Two recent reports by CNBC have stated the mortgage market is facing some major changes. The Obama administration is set to announce next week overhauls to Fannie Mae and Freddie Mac run programs and, according to many economic experts, mortgage interest rates are expected to go higher as the economy continues to strengthen.

These changes are going to affect home affordibility and buying a home will get harder as the government tries to roll back temporary housing fixes implemented during the recession. Here's what you need to know:

Calculating Higher Interest Rates

As rates rise, home ownership obviously becomes more expensive, but have you ever calculated the differences between just one percentage point? The numbers can be a little complicated so I'm going to show you what a higher interest rate means to your bottom line.

Interest rates reached an all time low last year around 4.25% on a 30 year conventional loan. Buyers who bought a home with a 4.25% rate on a $300,000 home (without taxes and insurance) were able to secure a payment of $1,472.82 a month.

Currently, rates are hovering around 5 percent for well qualified buyers. Five percent is still a fantastic rate, but if you've been sitting on the fence, you're probably kicking yourself as you missed out on last years rates.

Today at 5% interest your montly payment would increase to $1,610.46 on the same property, an increase at $137 a month. On your 30 year loan, you'll end up paying an extra $48,000 in interest. That's a nice chunk of change!

Home Affordibility Is Peaking

An increase by just one percentage point can add as much as 19% to the cost of a home, and by the end of this year, rates are expected to climb close to 6%. The good news is, while we will probably never see the extraordinarily low rates of last year, rates are still incredibly low.

The bad news is, these rates won't last long. The economy is recovering and the fed is expected to continue to raise rates to thwart inflation. If you calculate the difference between 5 and 6 percent on a $300,000 loan over 30 years, you'll end up paying an extra $67,000 by the time you pay off your home.

If you're waiting for the bottom of the real estate market you've already missed it. Although home prices are expected to decline another 5 to 8 percent over the next year, when interest rates hit 6%, you'll be paying another 19% in financing costs.

Even if home prices decline another 10% over the next two years, by 2013, interest rates will most likely be closer to 7%. And, in-case you didn't know, the government is making some changes to federally backed loan programs.

Currently, the government has a share of 95% of all mortgages and they plan on reducing that number to 50% over the next few years as required by the Dodd-Frank reform bill passed last year.

The bottom is now and if you plan on buying a home over the next couple of years, interest rates will never be as good as they are today. Unless you're paying cash, home affordibility isn't going to get better than it is today. If you're a ready and willing home buyer, it's time to get off the fence!

About The Guest Blogger: Lisa Udy is a Logan Utah real estate professional providing expertise for home buyers and sellers in Northern, Utah. Licensed since 2001, Lisa has been a top producing agent year after year and specializes in no pressure sales. To learn more about Lisa please visit herLogan real estate blog.

Aloha Tony's really easy iPad Giveaway ~ 3/31/11 

3 steps to enter to win a free iPad:

Step 1: Click "Like" here.

Step 2: Login to Facebook and go to the Aloha Tony Facebook Page and click “Like”. If you've already “Liked” our Facebook Page, you're already good for this step.

Step 3: Share this page on your Facebook profile by clicking the icon at the top of the post, or by cutting and pasting the URL into your FB status.

That's It! One lucky winner who has completed all 3 steps will be chosen
at random on March 31st, 2011 and will win a FREE 16gb iPad worth $499 courtesy of ME!

**This is a social media experiment.  At the beginning of this contest, my website had 10 likes, and my Facebook business page had 60. Both totally pathetic. 

My site ranks around middle to bottom of page 1 in Google for most Hawaii real estate search term, some of the most competitive are on page 2.

Let's see how we do!

WinPrizesOnline: Sweepstakes

A great comparison study done by Trulia shows the financial benefits of buying vs. renting in various cities around America. While New York and LA are places that one should rent, Honolulu falls nicely into the "BUY" section.

Why?  Simple - because rents are so high here.  Trulia explains their method:

Methodology

Trulia
calculates the price-to-rent ratio for the 50 largest U.S. cities using
the median list price compared with the median rent on two-bedroom apartments, condominiums and townhomes listed on Trulia.com. 

