Here we are with another month of stats and I sound like a broken record. Similar news with a few changes and I am adding another category this month to take a look at. Feel free to check out articles in the local papers, such as, Number of Oahu Home Sales Drop by the Honolulu Star Bulletin and Oahu Home Prices Might Dip In 2008 by the Honolulu Advertiser. To view this months stats and all previous months stats visit The Resource Center. All of the economist that I have spoken to or have read about have predicted a side-ways or flat market for next year. The Honolulu Advertiser title is a little comical since in the article the price decrease could be a .63% decline.
And what remains is heartier fare than most mainland markets are serving up; for the full year, home and condominium median prices posted gains. Even though the number of sales has declined in the last few months of 2007, we are coming off of such record highs that we are still at the levels we attained during the last peak cycle between 1988 and 1991..
The University of Hawai’i Economic Research Organization in September predicted O’ahu’s single-family home median price will fall 0.63 percent this year.
This is the first I have heard of any decrease, and, oh by the way……..on a $400,000 property, a .63% decline is $2,520.
Lets look at the same two properties with different scenarios for a breakdown comparison. We will look at a $400,000 property with 20% down payment, carrying a 30 year conventional, fixed rate, fully amortizing mortgage at 6% (the most standard loan that 80% of buyers choose) and the same property and loan at the $2,520 savings. For a bonus, lets throw in another with a 6.15% mortgage interest rate but the same $2,520 savings.
1. If you bought a condo right now for $400,000 with 20% down and carried a loan with a 6% interest rate for 30 years, fixed and fully amortizing, your monthly mortgage payment would be: $1,918.56.
2. Lets say you wait to take advantage of a price drop and you save, as the newspaper says, .63% on the sales price. Your new purchase price would be $397,480. Your 20% down payment would be $79,460 and the loan amount would be $317,984. your monthly payment with the same loan type would be: $1,906.47, or a savings of $12.09 a month.
3. Suppose you wait and in doing so you get that wonderful unit at the great discount of .63%, but interest rates go up from 6% to 6.15% (this easily could happen since mortgage rates typically fluctuate around these ranges) So….purchase price of $397,480, 20% down payment, loan amount of $317,984. Your new mortgage payment would be $1,937.25, for an increase of $18.19 more than in scenario one.
This is why I say we are flat. It also shows why interest rates and not prices can be a bigger determining factor in cost. Interest rates could drop some this year and have already. With excellent credit and strong financials you can get a loan UNDER 6%. That is extremely low. That coupled with what is expected to be our slowest year (relatively speaking) and I would say this is a good year for buying. It would set yourself up with probably the lowest interest rate you will probably see for a while, flat prices set you up to be able to buy in the low side of the current market preparing for the next up-cycle, and you have more to choose from in a less frenzied market.
Anyway….on to the stats:
On page 4 of 20 we see that residential sales for SFH’s dropped ever so slightly to 240 sales. Down from 245 last month. Condo sales dropped from 379 the month before to 353 in December. These last few months were slower than what I would expect, however, the 4th quarter definitely slows down due to the holidays. We ramp back up n January (Feb stats).
On page 6 of 20 the median sales price for SFH’s stayed the same at $610,000 and was slightly up for condos to $320,000. For the year ending 2007 the overall median sales price for SFH’s on Oahu ended up 2.1% and for condos ended up 2%.
On page 7 of 20 the median number of days on market, or days the property is listed before going into escrow to sell, was roughly unchanged for SFH’s at 51 days on market (last months was 53 days). For condos, the median number of days on market increased from 42 days to 47 days.
The new category is on page 11 of 20. The number of new residential listings, or the number of new listings we added. I show this because it mirrors the activity for the number of sales category. In the 4th quarter, we had a significant decline in the number of new listings coming on the market for both SFH’s and condos. It just reaffirms the slowdown of the 4th quarter and shows that even though demand looks like it slowed down during the holidays, well so did supply helping keep the market in balance.
On page 14 of 20 we see the inventory of active listings which decreased for both SFH’s and condos (less supply on the market).
Page 18 of 20 shows the months of inventory remaining. If we didn’t bring anymore properties on the market how fast would we sell all of the properties. This increased ever so slightly to 7.6 months for SFH’s and 6.2 months for condos. A balanced market is considered 6-7 months worth of inventory.
Page 19 of 20 break down the months of inventory remaining by area of the island, type of property and price range. The big numbers are in the $1.0 million plus properties, with 17.8 months of inventory (SFH’s). The North Shore has 41 months of inventory (SFH). For condos the $500,000 plus range has 10 months of inventory and the North Shore has 18 months.
So…..to summarize, we are consistently side-ways at this point. Not much for appreciation yet not much in declines.
Let me know if there are any questions.
