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Contact Damon Rhys: 808-358-2331 / E-mail: damon@hawaiidamon.com
 
This is a free Hawaii Real Estate Newsletter so please do not hesitate to pass along to any friends or family who could benefit from it. Great advice & tips for buying/selling property in Hawaii, Aloha! - Damon

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(Newsletter photos accredited to Jacob Coash, Articles & Videos written & produced by Damon Rhys*)
🌈 Buy A Luxury Home in a Buyers' Market - Strategies⚡| Canary in a Hawaii/US Real Estate Cycle | Great Value Luxury Props |Video, Tips, Stats & More! 🌊*
Aloha <<First Name>>!

Knowledge is Wealth!

So would be luxury homes on elastic rubber bands that actually fell in price in economic downturns (bust cycle) and snapped back upwards during economic upturns (boom cycles such as we are in now). After all, this is how the normal world works in free and fair markets. The same rules would also apply to almost all real estate EXCEPT luxury homes which is a market that seems to exist in a parallel universe encumbered with different laws of market physics. 

When Economists speak of "elasticity (think rubber band) of demand/supply" it simply means how quickly and how far prices react to overall demand and supply. It is also influenced by substitute products and services - all predicated on a free and fair market (no monopolies, colluding oligopolies and government price controls). For example, in the short term gas (petrol) is very inelastic in that you need to get to work no matter the price per gallon (litre). In the longer term though, people may buy more fuel efficient or electric cars thus possibly showing some longer term elasticity of demand. Other examples would be vacation airline tickets (lots of airline and destination choices) which are fairly elastic. However, concert tickets for some (think about your favorite musician) can be inelastic - you have to go no matter the price.  
Real estate in general is fairly elastic. When most people move they figuratively pick up their home and take it with them - literally speaking, move the equity in it by selling and buying elsewhere. Most people do not have the luxury of owning more than one property -at least not until later in life. If you get transferred, change or lose your job etc. you have to sell - no matter what. If you are fortunate to be selling in a Sellers' Market (less than 5 months of inventory) with relatively low interest rates where buyers can easily and inexpensively get loans -  you will get top dollar. If you are unfortunate and selling in a bust cycle you could face lowering prices and a glut of similar homes on the market. Regardless, you have to sell - no matter what.   

Luxury homes, on the other hand, are another matter altogether. Most wealthier people, at the end of the day, do not really need to sell - especially if it is their 2nd or vacation home - think Hawaii Loa Ridge, Diamond Head, Lanikai etc. Currently the supply of homes over $1.9M (luxury homes) is at a whopping 14.7 months (see statistics section at the bottom of this newsletter). To put it into perspective, a neutral market - neither Buyers' nor Sellers' markets - is approximately 5 to 6 months inventory. There is nearly 3 times this amount of luxury home inventory on Oahu. In median neighborhoods (where people have to buy or sell - no matter what) such a high amount of inventory would see the market and prices crashing into a black hole. It is not just luxury homes but also condos. In my last newsletter, Kakaako Update, I described ultra luxury condo buildings with dizzyingly lofty inventories of 17 months and prices not falling - or not by much. I surmised in July's Kakaako Update that the reason Ward Village canceled their newest "Gateway" ultra luxury project is that inventories would have eventually hit critical mass of around 20 to 25 months which would then result in an ensuing black hole price crash event. Yes, it is quite "sticky at the top" as in the cheeky graphic above. Wealthier individuals have the means to just "wait it out." What about the foreign buyers of luxury properties in Hawaii? For example, if you are a Japanese corporation and bought a nice company retreat home on Hawaii Loa Ridge that was 25 years or older, what is the hurry? You are still taking the yearly large % depreciation credit (for the home but not the land) against your corporate taxes in Japan.

Is there anything on the horizon which could change this inelasticity of demand for luxury homes and condos in Hawaii? If I am a Buyer what can I do to get a great price on one of these luxury homes or condos - regardless of the price inelasticity? What if I am a somewhat desperate luxury home seller and I really do need to sell - now!? I will answer all 3 of these below and the short answer to the 2nd question is to find the person asking the 3rd question! If you are asking the 3rd question then please do not despair, I have a great video for you.

