The national outlook for housing isn’t looking too good all the way until the end of 2008.  Luckily, the housing problems are not consistantly bad across all regions of the country.  In Hawaii we still continue to avoid the debacle that has occurred as we see inventory around 5 months (the same inventory levels that were at the height of the Japanese boom in the late 80’s early 90’s. 

As for the national outlook:

The trade group now says it expects a 3.7 percent decline in existing home prices in the third quarter of 2007 compared to a year earlier, which is worse than the previous forecast of a 2.2 percent decline. And the fourth quarter should see prices down 1.3 percent from a year ago, rather than the 1 percent drop that was previously forecast. The weaker than expected outlook for the second half of 2007 should leave prices down 1.7 percent for the entire year, compared to its previous forecast of a 1.2 percent decline. That would mark the first full year decline in existing home prices since the group started keeping track of median price data.

Well, The Fed Reserve is anticipated to cut interest rates.  What does it mean for mortgage interest rates?

Not a whole lot actually.  Remember that conforming home loan rates are tied to Bonds or “Mortgage Backed Securities” - so when Traders sell off Bonds, it causes the Bond price to go down, which in turn causes home loan rates to rise. And although most of last week’s economic news was “Bond-friendly”, and should have resulted in higher Bond prices and lower home loan rates, Bond Traders decided to sell some holdings and lock in their recent gains instead, ahead of what could be a volatile week of market action.

The Federal Reserve is meeting this coming week, and will release their highly anticipated Interest Rate Decision and Policy Statement on Tuesday at 2:15pm ET. So do you know what is expected from the Fed, and how their actions might save you money right away? Remember that a cut to the Fed Funds Rate would impact the Prime Rate, which affects Home Equity Lines of Credit, credit cards, business loans, car loans and the like - but does NOT have a direct correlation to home loan rates. For example, if the Fed should cut the Fed Funds Rate by .25%, you would likely see a change to your Home Equity Line of Credit by .25%, if it is tied to the Prime Rate as most are - but do not expect regular home loan rates to drop correspondingly, as the Fed’s take on inflation will guide the way.  Stock prices have a history of doing well after the Fed begins to cut rates. Since 1985, there have been seven initial rate cuts by the Fed. During the year following the initial Fed rate cut, the S&P 500 has gained an average of +13.7%.  Keep in mind though that if stocks are doing well, typically bonds typically don’t do well as people move money from bonds to stocks.  Could that mean a rise in home mortgage rates?

An oceanfront 2.6 acre residential complex with an 80,000 gallon saltwater fish bowl just sold on the Big Island for $29 million.

I remember when this home was being built, the workers used to come to me shaking their heads in awe of some of the work that was planned.  I am sure some of it was rumor or lies to the extent that the salt water fish tank was going to have sharks (Tigers), but it was the talk of the area for a little while. The funny thing is, it sits oceanfront, but not beachfront.  To gain access to the beach you have to go down to the Hapuna Prince or the Mauna Kea Beach Hotels.

The day I took this photo I counted 14 turtles in front of 3 side by side beachfront properties.  That is an amzing number of turtles in the tide pools in a small area. They do a release every year of green sea turtles and a lot of them end up coming back close to the area they were released from. 

French Lick, Indiana (home to Laryy Bird) has nothing on Hawaii’s basketball courts.  Would Jimmy Chipwood have been a better player if he had grown up playing on this court?  Probably not.  He would have been out surfing instead. If you don’t remember Jimmy Chipwood, then this clip should refresh your memory. What a movie!

How is this for a view.  This is the view from the top of the hike to Makapuu Lighthouse with rabbit island out in front.  In the distance on the left is where TC from Magnum PI used to land his helecopter on the show, also shown is Sea Life Park. (40 first dates).  They also showed a segment of Dog, The Bounty Hunter here. (a least I was told).

I just made an addition to my house.  I added a study, or is it a reading area in the sunroom? Who knows, but it sure was affordable.

I found this video on YouTube that I thought was great.  Check it out.

