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Location: Big Island- Hawaii, AK, WA where the whales are!
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I guess I will add my opinion and tell me as CD can do so well if I am wrong.
I believe HI will bounce back before mainland market because it is diverse and not only needing the mainland ( ok not all of it) meaning outside of mainland (other countries) to increase the market economy? Am I wrong in this thinking? Mainly towards real estate would be a question but also on a whole? Would you think this would also include BI?
The links below are to information from Paul Brewbaker, until recently the Chief Economist at Bank of Hawaii...
Quote:
For Hawaii, one new trend coming out of the shakeup is that changes in property valuations, which used to lag behind the Mainland market by a few months, now fluctuate in "real time," rising and falling nearly in sync with the Mainland.
Unquote.
If he's right, I'm wrong.
I'll be interested to have this discussion again in about a year.
Here is information about two houses - one in Califoria and one on Hawaii. I do not own either, (now) but I am very familiar with both neighborhoods. I have enough information about these two houses to believe the data presented.
The intersting thing to me is the price chart for each. The California chart peaked in 2005 and has been dropping ever since. The Hawaii chart peaked in 2008.
Yes, the whole "real time" thing is a new viewpoint. It's true that HI has been impacted by the global crisis at the same time as others, yet the real estate market has been falling in some states since start of 2007 - end of '06 when loans just began to go south. HI didn't react to that at the same time, because loans weren't coming due at the same time, with later originations. So there was lag in HI's real estate market for the last 2 years with real estate just beginning to slow last year before the Wall St crash, combined with "real time" impact of the fall-2008 financial crisis...both have occurred simultaneously this time for Hawaii -- unprecedented.
So where will it wash out? I suspect HI is not at bottom yet, but hopefully it is near enough to bottom that we're curving to the bottom and beginning the upswing...I hope. I really hope. Because if not, then Hawaii has at least another year of downswing to come. California I agree looks to be at bottom for most areas, perhaps some city-hearts still to drop a bit further. We dropped 55% where I live, and it seems to be stopping there. I'd think Hawaii would be hurting if it saw 55% drops in many areas after all is said and done.
Edit: just saw Hank's post, precisely what scares me for Hawaii! Soooo much drop has happened elsewhere, and it is not immune, and this drop is now happening worldwide.
Do we have as many (as a percentage) sub-prime, and adjustable-rate, loans in HI? It seems that the big drop in RE was precipitated by the re-setting of the rate on these loans, which people couldn't afford, which led to lots of foreclosures.
Do the loan portfolios out here look the same? Somebody mentioned later reset dates?
IMFresets.jpg (image)
Here's a chart for national resets by loan type. I cannot find a chart like this for Hawaii, but perhaps someone can and post. It is easy to see the coming additional resets that will cloud the market nationally. They wouldn't be such an issue, these later resets, because they are a lot of Alt-A and A paper loans, but home values have dropped so much that even A paper often cannot refi, including on investment property (even harder). (The Option Arm's shown may be less than shown now because many lenders would have called these early, as they are the negative amortization loans that a lender calls when they are upside down by a certain amount.)
I would love to see this type of chart for Hawaii. I suspect less people took these types of loans for Hawaii, but not enough to stem a further fall. In addition, incomes are lower and credit tighter. Thus I see further downturn, 15-30% in 2009 for different areas of Hawaii.
Another thing to watch is the NOD filing rate (Notice of Default).
Mahalo Cynmokolhe - but being your in the business - you have opinion?
I tend to agree with those who say we have not quite reached our bottom yet, especially on the Big Island. We have an over-supply of homes in some areas and lending is still tight, so we need to see an increase in the number of qualified buyers before some of the inventory levels begin to shrink. Another factor for our island is unemployment--the numbers are not encouraging right now.
That said, I do not necessarily think that a well-qualified buyer who really wants or needs a home on the island should necessarily wait much longer before getting into the market. There are good deals to be had and Sellers are getting more and more realistic about their prices in many cases. As conventional wisdom says, you won't know we've reached the bottom until prices start to rise again--and then you've missed it.
I posted the link to Paul Brewbaker's information because it makes a lot sense to me. I saw him speak last year and he brings a lot of common sense to his analysis. I do not believe it is possible for anyone to predict what will actually happen over the next year--there are just too many factors in play, including nature....but I do think buyers and sellers need access to sound information to make the best decision possible in light of their own personal circumstances.
Great discussion in this thread. I'm also curious as to whether the "real time" correlation is going to prove to be consistent over time.
Just my two cents! I have been spending a lot time researching the housing market on Oahu. My wife works in escrow, so I get a little bit more info from her too.
As much as we hope for a bottom, I don't even think we are even close to one with the Oahu housing market. We didn't get where we are now in just one year, it took roughly 7 years, didn't it. It started in 2001 and really went crazy from 2004 to 2005. Although the local lenders didn't underwrite a ton of Alt A mortgages, they did underwrite a bunch of jumbo, 100% financing, no doc loans. These are very risky too.
If unemployment continues to rise, it will have a major impact on housing prices. Our two biggest industries are getting hammered, tourism and construction. Prices have to come down, the vast majority in Hawaii really can't afford the home they're in right now, nor can they afford to buy at current prices.
Before we can even talk about a bottom, a lot has to be repaired on the Federal level. Our banking system is broken and until we fix this, Hawaii, just as parts of the Mainland, will struggle. Also, keep in mind that President Obama's plan will do nothing to help those who bought a house for 725+K. How many buyers bought homes on Oahu for over 725+, a ton.
My bold prediction is we will see a median price for single family homes at 350-300K within 3-4 years on Oahu. It could be sooner. The only thing that's keeping real estate transactions going is the super low interest rates. The problem is banks and mortgage lenders are tightening up their underwriting, so many who qualified before (basically anyone who could breathe) cannot now. Of course, I don't like to see people losing their homes, losing their equity and being upside down. Its very, very sad, but a correction is needed. My wife and I nearly closed on a house in Pearl City back in Oct. of 2006, lets just say we are so glad we didn't.
If I'm wrong, I'll be happy to take all of the heat from everyone. I don't like doom & gloom posts or people, and I hope I haven't come across as such. I'm a realist, but that doesn't mean I think we are heading into a full-blown Depression in Hawaii. The world is not going to end like some say.
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Did California peak well before Hawaii?
I agree that it will be also an interesting conversation in a years time... thanks for all the posts everyone...