This year the state of Hawaii radically changed the property tax structure which leaves most home owners unaffected but could really take a bite out of wealthier individuals and owners of vacation or 2nd home properties in the ultra luxury range ($3M and higher) - enough to even make Bill Gates say, "ouch." Let's take the example of a $4M Kakaako luxury vacation condo buyer (same math would apply for a Hawaii Loa vacation home). On the 1st $1M the tax would only be .45% or $4,500. Not so bad (one of the lowest property tax rates in the US), yeah! However, after $1M in value the tax rockets to .9%. The blended rate on a $2M luxury condo or home would be $4.5K + $9K = $13,500. OK, this is not so bad. However when you do the math on the $4M vacation home or condo that would be $4.5K + (3 X $3X9K) = $31,500 in yearly property taxes - OUCH! Enough to make Bill Gates or even our Japanese corporation described above cringe. Unless your other home is a $10M property in the Hamptons, you would really need to plan on turning your Hawaii luxury vacation home/condo into your primary residence (thus spending more time in Hawaii) with a much lower tax rate - please do not hesitate to contact me for details. These new ultra luxury property taxes, in theory, should lessen the demand for ultra luxury and soften prices. However, as mentioned above - prices are sticky at the top!

As for the 2nd question above, let me paint a picture for you. On multiple occasions I have met ultra luxury home sellers of, say, homes worth $5M (for example) who claim, "The market is hot now - prices are going up everywhere!" and "I want to sell my home now for $10M!" I have to politely explain the news he/she is watching on TV is for $1M homes in median neighborhoods on other parts of Oahu and that he/she would be - in actuality - selling in a Buyers' Market with 15 months of inventory. "I don't care, I am not desperate and my home is so unique someone will for surely pay $10M for it!" - quite a typical response! For those who are asking question 2 above, the seller described here is definitely not your guy/gal. Sifting through the large inventory of luxury home sellers to find the ones that are really motivated to sell (as opposed to just letting it sit on the market for a very long time at the same price) is an art in and of itself. It would be too much to talk about in this month's newsletter but, needless to say, motivated luxury home sellers are out there. First finding and then teasing them out with strategic negotiations and offers is a specialty of mine so please do not hesitate to contact me.

"Won't luxury homes really start to decrease in price when the economy eventually slides into a down cycle-recession again?" The answer to this is probably very little if at all at the luxury level (below $3M) while ultra luxury (above $3M) will continue to soften (but not crash) due to the new property taxes. We'll also no doubt see some strategic primary residence shuffling with property owners making Hawaii their official residence (so as to avoid paying the higher property taxes). Counterbalancing, the next recession will probably be mild and most ultra luxury home & condo buyers (especially above $3M) will not be getting loans to buy properties thus interest rates will not factor much into the equation. On the contrary, when the stock market turns bear, wealthy individuals start looking for other places to park their money e.g. real estate, precious metals etc. Also, Japan always plays a major factor in luxury homes and condos in Hawaii as any downturn the US economy will wll most likely be delayed in Japan - when the US stock market goes down gold and Japanese Yen tend to increase in value which could ultimately cause higher demand for luxury homes and condos in Hawaii for Japanese nationals - even during a US recession.

"What if I am a somewhat desperate luxury home seller and I really do need to sell - now!?" For you I have a special "Do Not Despair" video tailor made for you. It is possible to get a fair market price for your home in a reasonable amount of time. Our company, Sachi Hawaii, specializes in successfully selling luxury properties in today's market. You can find the video thumbnail in this newsletter (above if reading this from a computer or below if from a smartphone) or click the link here. Please do not let the "floating in the clouds" background distract you from the important points and saliency of the overall message I am making in the video (it was one of my first videos - getting much better now and I plan to redo this particular video in the near future). Again, please do not hesitate to contact me.

