From the Story, some bad news for owners of subprime mortgages, and a opportunity for buyers:

“The Ewa market’s new developments and price-points attracted many New Home Buyers. Many Home Buyers maximized their buying power by taking on adjustable loans that required little to no down payments so that they could get into the house. Statistically, historical defaults in the mortgage market are directly correlated to the size of the down payment. First time home buyers really don’t have a lot of money to put down so their down payment is low which leads to higher monthly payments and they’re more prone to default,” said Prudential Executive Vice President Dan Tabori.

But in real estate, a seller’s loss is a buyer’s gain.

“It’s not a bad time to buy. You could actually get probably something today that you couldn’t get two years ago, a bigger house for less,” said Ching.

Post from: Hawaii Real Estate Reporter

KHNL Reports on Hawaii Real Estate

Post from: Hawaii Real Estate Reporter

Hawaii Real Estate Market June 2008 Discussion

By Lisa Scontras
Custom Publishing Group

Waiting for the right time to release a summer blockbuster movie makes show-biz sense. Waiting for a bottle of wine to be perfectly aged is almost an art form. But waiting until the price of homes in Hawaii come down? You might just wait forever, says Carl Worthy, training director at Prudential Locations.

“I remember one of my first open houses in Manoa in 1972, the home was listed at $65,000,” says Worthy. “And at that first open house, most of the people who attended told me very emphatically that prices were going to fall and that ‘these high prices cannot possibly hold.’ I wonder how many of them missed out altogether?”

Worthy’s 35-plus years of experience in the real estate business says that “waiting is the human default position taken when we’re confused or not sure of what we’re doing.”

“I hear things like,’My hairdresser says prices are falling so we better wait,”‘ he says. “But waiting can be very expensive.”

Worthy says there is a misconception that home prices are falling in Hawaii. In fact, while there have been slightly fewer sales, the average price for single-family homes on Oahu is up 2.4 percent through May 2008, and the median price of condos is rising as well — setting an all-time record high in May of $337,300. Prices are actually up.

With interest rates on the rise, he adds, waiting is going to actually cost you.

“Interest rates will be heading up very soon,” says Worthy. “Count on it.”

Rates have been at their historic lows for several years now. Consumers have almost become complacent — in a form of denial not believing that low rates are poised to change anytime soon. The Federal Reserve has kept rates low to date to stimulate a sluggish economy and earlier this year to bring some liquidity to the financial markets to offset the destructive subprime nightmare. But now, according to Worthy, there are bigger problems.

The U.S. dollar is weakened by the repeated lowering of rates. Inflation is high because of the weakening dollar. In the minds of the Feds, the one thing worse than a weak economy and market liquidity is escalating oil prices and inflation.

“The Fed has one response to inflation, and that’s higher interest rates,” say Worthy. “Today’s low interest rates are headed for extinction — quickly. And they are not likely to return anytime soon.”

Once rates start rising, even if the price of a home does go down, buyers will pay more. Remember when rates began falling from 8 percent in early 2000 to 7 percent about a year later, 6 percent in mid-2001 and then dipped under 6 percent in 2003? Buyers realized that as rates fell, their buying power increased. And the inverse is also true.

When interest rates go up, the amount a buyer can borrow for a home goes down.

“If home prices were to drop by 10 percent and interest rates increased by 1 point, the buyer’s monthly payment would actually be higher for the same home,” says Worthy. “If rates go up, the loan amount goes down — in direct proportion. That means the price a buyer can pay for a home goes down — a lot.”

For example, on a $600,000 home, he says if interest rates go up just one point, the buyer loses $60,000 in buying power. That means the same buyer is now only qualified to purchase a home for $540,000.

Interest rates ultimately have a much bigger impact on cost than the purchase price does.

Worthy adds, you’ll feel the effect of the purchase price of the home only once … you’ll feel the effect of the interest rate you pay every month, when you make your mortgage payment.

“So the question you should ask is, what is more likely to happen: a 10 percent fall in home prices or a 1 percent rise in interest rates?” he says. “Truthfully. I have been selling real estate since 1972 and I can’t recall anyone ever telling me that they were sorry they went ahead and bought something. However, I have had hundreds tell me their horror stories when they waited.”

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Buyer beware of what waiting can cost

Home Equity at lowest Level Since WWII

from today’s article from the Honolulu Advertiser dated June 6,2008

Let’s start Friday off with some good old doom and gloom from the Mainland. The media has discovered that as prices fall, the equity owners have becomes smaller. Since this sounds really scary it must be good to put into news articles.

Now we have something else to worry about, being “upside down” in your home. This can be a serious issue. When you become upside down, drinks fall out of glass, everything on TV looks funny and the doggy door is in the wrong place. So keep an eye on your neighbors and be careful if you see their home flip over.

After the article scares everyone with becoming upside down, it then makes the point that 1/3 of all homes are owned free and clear and therefore can’t ever be upside down.

Also, this article is a great example of the difference between what is happening on the Mainland and in Hawaii. In May we set a record for condominium media prices and single family home median prices are stable. In 60% of the neighborhoods single family median prices have actually increased over last year. That leaves 40% where prices have declined some – but not much.

Just one more reason why Hawaii is a great place to own real estate

Post from: Hawaii Real Estate Reporter

More Gloom and Doom From The Mainland

It’s time for some good old media hysteria. As mentioned in the Honolulu Star Bulletin on Wednesday, May 14, 2008

Hawaii’s foreclosure rate tripled in April, with a 218 percent increase over the year-earlier period.
The state climbed to 36th in a national foreclosure ranking last month, with 210 foreclosures filed, or one for every 2,381 households,

My god, foreclosures up 218%! It’s time to build a bomb shelter and store food. In fact, curl into a ball right now and play dead, just in case there are any bears in the area.

The article says that Hawaii is experiencing a “relatively small number” of foreclosures. This is a tremendous understatement: 1 out of 519 US homes are in foreclosure, only 1 out of 2381 Hawaii homes are in foreclosure.

We’re in good shape with regard to foreclosures. You don’t have to be a rocket scientist to figure this out. (Although a research background in non-jet propulsion can help in any situation)

The outlook on Oahu is even better than the outlook for the state as a whole: UH’s Economist says that he thinks that the 218% increase mostly represents neighbor-island foreclosures. Among those, he says, many are probably mainland second-home buyers.

Don’t let these headlines scare you. We’re OK.

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Foreclosures up: “Okay, on my word, everybody panic. Wait for it . . . wait for it . . . GO!”

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2008 Kailua Real Estate Market Discussion