 

Sample Price-to-Rent Ratio Calculation:

• Median List Price: $140,201.37

• Median Rent: $1,871.65

• Price-to-rent ratio: $140,201.37 ÷ ($1,871.65 x 12) = 6

While cities like Las Vegas and Miami are the best places to buy (as opposed to renting,) Honolulu looks pretty solidly in the buying category as well. 

“Although owning a home is relatively more affordable in most cities, market conditions have caused an interesting demographic swap between traditional renters and buyers,” said Tara-Nicholle Nelson, Consumer Educator for Trulia. “For example, lifelong renters are seizing the opportunity to become homeowners while affordability is high. At the same time, a growing number of long-time homeowners are finding themselves tenants – some by choice and others by necessity.”

Read more at Trulia.

As we had predicted a couple months ago, the Oahu housing market finished the year very strong. In December, there were 306 Single family sales, which was up 12.5% from last year.  For the year, there were 3051 sales, compared to only 2690 sales in 2009.

Condo sales did well too, though December was down by 9 sales compared to December '09, the 2010 total was up 10.3% to 3934 condo sales on Oahu.

The median price of Oahu homes was also up to $587k in December, compared to $555k at the same time last year. That is a 5.8% increase, and year over year, the prices were up 3.1% to $592,750.  I would say that all over Oahu, prices were steadily rising all year and continue to do so now.

Oahu condo prices had a $303k median, up just 0.2% since last year. Not entirely sure why condo prices didn't do as well as homes, though I would gues that there were a lot of foreclosures on Ewa Beach condos.

December Pending Sales: This number is the best predictor for the following 2 months, and the number was looking strong, with 234 pending single family sales, which is up 20% from last December.

Pending sales of condos were up 25.1% to 329.  A pretty huge increase, which means January and February should be very strong as well.

Days on Market: It took just 36 days to sell a house on Oahu in December, and 42 days to sell a condo. Those numbers are just slightly up from last year, which may mean the market is a tad slower.

Average percentage of list price received: The average Oahu home seller got 95.6% of the list price, and condo sellers got 94.4%. Roughly the same as last year. This is a great indicator of what buyers think the market is doing. When this number is low, buyers are trying to get a great deal because they believe the market is falling.  At 95% or better, it means buyers are anxious to buy. 

Inventory of Oahu real estate - Down 10% to 1301 homes while Oahu condos are down to 1874, a 3.7% decrease. There continues to be a decline in available homes. Every buyer I am working with is having a hard time finding a home they like.  A lot of the inventory right now is junk - needing total renovations just to be livable.  If you have  a nice condition home, it should sell quickly unless it's way overpriced. 

Bottom line is that Oahu real estate is still looking strong for 2011. The only variable right now is interest rates. Hopefully they stay low, but they can't stay this low forever. In fact rates are up from the low 4's to about 4.75% right now.  Which, by the way, is still ridiculously low. 

CNBC gave Honolulu some nice publicity:

"While Hawaii in general has a unique air concern known as VOG (volcanic smog) that can affect health, Honolulu regularly makes lists of greenest and cleanest cities, and Sustain Lane ranked it the best city for air quality."

Actually what they don't realize (probably) is that VOG is a problem mostly in Kona, on the Big Island, not in Honolulu.  The only time Honolulu has any VOG is when there is a South wind, which is only a few days a year, once in a while.

"Honolulu's water is filtered through volcanic rock and is known to be free of the chlorine taste of other cities' supplies. The nonprofit Environmental Working Group, based in Washington, D.C., rated the Honolulu Board of Water Supply No. 6 among big American cities for the following criteria:

    * Total number of chemicals detected since 2004
    * Percentage of chemicals found of those tested
    * Highest average level for each pollutant"

Pretty Cool!

When meeting with a real estate agent to search through your new home options, it is easy to get a bit confused by the terms that are used by real estate agents. While agents are not trying to confuse their clients, the reality is that certain terms are so common in the industry that it is easy for an agent to forget that everyone might not be familiar with that term.

One such term that could potentially cause some confusion is "spec home." In the simplest of terms, a spec home is a home that a builder constructs with the belief that someone will eventually come along and want to purchase the home.

In other words, the builder constructs the home based on speculation of what a buyer would look for. As such, these homes have already been constructed with a number of options that are already included in the price.

