Despite the loss of nearly 2,100 jobs when Aloha and ATA airlines abruptly shut down, Hawai’i’s unemployment rate rose just slightly to 3.3 percent in April, according to the state Department of Labor and Industrial Relations.Although April’s jobless rate was lower than anticipated, the labor department cautioned that the full impact of the airlines’ layoffs may not be felt for another few months.

With home prices in hard hit areas around the country dropping, affordability has improved dramatically. 

As a result, 53.8% of all new and existing homes sold nationwide during the first three months of 2008 were affordable to families earning the median household income of $61,500, according to the latest Housing Opportunity Index released Tuesday by Wells Fargo and the National Association of Home Builders (NAHB).

That’s up from 44% during the first three months of 2007 with home prices the most affordable they’ve been since the three month period that ended June 30, 2004.

This is one sign of getting close to the bottom of the cycle.

Another is when you see the hardest hit areas in the country begin to increase in the number of sales.  San Diego, one of the hardest hit, is anticipated by some to be one of the first areas out of the down cycle.

Hawaii hasn’t seen a drop in the median home or condo price, and we may be seeing the first signs of the bottom in the national housing outlook. That isn’t to say prices won’t continue to fall, but an increase in the number of sales is one of the first signs of reaching the bottom. Check out the mixed reports.

Just like when housing prices increased by 20-30% in one year before it all ended, we see the opposite occurring now. 

In Stockton, Calif., the average price of a single-family home fell 35% to $230,800 in the first quarter of 2008 from $357,800 in the first quarter of 2006. Over the same two-year period, Stockton has gone from being 71% over-valued to 4.3% over-valued.

Are we close to the end? Any thoughts?

As seen on the Today Show, Best Life Magazine has voted Honolulu the #1 city in the U.S. to raise a family.  Check out the video on the Today Show website .

You can also read the article at the Honolulu Advertiser.

They want to raise their children somewhere safe, where they can attend good schools with favorable student-teacher ratios, above-average test scores and respectable budgets. Plenty of museums, parks and pediatricians also contribute to a good quality of life, whereas multihour commutes, expensive houses and divorcing friends and neighbors do not. Best Life editors used these categories and data from the U.S. Census Bureau, the National Center for Education Statistics, the FBI, the American Association of Museums, the National Center for Health Statistics and the American Bar Association to evaluate 257 cities. Here are the best — and worst — places to raise a family.

The ban on smoking in your own condo unit may be coming.  The latest newsletter I received from Hawaii Community Associations had an article that states that this is on the very near horizon. Read Prohibiting Smoking In Condo Units.  There are several article posts from a local Condo Association Attorney Richard Ekimoto on this very issue that is interesting to read.  What do you think?  Are you for or against it?

So you are thinking about buying an investment property on Oahu and maybe you are wondering if there is a better place to put your money.

Let’s take a look at and compare what history says about 3 different investments: 1. Oahu SFH bought in 1985.  2. Two SFHs bought in 1985 somewhere else in the U.S. based on the median SFH price in 1985.  3. An investment made into the S & P 500 Index in 1985.

We have housing data for Oahu homes back to 1985, so we can look at that.

In 1985, the median SFH price was a whopping $158,600.  For our example to keep it simple, lets say you put 30% down and rented it out for break-even every year until the end of 2007. This clearly wouldn’t happen, but so we don’t complicate things and we compare apples to apples, we will be looking at appreciation only, and also not take into consideration any depreciation you would have on your tax returns as well.

30% down on $158,600 is $47,580.  So you invest $47,580 into the property.

In 2007 the value of that property on Oahu would be roughly $643,500. That would give you an appreciation of ($643,500-$158,600) $484,900 or a 1,019.13% ROI.

Lets look at the U.S. median price in 1985and compare this one.  In 1985, the median SFH was $75,500.  If we invest $47,580 that would be more than 50% down, so to keep it similar, lets say you bought two properties on the mainland based on the national median sales price of $75,500.  You would have paid $151,000 for the two homes.  Once again, we assume that you broke even on the rent up to 2007 and we didn’t factor in depreciation.

At the end of 2007 the two homes would be worth $219,000 each, or $438,000.  That would have given you appreciation of ($438,000-$151,000) $287,000 or a 603.19% ROI.

Lets look at a totally different investment now, the S & P 500.  Say you took that same $47,580 and bought into the S & P 500 index in 1985.  The Index was at 179.63 at that time. 

