Effect of TRID Oahu Real Estate

Posted by Aaron Agsalda on Wednesday, January 13th, 2016 at 8:18pm.

New loan regulations may have had a negative impact on the U.S. real estate market, but national figures differ noticeably from the very resilient Oahu real estate market.

Reuters reported last month that “U.S. home resales posted their sharpest drop in five years in November,” a 10.5% drop from October 2015. While some may see this is a potential warning sign for the health of the U.S. economy (especially after last week’s stock market plunge), NAR economist Lawrence Yun suggests that new regulations on paperwork for home purchases may have driven the decline.

What new regulations?

If you’ve been looking into real estate recently, you may have seen the acronym T.R.I.D. TILA-RESPA Integrated Disclosure Rule Implementation (TRID) went into effect on October 3. In a nutshell, these changes are meant to benefit you (buyers and sellers) by simplifying forms and increasing accountability for lenders. Imagine a new set of procedures being handed out to an entire industry sector. That’s what lenders experienced in October. Such a broad, sweeping change was bound to have an effect on speed and overall efficiency.

Has TRID had any impact on Oahu real estate?

I believe so, but since comprehensive data is still forthcoming, it may be difficult to see right now. What iseasy to see is what has increased, or at least remained steady. The health of the market in our state is shown in 4 categories. As displayed in the infographic below, numbers are up from last year in: 

  1.     Median Sales Price
  2.     Number of New Listings
  3.     Number of Active Listings
  4.     Number of Homes Sold

The December median price for single family homes (SFH) on Oahu was $700K. This is nearly 3x the national average (which is one huge difference between the Oahu market and U.S.); however, this is a decrease from the year’s high of $730K in September. Why did the median drop? Does this have long-term implications? Is the market starting to adjust?

Mysterious absence of the “winter peak”

In my previous posts, I charted market trends over the last 5 years. From 2011-2014, median prices in Hawaii have had a 1) summer peak, 2) an autumn dip and 3) a winter peak. In 3 of those 4 years, the winter peak surpassed the summer peak – that is, median home values were higher in the winter than in the summer. 

That was not the case this year. Contrary to the predictable rise/fall/rise of median prices in previous years, there was no winter peak. In fact, when the median should have dropped in autumn, it rose … to an all time high of $730K. Then, uncharacteristic of previous years, it declined incrementally as the year came to a close: $720K (Oct), $715K (Nov), $700K (Dec).

Does this mean that home values will continue to decrease? I believe the median will rise again in the next couple months and here’s why:

Initially, when I saw an autumn high (instead of a dip) and a winter dip (instead of a peak, I thought the patterns had somehow inverted. Yet, other stats saw almost no change. On average:

  1.     Sellers were still getting 98% of list price,
  2.     Homes were still selling in 20 days
  3.     And, just as in previous years, the overall number of homes available dropped in the winter.

Mysterious increase of pending sales

But one stat was different: the number of pending sales jumped up 10% in December. That increase may not seem like much … until you compare it to the next highest increase in the last five years of about 1%.

What does this mean? Homes are still being sold on Oahu in greater quantities and higher numbers than before. They are just taking a little longer to close.

If NAR economist Lawrence Yun is correct, what seemed to be an inversion of rise/fall pattern may prove instead to be an elongation of the wavelength, caused by a delay in closings.

Conclusions

Does this mean we need to plan for longer escrows from now on? Not necessarily. Since lenders and escrow companies are getting accustomed to a new set of procedures, timelines should be back to normal once organizations find their flow again.

In closing, the Oahu real estate is not merely a microcosm of the US market, nor is it like that of any other state. Properties here are more valuable, less available and very diverse. There are still great opportunities for selling, buying, owning and/or investing in real estate here on Oahu. Team up with a Oahu real estate agent who understands this unique and thriving market. Call Team Aloha Tony today! 

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