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What's the hurry everyone? The fed already said rates are staying low thru 2014. If you bought in the last 10 years you aren't ahead. If you can't pay cash - you are lilkely to have a negative cash flow.
In Oahu - a lot of landlords don't want to be a landlord since they lose money every month. They can't sell their property. They can't sell because of tight lending standards - most properties aren't FHA loan eligible since they aren't 51% owner occupied - a lot aren't even conventional loan eligible because of litigation like the Moana Pacific - so buyers need a full 20% down.
Use caution - if you have all cash there are some deals - but get a deal - in most cases, the property will still be there in 10 years and even if the price went up you are net even by skipping the negative cash flow.
I don't know anything about the Big Island market but can say you are completely wrong on the Oahu market, particularly Waikiki and Diamond Head. I have purchased three properties during the last 10 years. The first one has doubled in value. The second has increased in value 47% and the third, closed 9/2008 is up about $80000, based on a subsequent sale. All rents have increased since purchase.
My experience since 1978 is that properties have appreciated on average 9% per year and rents have increased 6-7%.
You don't have to believe me. You can go to oahure dot com and check out sales from 5 years ago.
I agree that I would NOT rush to buy now but that makes this the BEST time to buy. You can be selective and not have twenty people against you in a bidding war. And when prices jump, it will be quick in probably at least $50,000 increments. How are you gonna make up $50,000 when you jump into the market paniced that prices will keep jumping?
NOW is the time to make a good purchase.
I don't know anywhere where rents have fallen so any landlord not happy with his purchase either gamed the system with a fancy mortgage that is going to reset with higher payments or planned on a quick flip and doesn't have the resources to keep the property or pay the transaction costs to exit his investment. Poor planning on their part.
I don't know anything about the Big Island market but can say you are completely wrong on the Oahu market, particularly Waikiki and Diamond Head. I have purchased three properties during the last 10 years. The first one has doubled in value. The second has increased in value 47% and the third, closed 9/2008 is up about $80000, based on a subsequent sale. All rents have increased since purchase.
My experience since 1978 is that properties have appreciated on average 9% per year and rents have increased 6-7%.
You don't have to believe me. You can go to oahure dot com and check out sales from 5 years ago.
I agree that I would NOT rush to buy now but that makes this the BEST time to buy. You can be selective and not have twenty people against you in a bidding war. And when prices jump, it will be quick in probably at least $50,000 increments. How are you gonna make up $50,000 when you jump into the market paniced that prices will keep jumping?
NOW is the time to make a good purchase.
I don't know anywhere where rents have fallen so any landlord not happy with his purchase either gamed the system with a fancy mortgage that is going to reset with higher payments or planned on a quick flip and doesn't have the resources to keep the property or pay the transaction costs to exit his investment. Poor planning on their part.
I'm glad you've had a good experience - but according to the data from the Honolulu Board of Realtors, their data paints a very different story. We haven't had the drops like the mainland - but the average sales price has gone down for homes from $794K in 2007 to $707K in 2011 and condo average from $381K to $357K. I'm in a very high end building downtown - units on the low floors that sold for $900K when it was built a few years ago can be had for $800K today.
My original post wasn't about home prices - but was stating it is really hard for people to get financing - so many are forced to be landlords since they can't sell their units. The majority of condos in Oahu require at least 20% down since the owner occupancy is to low for FHA financing or is in litigation and require a higher down payment.
Back to the data - here is the link, it is what it is. Your experience is certainly not typical. If you have all cash - you can grab some deals - people are trying to sell their property.
I wanted to add this to my post regarding the realtor data and home prices in Oahu.
For fun, I looked up 3 properties that I thought were representative of condo's one could rent out - they are all nice buildings with recent sales data and are not leasehold.
Downtown: The Pinnacle 1199 Bishop St #20A (my building, not my unit) Purchased 8/2008 for $992,000 listed for $959,000
Ala Moana: Moana Pacific 1288 Kapiolani blvd, unit #I2007 Purchased 8/2007 $612,000 Listed $550,000
My original post wasn't about home prices - but was stating it is really hard for people to get financing - so many are forced to be landlords since they can't sell their units.