Though I am busy, if you have taken the time to read this and my other newsletters, I would definitely make a priority to work with you - no matter your price range - Buyer or Seller.


Knowledge is Wealth!

Aloha!

Damon Rhys


*Disclaimer: Any opinions expressed in this newsletter are that of Damon Rhys only and do not necessarily reflect the views of his brokerage firm, Sachi Hawaii Pacific Century Properties. Though knowledgeable including Management Science / Quantitative Economic Decision Science & Master (MPIA) Degrees from the University of California, Damon Rhys is a licensed Realtor in the state of Hawaii. He is not a licensed Financial Advisor. For any specific investment decisions, it is advised that one consults with a licensed financial advisor.
Welcome to the Fall 2018 edition of our Great Value Hawaii Luxury Real Estate where feature both Homes & Condos which we think offer especially great value for potential Buyers. Presently most of the luxury home and condo neighborhoods on Oahu are experiencing Buyers’ Markets (defined as having more than 5 to 6 months of inventory currently on the market) with average inventory levels at 14.7 months for luxury homes over $1.9M (slightly down from a year ago) and 8.8 months for condos over $700K (see Latest Oahu Hawaii Real Estate Statistics). Prices are somewhat decreasing for upper end homes (final sales prices for luxury homes are on average approximately 7-8% less than the last listed MLS asking prices) and upscale condos - especially in the $1M plus range, see July's Kakaako Update - have been suffering from an over-supply in some areas making it a great time for Buyers to find great value luxury properties in general. In this month's Great Value Luxury we will showcase both a beautiful Spanish-Mediterranean style home on Hawaii Loa Ridge and a penthouse on the Honolulu Harbor bathing in opulence - both with asking prices below tax assessed values. 

The first property we showcase is a luxury home on Hawaii Loa Ridge at Moaniala Place. Originally built in 1988, it was remodeled in 2003 and features 3 stories - entry level at 2nd floor - with an ocean view master resort-suite upstairs.  As of this writing there are 6.6 months of inventory on the market in this neighborhood becoming very close to a neutral market which would be 5 to 6 months of inventor. Note this is markedly lower than the 11 months of inventory (extreme Buyers' Market - see Buyers/Sellers Market Inventory - Strategize Accordingly!) reported earlier this year. Though luxury homes neighborhoods tend to be less price elastic than the median (for what this means please see this month's newsletter's main article), demand and supply are becoming more balanced though still in a slight Buyers' Market. We shall see if this a permanent trend or just a temporary reprieve when we revisit inventories again at the end of the year.
Hawaii Loa Ridge Luxury Home
96 Moaniala Pl

Value Features:
  • Priced at $2,300,000 which is below tax assessed value for this beautiful luxury home.
  • Stunning ocean views and features 3 stories - entry level 2nd floor - with an ocean view master-suite upstairs.  
  • Brings Spanish-Mediterranean island-style architecture to the Pacific Ocean. 
  • Sprawling total of 4,180 SQF indoor area including lanais with downstairs pool, BBQ in a tropical landscaped yard.
  • Features ceramic tile flooring, marble and granite countertops.
  • 24 hour security in the gated Hawaii Loa Ridge community.
  • The home has stunning curb appeal with gorgeous stucco and red ceramic roofing in tropical setting.
  • Access to Hawaii Loa Ridge community park, tennis courts and clubhouse for social/private events.
This polished Spanish-Mediterranean ruby of a luxury home is on offer now at less than tax assessment. Great Luxury Value for the discerning Buyer!  


