September Oahu real estate sales

The September Oahu real estate sales stats are out, and some of them are not good. And I think I should start with this caveat - these numbers reflect one month, not the year, and also they reflect the sales that went into escrow somewhere between 30-90 days ago.

Is this market crashing? Inventory of homes for sale in Oahu has not risen any higher than it was 2 years ago. Seriously. In November 2006, there were just as many homes for sale, and MORE condos for sale than today. Can anyone say that about any other market?

Also there are only 8.1months of homes for sale in our inventory. That's lower than most of this year, and certainly lower than most markets in America.

The number of sales on Oahu year to date is down 26.5%. That's not too bad since we have been at record highs for several years now, but the prices are now starting to reflect the drop more. The median price of homes sold in Oahu dropped to $590k. Why?

Well for one thing, you have to look carefully at the report to see where the homes were that actually sold. The area with the most home sales was the area with the biggest price drops and most number of foreclosures - Ewa Beach. That area has been hard hit, mostly I think because all of the military homeowners that bought homes 3-4 years ago that are now selling short of their mortgage balance. While prices in other areas dropped some, there was no place like Ewa Beach, where short sale and foreclosures are common, and where dozens of homes are for sale in each neighborhood.

In Comparison, The homes in Waialae and Kahala were actually up 7% in median price, even though the number of sales was down 33.3%.

Conversely, In Hawaii Kai, the median price is down just 21.5% compared to last year. Why? Because the most expensive homes are selling there, while cheaper starter home are selling.

But there are also very positive numbers that reflect the strength of Oahu real estate. The total number of homes sold in Oahu real estate was down to 215 from 255 last year. However only 163 closed in February of this year, so we're well above that. Also the homes that sold were on the market for an average of 55 days, which is less than January and February of this year.

One interesting stat I saw was that Waikiki is still very active, with 56 sales last month, compared to 57 sales in the same month last year. The prices were down almost 20% compared to same month last year, but year to date, the prices are still up 18% since last year, and the number of sales shows that buyers are still in that market.

Regionally, most of the available inventory of homes is on the North Shore. But if you look at price ranges, the most homes available are in the $1million plus market, where there are 15.5 months of inventory.

Will the real estate market "crash" like it did after Sept 11, 2001? I hope so!

Almost everyone said the real estate markets would crash, or at least slow down tremendously, after the Sept 11 terrorst attacks. Realtors and mortgage brokers were afraid that difficult days were ahead. In fact, for about a month that was true.

Mortgage rates went up, buyers sat on the sidelines, and sellers panicked. Then in about November, the market started picking up steam into the biggest real estate boom in history. Rates came down, buyers begged for properties, the Fed lowered the discount rate, and the market took off like a rocket.

Today feels something like the events of Sept 11. The market is down. Congress is in a panick. The news is all bad. I hope it all turns out like it did last time. The Fed is expected to lower rates again when it meets this month, to loosen up liquidity and start the flow of loans.

Mortgage rates are currently well under 6% again, and the economy is slowing just like it did post 9/11. People are afraid of the stock market, just like post 9/11.

We'll see if it has the same result on housing...

Where to invest right now - Your Hawaii Home

It's time for people to get back to sane and safe real estate investing - we should buy our homes and pay them off instead of moving every few years and refinancing to take cash out.

If you had bought an index fund or almost any mutual fund 10 years ago, you would probably be down or about even today. And what would you have? Nothing to show for it really except the money you put in.

On the other hand, if you had put the same money into a home 10 years ago, or even 5 years ago, (and you don't sell) you would have your home, some equity built up from paying down your mortgage, some tax write offs from your interest, and some gain in your property value if you live in the right areas of Hawaii.

But let's say your home value went down. You still have paid down your mortgage a bit, and you still have the tax write offs, and you still have your home. The only people suffering from falling prices are those who sell their home or have some crazy loan that requires them to refinance or get killed by the new higher adjustable rate.

If you got a regular fixed loan, and you don't have to move, you've done better in Oahu real estate than in this crazy stock market. And there aren't days when your home's value goes down 10% like the market did yesterday.

Stock brokers always told me that if I stay in the market my value would go up. That's because they're looking at a period of America when the market went crazy for about 30 years. Before that and since about 1999, the market has been awful.

If you have money to invest right now - why not pay down your mortgage? Or improve your home? Most people are afraid of the stock market right now, but Oahu stands almost completely alone in the country as a real estate market that is quite stable.

Buy a home, stay in it for a long time, pay it off. In the end you have - A HOUSE FREE AND CLEAR!