If your argument is that financing is harder today than 2007, then sure, I agree. But that is not what you said. If you look at the link you provided it shows average and median prices almost double what they were 10 years ago. What is your point? Financing today is more restrictive today than yesterday? I agree! Wait ten years to buy a better deal? NO WAY.
If your argument is that financing is harder today than 2007, then sure, I agree. But that is not what you said. If you look at the link you provided it shows average and median prices almost double what they were 10 years ago. What is your point? Financing today is more restrictive today than yesterday? I agree! Wait ten years to buy a better deal? NO WAY.
My point is there is no hurry to get a place now when rates are going to be low for the next 2 years and housing prices aren't going up - at least for now. If you bought a place in the last 5 years - you likely have lost a lot of money. After the crash in 2008 if you said - I should buy, or 2009, 2010, or even 2011 - you are likely negative. If you bought 10 years ago - you are in good shape.
Also, I didn't say wait 10 more years - I said, what's the rush - no data indicating prices going up - data from the fed says rates low at least more years.
I bet prices continue to go down for now with economic uncertainty, tight lending standards, and excess inventory - deals can be made if you are cash rich and you find someone that must sell.
Rates should stay low for another 2 years - prices don't seem be going up - there is excess inventory - no need to rush to buy.
April 4, 2003 2304396
1-3-1-032-003-0012SOLD277$779,000$779,000$750,000
Coral Strand exact unit sold 4/4/2003 for $750,000!!!! OK, they did a remodel but someone that WAITED until 2007 when the market was HOT HOT HOT threw money at the owner (say $875,000 more) four years later and then that owner tried to flip 3/11/2008, not even a year later, for $1,965,000!!!!! Duh!? Yeah, wait until the market gets hot again, or the day before what is that date again?
April 4, 2003 2304396
1-3-1-032-003-0012SOLD277$779,000$779,000$750,000
Coral Strand exact unit sold 4/4/2003 for $750,000!!!! OK, they did a remodel but someone that WAITED until 2007 when the market was HOT HOT HOT threw money at the owner (say $875,000 more) four years later and then that owner tried to flip 3/11/2008, not even a year later, for $1,965,000!!!!! Duh!? Yeah, wait until the market gets hot again, or the day before what is that date again?
Seriously, what is your point?
Ok, I'm game - I'll try this again (and, what's with the hostility - I'm glad it worked for you). The point is that nobody needs to rush into real estate right now. Rates are going to stay low for at least 2 more years and there is a lot of excess inventory with tight lending standards. I picked 3 random hot properties in different areas - including ocean front in the diamond head area, all properties are selling less than they were 5 years ago.
It's probably not the bottom of the market, that's my point. And if you thought the bottom of the market was 2008, 2009, 2010, 2011 in Hawaii - you were wrong.
Low rates, excess inventory, and economic uncertainty will keep prices at these levels for probably another couple of years. Unless you find a desperate seller - wait awhile - you'll likely get that property cheaper later. The data doesn't support buying investment property today or future retirement homes - its a guessing game for the timing, but probably at least 2 more years.
Predicting the bottom of a market is difficult. My take is that you don't need to be at the absolute bottom of a market to make a purchase if your intention is to hold onto the property more long-term. In the end, each person needs to make a determination where they believe the market is at, and how long they plan to hold on to a property.
Personally, as a buyer, I think if you wait until all the data inconclusively proves the market is improving and the economy is getting stronger and prices are rising again, then you've missed your best time to negotiate a purchase. I prefer to study a neighborhood, understand current values and rents and then wait for the right opportunity to buy. Set specific financial parameters for the purchase and if the seller is not responsive to your offer, move on and wait for the right deal.
Once the data is obvious to all that things are improving, then sellers will be less willing to negotiate on price.
But like whtviper indicates, make sure you get a good deal. My impression is that a lot of people come to Hawaii on vacation, have a great time, decide to buy something and make an emotional purchase without educating themselves on the market. As a result, they don't get a good deal.
Prices may continue to drop a bit. But I just don't think you can pinpoint the exact bottom. So if you buy a little before bottom or a little after bottom, and you have researched your purchase and you are looking at it as a long-term investment, you should be o.k.
My problem with the stats & reports provided in an earlier link is that they are so general. They just provide general numbers for all sales across the board. For example, they show average home prices falling a bit. But what does that mean ? It could be that there were simply many more lower priced homes that sold and the higher priced homes were not selling so well. That would bring down the average. It could be that lower priced homes are actually increasing a little and selling well and higher priced homes are not selling at all. That could also lower the avg sale price from one year to the next.