The second property showcased here is a Castle-in-the-Sky Penthouse unit in Downtown Honolulu's prestigious Harbor Court building situated right on Honolulu Harbor. Built in 1994, it is a relatively newer building (less than 25 years) where units have sold at a median price of $779K - approximately $618 per SQF -  in the last 12 months. Including one other Penthouse there are currently 6 units on the market with 8 months of inventory putting it in Buyers' Market territory (above 5 -6 months of inventory). The asking price for this Penthouse is very close to tax assessed value and in terms of $s per SQF it is very near the median which, as far as Penthouses are concerned, represents a bargain (see last month's How to Price a Penthouse). This building also located in Kakaako - South East Corner, sits with a front row seat to Ala Moana Beach Park and the clear blue ocean beyond. This well managed building has, without a doubt, suffered from the rising Ward Village Development and namely the Anaha and Waiea buildings there creating competition with a flood of new ultra luxury condos. However, there is every reason to believe that inventories may start to decrease with recent developments in Ward Village (see July's Kakaako Update for more details on developments there). From your Harbor Court Citedel-in-the-Sky Penthouse enjoy sweeping views of Harbor, Ocean and Mountain along with the New Year's Fireworks.
Downtown Harbor Court
Unit PH4102

Value Features:
  • Priced at $1.277M for this Citadel-in-the-Sky ultra luxury 3 Bedroom Penthouse.
  • Stunning ocean, harbor and mountain views.
  • Spacious total of 1,918 SQF indoor living space, larger than most single family homes.
  • Asking price in $s per SQF = $665 which is not far off from the median for this building representing a bargain price for a Penthouse.
  • Features hardwood flooring and granite countertops.
  • 24 hour security with Fob Keyed elevator access.
  • The building has stunning Citadel-like curb appeal and is centrally located for easy access to shopping, dining and downtown offices.
  • Amenities rivaling resort hotels with Pool, BBQ and Exercise Room.

Harbor Court PH 4102 - 60 Second Open House Video!
The Harbor Court Building and this fantastic gem of a luxury Penthouse condo has undoubtedly suffered from an excess of surplus from the Ward Village. It comes close to competing with the ultra-luxury of Kakaako, perhaps falling just short of it in exuberance, but in terms of $s/SQF - prices are substantially less. As the surplus begins to recede, we may now start to see some upward pressure on prices for units in this beautiful building*.


If you would like to know more about these properties please contact me (Damon Rhys) for more information. Disclosure: Some properties in this section may be listed by the brokerage firm I work with, Sachi Hawaii. My goal is to give my unbiased opinion on great value Hawaii Real Estate for all brokerage firms on Oahu. In this month the two featured properties here are listed by Damon Rhys, Sachi Hawaii.

Please check out this site’s easy to use Search Tool to find current listings of Hawaii Real Estate now on the market. Homes for sale in Oahu and Condos for sale in Honolulu (Waikiki, Ala Moana, Kakaako, Hawaii Kai etc.) can all be found here using the Hawaii Condo Search or Hawaii Home Search tools.

Aloha!
Damon Rhys

*Disclaimer: Any opinions expressed in this newsletter are that of Damon Rhys only and do not necessarily reflect the views of his brokerage firm, Sachi Hawaii Pacific Century Properties. Though knowledgeable including Management Science / Quantitative Economic Decision Science & Master (MPIA) Degrees from the University of California, Damon Rhys is a licensed Realtor in the state of Hawaii. He is not a licensed Financial Advisor. For any specific investment decisions, it is advised that one consults with a licensed financial advisor.
An impassioned recommendation video by Damon's Buyer clients!
Check Out the Fantastic Diamond Head Views from this Japanese-Hawaiiana Architecturally Styled Home at the Top of Maunalani Heights
Great Value Luxury Property in Hawaii Kai - Modern Fusion Home with 360° Mountain to Ocean Views!
60 Second Open House Video - Luxury Meets the Harbor at This Exquisite Penthouse in the Harbor Court Building
Luxury Home & Condo Sellers - It is a Buyers' Market. However,
Do Not Despair!
60 Second Open House Video - Hawaii Kai Modern Fusion Luxury w/360° Mountain to Ocean Views!
Knowledge is Wealth!