I just read: Job Report Shows First Decline in 4 Years 

There were 4,000 fewer jobs in August, marking the first monthly decline in four years, the Labor Department said, confounding analysts who had forecast a moderate gain for the period. Many financial analysts had said they believed August would show about 110,000 new jobs. Instead, the number dipped for the first time since August 2003. At least one expert, global economist Jay Bryson of Wachovia, predicted that at its Sept. 18 meeting, the Federal Reserve would respond to the job losses by cutting interest rates by at least a quarter of a percentage point.

A lot of “ARM’s”  are set to start adjusting towards the end of this year.  Will we see a lot more foreclosures? Here are a few problems that ARM owners have:

For some people, their mortgage payments are about to adjust upwards into a territory they can’t afford.

They will want to refinance and in doing so, with mortgage guidelines having tightened and changed, they may not be able to qualify. (100% financing is almost non-existant now and 95% LTV is very difficult). Also, if they refinance and their value is down below what their loan balance is, do they have the money to make up the difference?

Also, if their value is down in the range of the mortgage value and they feel they have to sell, do they have the money to pay the fees to sell the home and/or make up any shortage in value to pay off the mortgage.

ARMs Fuel Foreclosures was a good read dealing with how lenders and owners may hope to deal with some of these issues.

As I figured we would see, the mortgage industry is laying off people to cut costs.  I actually expected this a little sooner than it happened.  What does this mean?  That the lenders that stay in the industry after all the fallout are in it for the long haul and are most likely the people that know what they are doing.  This will just weed out those that aren’t seriously committed to working hard to help you achieve your goals of owning a home in Hawaii.  Most of those that are let go will get out of the industry all together. 

Countrywide Financial and IndyMac Bancorp, two of the nation’s largest mortgage lenders, announced plans to sharply reduce their workforces in coming months as they try to cut costs in a turbulent mortgage market. Countrywide, the nation’s biggest mortgage lender, said yesterday it expects to cut 10,000 to 12,000 workers — or about 20 percent of its workforce — in the next three months.  IndyMac said it will offer voluntary severance packages to be followed by layoffs as it tries to shed 1,000 workers, or about 10 percent of its staff.

Countrywide to cut jobs
Counrtywide & IndyMac

Here are the August real estate market stats for Oahu.  We see more of the same old stuff, we a few minor changes.  For articles, check out: Oahu August Median Home Prices Up Slightly, and Oahu’s Median Home Price Jumps 2.4%   To see a full copy of the market stats for August and all previous monthly stats go to the Resource Center.  Oahu’s overall sales for SFH’s is down 4.6% for the year-to-date comparision from 2007 to 2006.  Condos are down 14.5% for 2007 from 2006 (fewer new development projects coming up).  The overall median price for SFHs is up 1.4% from last year, and for condos is up 4.8%.

On page 4 of 20, we saw a big jump in the number of sales for SFHs to give us that summertime push, with 381 sales last month (most number of sales in a month since Mar. 06).  Condos sales increased as well to 495 units sold.

On page 6 of 20, the median home price for SFHs increased to $650,000, but this still keeps it in-line with a consistent leveling sales price range.  Condos decreased to $325,000, but it too is in line with recent numbers.

Page 7 of 20 shows the median number of days-on-market increased to 44 days for SFHs and increased slightly for condos to 38 days.

Page 14 of 20 shows the inventory of active listings increased slightly for sfhs to 1859 and increased slightly for condos to 2,386.

Page 18 of 20 shows the months of inventory remaining for SFHs at 5.5 months and for condos at 5.2 months.  Still very healthy numbers.

On page 19 of 20 we see the breakdown of inventory by area of the island, type of property, and price range.  Everything is pretty much consistent across the board.  the $1 million plus properties increased from 8.5 months of inventory last month to 10.6 months of inventory. 

Most of the activity here was prior to the recent problems in the lending industry.  Jumbo loan rates jumped about 3 weeks ago, so next months data should be a better sign of where things are headed.  Overall a consistent showing in the housing numbers, but we may see some changes due to the lending problems that recently occurred.

Feel free to contact me with any questions.  scott@kahalaassociates.com

Oh Boy!!!!!  As an Appalachian State Alum I must say I am very proud of these guys.  This is how to do it right, even if the game wasn’t played at App.  I true source for higher education.  This is a must watch video.

And a few more:
Mastercard
App Who?