There are numerous benefits to purchasing a spec home.  Some of these include:

• These homes are usually at or near completion, which means the buyer can move into a newly constructed home in just 30 to 60 days rather than having to wait 6 months for the home to be built from scratch
• Numerous options are already included in the priceÂ
• Buyers can see exactly what they are buying before they make a purchase

Of course, there are some potential downsides to purchasing a spec home as well. For example, for those who are looking for specific options, purchasing a spec home may be a bad idea because the buyer does not have the option to choose his own options. Furthermore, purchasing a spec home generally is not the least costly option available for those who are interested in purchasing a newly constructed home.

When discussing new construction options with a real estate agent, he or she may use a number of other terms that mean the same as “spec home."  Some of these include:

• Featured homes
• Immediate delivery homes
• Inventory homes
• Move-in ready homesÂ

It's important to understand that the spec home market will differ from market to market, depending on how strong that real estate market is at the time. Just as in another Metro area like Austin's condo market will differ from Hawaii's, the spec home market in Austin will differ from Hawaii's.

That's why it's always important to contact a professional to find out what your specific sub-market is like. For those who are interested in purchasing a spec home, the best way to go about doing it is to contact a real estate agent in the area who specializes in new homes. By hiring an agent who is experienced with these types of transactions, you can be sure the agent will be knowledgeable about the different types of incentives that are available through the builders.

In addition, a real estate agent who specializes in new homes will be familiar with the new home communities that are available in your area.

About the Author: Eric Bramlett is the broker & co-owner of One Source Realty, a boutique real estate company in Austin, TX. Eric specializes in central & west Austin, and Steiner Ranch.

 Lost and Hawaii 5-0 star Daniel Dae Kim is selling his house for $2,430,000.  Located in beautiful Kahala on the East side of Oahu, the home has 5 bedrooms, 2.5 baths, and a large pool. It's a vintage Hawaii home in Oahu's most expensive neighborhood.  Best of all, it's about a block from Kahala beach! Check out the video. 

Just got this email from a lender:

The maximum loan amount was just updated to the VA Matrix for 2011 which includes a
loan increase for Honolulu
county of $741,250!  Other highlights include:

·       
620 FICO up to $700K no reserves

·       
Max loan amount of $1,500,000

·       
Split entitlement is ok

·       
Spouse can satisfy occupancy
requirements

·       
Case by case VA IRRRLs with no
appraisal up to $1,500,000*

·       
AVM (no appraisal) only if the LTV is less than 95%
for IRRRLs up $1,500,000*

*anything over $700K needs an exception

The VA loan is one of Hawaii's best financing options.  Without it, many military would never be able to buy a home. I have worked with many military families and I can say that the VA loan has really been a great tool for them. 

 It's 80 degrees, breezy, and the water is about 75 degrees.  Just another "winter" day on Oahu.  How is the weather where you are?  And WHY don't you live in Hawaii yet?

Here is the view out to the ocean over my neighborhood.  My house hidden in the trees.

I went through some of the Census data and tried to glean anything interesting for real estate purposes. 

Here are some highlights:

148,764 more people live in Hawaii today compared to 10 years ago.  Our State population now totals 1,360,301, up 12.3 percent from the 1,211,537 people who lived here 10 years ago. It's hard to even imagine where these people live, considering there haven't been very many new homes built since then.  No wonder there is a housing shortage! 

As the population increases, the Island gets more expensive. I've talked about this over and over, but the Census really drives that home.  If there really are 12.3 percent more people over just a 10 year period, we are going to run out of room very quickly.  More likely, they counted a little better this time, but still there was definitely a large increase. 

Hawaii is now ranked 40th in population size nationwide, up from 42th in 2000, according to Census data. Hawaii will continue to have tw

Hawaii has the 7th highest median household income in the nation, using a 3 yr average up to 2009. Hawaii's median was $61,055 in that period. The highest in the nation was New Hampshire with $66,654.  California's median was $56,862.  It's no wonder, because it takes a lot of money to live here. We also have one of the highest median home prices at about $600,000 this year. 

The per family median income is a different number, but Hawaii is still very high, with an estimated median family income as follows:

Overall average:      75,066
2-person families    63,143
3-person families    74,449
4-person families    85,190
5-person families    80,552
6-person families    94,304
7-or-more-person families    112,585

In comparison, California's average income is $67,038. Connecticut's average is $83,069.  New York's average is $66,891.

In summary, Hawaii's population is growing and making lots of money, which is all good real estate prices.