signs beyond the statistics that the market is in transition and that it's beginning to slow down," said real estate agent John Riggins, of John Riggins Real Estate, who recently began working with Lampano to help her become a first-time homeowner.
Those participating in the market and industry have started to see an increase in the length of time properties are on the market, fewer multiple offers and more downward price adjustments, Riggins said.
Said Shapiro, "A review of current statistics would indicate that sales will probably continue slowing, but there is clearly still enough demand to push prices even higher in 2006."
These days, it seems the question on everyone's mind -- after gas prices -- is just how high Hawaii's housing market will go before it stabilizes or drops for good.
"I don't have a crystal ball," said First Hawaiian Bank economics consultant Leroy Laney when asked about Hawaii's housing market at the bank's recent annual business outlook forum.
However, Laney indicated that the longer the run of double-digit increases in Hawaii's housing market, where some neighborhoods have seen home values double in the last three years, the more likelihood that some correction will occur.
Nationwide there has already been some cooling, and experts say the trend should continue into next year, particularly if mortgage rates continue rising. But when it comes to Hawaii, the market might be different, said Mary Begier, of Mary Begier Realty on Oahu and the Big Island.
"We really aren't in a bubble. I can't stress that enough," Begier said. "We have to keep in mind that we live in paradise, where people are willing to go to great lengths and endure all sorts of financial anguish to buy."
Anguish is right, said Lehua Rosa Malott, a counselor at the Hawaii HomeOwnership Center, a nonprofit agency that helps buyers break into Hawaii's residential real estate market.
"Right now, there is truly no such thing as affordable housing in Hawaii," said Rosa Malott, who has seen many clients squeezed out of even the condominium market.
"The affordable-housing crisis has begun to reach epidemic proportions," Rosa Malott said. "Everyone needs to look closely at what is happening."
Hawaii's children are moving away because they cannot afford to live here. And more people have been made homeless, as landlords trying to capitalize on the market have sold their homes out from under them or raised rents.
Each day, Rosa Malott said she sees longer lines outside the Institute for Human Services near where she works.
"It's not just people with drug problems or mental problems; most of them have jobs. The only difference is that we have a house and they don't," she said.