The index at the end of 2007 was at 1,463.36.  That would have put the value of your investment at $387,647.04 and given you appreciation of $340,067.04 or a $714.73% ROI.

So, just looking at these, the best investment would have been real estate on Oahu.  There are several reasons this occurred.

1. Leveraging.  Real estate is one of the only investments were you can use someone elses money to purchase your investment. 

2. Location- Oahu and Hawaii in general is land-locked, so the supply is limited and the demand is usually much higher.  We aren’t creating new land here on Oahu, so your neighborhoods tend to be consistent over time.  Diamond Head will always be Diamond Head.  Here, when you buy, you mostly are buying resale homes.  Much of the land is developed already, so you don’t have to worry about your neighborhood be the best neighborhood this year, and 3 years from now, the new place to live is 5 miles further down the road.

 3. Did I mention Location? We are located in the middle of the Pacific in between Asia and the mainland U.S. giving us multiple market segments and the Internet added a global buyer to our marketplace.

Want the best way to pay your child’s college education? or a plan to get you to retirement quicker?  Oahu real estate has been a great way.  The hardest part is getting into the market due to the higher initial cost, but historically the return is quite worth it. 

***Past results are not a guarantee of future performance****

The new Koa Ridge development that is planned by Castle & Cooke still looks to be moving forward, slowly. 

The plan for the new subdivision is to have roughly 3,500 homes and the target start date for construction is 2010, with 2012 being the beginning of completion for those first units. 

I mention this because, not only will it add another option for you to live or invest in, but some of the things to think about are, how will the traffic flow be handled on the H-2 and H-1.  If you live in Mililani, will your commute time to town increase? If so, by how much?  What services/shopping will be offered?

R. Don Olden, Wahiawa General Hospital CEO, said facilities being considered for Koa Ridge include emergency care services, surgical and other ambulatory services, diagnostic imaging, oncology services, acute inpatient care, physician offices and skilled nursing.

Bonds and home loan rates ended the week on a sour note, but had spent the early part of the week moving sideways and slightly higher on a blend of mixed economic news and action in the Stock market.

What is happening with home loan rates? What is in store for next week?

Check out all the info at Keri’s Mortgage Newsletter. Signing up for this weekly newsletter is FREE!

“I’m going to sell my house this summer. I know how important it is to price your home right. So I plan to get 3 agents’ price opinions and then hire the agent in the middle? Is this a good idea?”

So, in case I wasn’t clear regarding you idea of choosing the agent with the middle price: don’t do it. Choose the best agent and choose the price that the market data supports.

“On foreclosures, I’d like to get an idea of how much the bank has into the property. Is there any way to find out the loan balances on the foreclosures?”

***ANSWER:
I know what you’re thinking…that if the bank has say 500K into a property, if they sell it for $535,000 and break even, they’ll be happy.

Unfortunately, you’re wrong on two counts.

First of all, banks have tremendous expenses when they foreclose. All told, it can be 25-30% of the value by the time escrow closes.

Secondly, banks are not pricing their foreclosures based on the “UPB” (the insider’s term for “Unpaid Principal Balance.”) Once they own the property, they want close to market value so they can maximize revenue from the sale

So, yes, you can get the loan balance at the time of foreclosure. But it won’t do you any good…

Do you have a particular home buying or selling questsion? email me and I will be glad to answer it for you.

The Fed News Is Good News.

However, speaking of inflation, the Fed’s most favored measure of it - the Core Personal Consumption Expenditure Index - arrived on Thursday, showing core inflation at 2.1%, just a whisker above the Fed’s desired range for inflation of 1 to 2%. This read wasn’t great news for inflation-sensitive Bonds…but the resulting market action was nothing, compared to what happened when the Jobs Report arrived on Friday morning.

Talk about a real mover and shaker…the Jobs Report brought word of 20,000 jobs lost in April, which was better than market expectations of 75,000 jobs lost. Initially, Stocks rallied higher and Bonds worsened dramatically, as the headlines were so much better than had been anticipated. But when the details of the report were unpacked, showing prior months worsening revisions - as well as a sobering realization that 20,000 jobs lost is still lousy news - the markets quickly reversed direction, helping Bonds and home loan rates improve once again. Another ultra volatile week - and when the dust settled, home loan rates improved by about .125% overall.

Always an interesting read and you can sign up for the free newsletter by clicking on this link and subscribing in the upper right hand corner.