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Flat. On Oahu from 2006 to present about a 15% price increase or 1.6% per year. Compared to the decade prior: 1996 to 2006 the increase was closer to 90%.
To go back a little further... in 1980 the median price on Oahu was $140K. Assuming the median price hits $800K in 2017 (as predicted by UHERO and Brewbaker), this translates into a 4.8% annual rate of appreciation.
But a typical home in 1980 is nothing like a typical home today.
The returns investors make on property here are among the lowest in the nation (and the world).
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Geez, my newest investment was build in 1975 and hasn't gotten any bigger yet has seen 6% annual rent growth and appreciated 9% annually.
Most of these new mcmansions are in TX where they have minimal appreciation. That has nothing to do with Oahu profitability.
Median for SFH in 2006 was $630,000 and now $760,000 or 20% difference.
Median in 2011 was $575,000 or a greater than 30% difference today.
$760,000 is the highest median month this year.
2016 -
Jan $733,500
Feb $700,000
March $725,000
April $720,000
May $719,000
June $760,000
July $746,000
August $747,500
Average for the year-to-date is $731,400
Median price in 2006 was $630,000.... therefore prices increased only 16% over the 10 year period. A 1.5% increase per year over 10 years. Not exactly flat but it's pretty close.
The fact that prices have been rising at a fairly stable pace is a good thing. 2-3% growth (in our current low inflation environment) is stable and sustainable... significantly more than that will guarantee a steep correction at some point.
Condo prices, however, have increased over 25% over the same 10 year period ($310K in 2006 vs $388 2016 YTD). That is 60% more appreciation than SFHs... when SFHs almost always appreciate at a higher rate than condos. This goes to show the increasing desirability of living in the urban core where the bulk of condos are located.
If a potential buyer's primary concern is long-term (>15 years) appreciation, they should consider buying a SFH in or just outside the urban core. All the benefits of SFH ownership right smack dab where more and more people want to live and where SFHs are being demolished and replaced with substantially higher density condos. The growing scarcity of SFHs in or near the core will push their values up faster relative to their increasingly omnipresent condo counterparts. Look at those single family home lots in Waikiki. They are veritable gold mines.
But it seems for the OP, the country is more their speed.
Geez, my newest investment was build in 1975 and hasn't gotten any bigger yet has seen 6% annual rent growth and appreciated 9% annually.
Most of these new mcmansions are in TX where they have minimal appreciation. That has nothing to do with Oahu profitability.
The typical SFH available for sale on Oahu today is substantially larger than the typical SFH home available for sale in 1980 (keep in mind, the bulk of the homes available to purchase specifically in the year 1980 were mostly homes built between 1950 and 1975). The oldest SFH homes built on Oahu were tiny and had very large yards respective to the lot size. Today's SFHs sprawl out and cover a much larger percentage of the lot. Most homes in the urban core have 5 ft yards that surround the entire perimeter of the property (10 ft at the street) - it is virtually all house. Much stricter building codes (flood and hurricane grade compliance) and amenities like air conditioning drive up the cost of today's homes vs those built in the 50,s 60's and 70's.
When you actually compare a typical home on the market in the year 1980 and a typical home for sale today, you are (generally) getting a much stronger, much more energy efficient, much larger and amenity-rich home when compared to homes sold 36 years ago. That really shouldn't be ignored.
To go back a little further... in 1980 the median price on Oahu was $140K. Assuming the median price hits $800K in 2017 (as predicted by UHERO and Brewbaker), this translates into a 4.8% annual rate of appreciation.
But a typical home in 1980 is nothing like a typical home today. They were much smaller without many of the amenities and rigorous code compliance requirements of today's (or recently built homes). Once you factor these realities in plus the constant repairs and maintenance required to keep a home from falling apart, the real annualized return on investment is closer to 3.5%. Many will argue that there are many other investment opportunities with similar risk that return much more than 3.5%.
Rents are very affordable on Oahu when you factor in the cost of ownership. The returns investors make on property here are among the lowest in the nation (and the world).
But there are many potential benefits of home ownership that outweigh the financial benefits. If those appeal to the OP, then buying is the way to go as long as they plan to hold on for at least 15 years.
Nice post, and I agree totally. Looking at the longer term, it makes sense to purchase instead of rent. One of the key advantages of buying is that you're locked into a mortgage monthly payment that is somewhat comparable to monthly rental rates. But over the long run, you'll still be paying the same mortgage rate, while the market rental rates is much higher.
If you bought that house in 1980 for $140k, you're done with the mortgage payments. If you're renting, you're still paying market rate rents, which is probably $2k to $2.5k for an ok single family house (if not more).
The typical SFH available for sale on Oahu today is substantially larger than the typical SFH home available for sale in 1980 (keep in mind, the bulk of the homes available to purchase specifically in the year 1980 were mostly homes built between 1950 and 1975). The oldest SFH homes built on Oahu were tiny and had very large yards respective to the lot size. Today's SFHs sprawl out and cover a much larger percentage of the lot. Most homes in the urban core have 5 ft yards that surround the entire perimeter of the property (10 ft at the street) - it is virtually all house. Much stricter building codes (flood and hurricane grade compliance) and amenities like air conditioning drive up the cost of today's homes vs those built in the 50,s 60's and 70's.
When you actually compare a typical home on the market in the year 1980 and a typical home for sale today, you are (generally) getting a much stronger, much more energy efficient, much larger and amenity-rich home when compared to homes sold 36 years ago. That really shouldn't be ignored.
I'm not sure what you think is being ignored or even if you are actually foolishly claiming that property values have not gone up but only got Bigger.
Looking at a property I bought in 1978 for about $60 SF now sells for bout $1;000sf. My 2008 purchase at $1,000sf is now selling bout $1,800sf. That is appreciation NOT resulting from increased size.
I bought a place in late July, after having been on island for 4 months. I was tired of paying rent and view my property as an investment. I own a 2 bedroom condo in a high rise in Makiki and would probably rent the unit out when I leave the island.
Having written that, I would not encourage one to buy or sign a long-term lease agreement if one is not yet on island, especially if you don't have friend/family to conduct due diligence for you.
You need to face the facts. Your personal residence is not an investment. ala Robert Kiyosaki-Hawaiis own Japaneese financial expert.
If you are looking to renting to bail you out of a bad buy.......................good fr. e a .ki.ng LUCK!
You will be fine buying in right now. Just pick the right neighborhood! If you are considering the safety of your investment both short and long term, forget about the areas that require a long commute. Close-in is the trend and the SFH with a reasonable commute will always have less exposure to downturns in the housing market. If you ever find yourself in the situation where you have to sell or rent you will be much better off as well.
The housing market in HI has been relatively flat the past ten years and any price appreciation we have seen pales in comparison to West Coast markets. The record low interest rates right now make a huge difference in affordability but you have to stay in long term to negate market risks. Buying a home today is a great hedge against inflation (borrowing at current rates) and you put yourself in position to benefit from future home price appreciation.
My condo value went from $72k to over $250k over the last 12 or so years. Is this a FLAT market? I would like to see what you think is a FLAT chested person.................hahahaha. DOLLY PARTONn Raquel Welch?
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