With condo's: same thing. But add in differences such as the numbers include studios, 1 bdrms, 2 bdrms, fee-simple, leasehold properties, etc. In all neighborhoods. Perhaps the price on leaseholds are falling fast but fee-simple units are holding their value. Or studio prices are falling fast because banks won't loan on all the studio condotels so their sale prices have dropped. But non-condotel 1 bedroom units are slowing increasing in price in the under $350,000 price range but falling in the over $500,000 price range. All of these are just speculative questions for thought. And reasons why I put little value on reports that provide such general numbers.
It's also why I say you can't make an emotional purchase, you must study your market and you must be able to identify a good deal when you see it, or negotiate it.
I do think overall prices have dropped over the past 4 years. They may continue to drop and the may level off and just hold steady for a couple years. But if you do your research ... and I mean some real specific in depth research, you can come to a decision that is right for you and your goals.
Personally, I spent over 9 months working on my current purchase. And if pricing drops a little more or if it drags along with no increase for a few years I'm o.k. with that. Because I'm looking at it as a long-term purchase.
We did this on Oahu and learned a lot in the process but have enjoyed almost every minute of it.
We had the great timing to buy at the top of the market in 2006 but got lucky on the property being a licensed vacation rental. We had no idea about running a VR or even that they existed. We originally were just looking for a place to rent out to cover most of the operating expenses. With a little trial and error we got the hang of advertising, booking, cleaning staff, deposits. taking credit card payments and the many other details to handle when you operate a VR. Several things that we've found to be very important:
1) Maintenance is a priority. Unlike a long term rental, the VR guests are not forgiving when the sliding glass door doesn't work - and they shouldn't be forgiving.
2) Your cleaning staff is the face of your business. Hire a good one, treat them very well, buy them Christmas presents, don't ask them to work holidays and give them the authority to do whatever is necessary to make things right with the guest. Without them you'll be in real trouble.
3) Have a backup plan for everything, multiple sets of towels and linens, extra keys when they get lost...
We haven't retired to our place yet but travel there every year to do upgrades and enjoy a vacation. Someday soon it will be a full time vacation.
Ok, I'm game - I'll try this again (and, what's with the hostility - I'm glad it worked for you). The point is that nobody needs to rush into real estate right now. Rates are going to stay low for at least 2 more years and there is a lot of excess inventory with tight lending standards. I picked 3 random hot properties in different areas - including ocean front in the diamond head area, all properties are selling less than they were 5 years ago.
It's probably not the bottom of the market, that's my point. And if you thought the bottom of the market was 2008, 2009, 2010, 2011 in Hawaii - you were wrong.
Low rates, excess inventory, and economic uncertainty will keep prices at these levels for probably another couple of years. Unless you find a desperate seller - wait awhile - you'll likely get that property cheaper later. The data doesn't support buying investment property today or future retirement homes - its a guessing game for the timing, but probably at least 2 more years.
I haven't mastered multi-quotes but you also said
My original post wasn't about home prices - but was stating it is really hard for people to get financing - so many are forced to be landlords since they can't sell their units. The majority of condos in Oahu require at least 20% down since the owner occupancy is to low for FHA financing or is in litigation and require a higher down payment. Rates should stay low for another 2 years - prices don't seem be going up - there is excess inventory - no need to rush to buy. the property will still be there in 10 years and even if the price went up you are net even by skipping the negative cash flow.
Also, I didn't say wait 10 more years - I said, what's the rush - no data indicating prices going up - data from the fed says rates low at least more years.
I think you are wrong for advising people to wait. I also don't think you understand the figures you're reporting on median prices. WaikikiBoy explained very well how to interpret the data.
People are always telling me how lucky I was to buy in the 70's..oh, and the 80's & 90's and the 00's while they are still waiting for the perfect deal. and waiting........
Meantime, condos in Kailua/Waimanalo had the biggest increase in price at just under 60 percent, from $373,000 to $589,000
What really matters is what is happening to the specific market for the type of property you're looking for and the area. Waiting is for renters.
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Rent-to Retire and/or Investment Property experiences