So would be a canary in a real estate cycle. The proverbial canary in a coal mine was used to portend levels of noxious gases (usually methane or carbon monoxide) that would be harmful to humans as these birds were susceptible to passing out at much lower noxious gas concentrations. Once seeing your canary buddy unconscious the smart move would be to make like a roadrunner and hightail it out of the mine. What if you had your own "canary in a real estate cycle" that predicted when this cycle would peak? What would you do with that information? It is not like the stock market where if you could predict the exact tide changing between bull and bear markets, you could sell everything - perhaps even short the market. Real estate is not as elastic as the stock market because for most people their primary property is not just their shelter but also their "home sweet home." Ultimately though, the canary in the real estate cycle would be different indicators for different people in various stages of their lives. For a first home buyer it might be a good idea to wait it out a couple of years, stay with mom and dad for a bit longer. Investors may want to liquidate some property investments and invest elsewhere (precious metals, stocks, bonds etc.) or just hoard their cash. However, most people would just stay at home and ride out the usually short bust phase of the cycle.

Many readers may find this topic a bit dry but please read on if you can. Please note the latest Oahu real estate statistics can be found in the last section of this newsletter and 60 Second Open Houses video thumbnails are located above this article. For general info on which way the weather vane could be pointing in this real estate cycle, please keep reading about the canary!:)

To continue, let's quickly review the 4 basic phases of the real estate cycle noting that our last bust corresponding with the great recession happened in 2008 with the real estate market bottoming in 2011. Here is a simple graphic courtesy of Mueller, Real Estate Finance, 1995:
(click graphic to enlarge)


In a typical 8 year cycle, Phase 1 (Recovery) and Phase 2 (Expansion) would last about 6 years while Phase 3 (Oversupply) and Phase 4 (Recession) would last about 2 years. The great recession in the US officially ended June 2009 but as it was financial (crisis) in nature (Lehman Brothers bankruptcy etc.), it was especially severe. Because of this many Economists including myself believe this current cycle may last quite a bit longer this time, perhaps 12 years or more. In Hawaii median prices of single family homes bottomed at the beginning of 2009 and flatlined thru 2011 (condos bottomed mid 2011) and then turned upwards from there. Here is a graph courtesy of the Honolulu Board of Realtors:
(click graphic to enlarge)

Given the already extended economic cycle this round (real estate cycle typically lags the general economic cycle by a year) and assuming this time we run for 12 years (instead of 8), we have at least 2 more years or more to go in Phase 3 (Expansion) as shown in the Market Cycle Quadrants graph above.  

Back to our canary, we have one here in Hawaii which at first may seem very surprising to you but I assure you it is the perfect bellwether taking into consideration the diverse real estate buyer market in Hawaii compared to the mainland US e.g. Japanese buyers especially at the upper end and for pure investment purposes etc. Our canary is none other that the Ala Moana Hotel with 1,100 units each of which are owned by individual investors. Because of this it is technically a "condotel" but is run like a hotel with each of the unit owners having the option of putting their units/rooms in the "hotel pool" and letting the hotel manage their nightly rentals for a % fee. Though not as liquid as buying stock, the residual income owners receive from renting their units out thru the hotel could be comparable to a stock dividend or compete with US Treasuries (bonds) as I will explain. Here are some of the pertinent facts about this real estate weatherbell condotel:

1) With units in the $200K range selling them can be fairly quick allowing for a certain level of liquidity.
2) As of this writing 9/7/2018 the 10 year treasury yield is 2.94% and the 2 year treasury is 2.71% (note the spread between these two has just started to flatten**)
3) The CAP (Capitalization) Rate on the units with the most consistent occupancy rates runs about 3% or just over (for a Buyer client I recently examined data on approximately 20 units carefully looking for the ones with the best CAP Rates and I found a pattern). For an explanation of CAP Rates please my Oct 2017 - What's Your Investment CAP Rate?
4) The US Economy managed to stoke its inflation rate just reaching 2.9%.
5) Japanese investors also like to invest in old condo buildings. Why? In Japan they are allowed to depreciate (and deduct from their taxes) almost the entire purchase price of a condo in a building 47 years or older over a 9 year period. Ala Moana Hotel Condo was built in 1970 making it 48 years old.

How is all of this related? Assuming that you:

A) Invest in one of the good units in the Ala Moana Condotel at a good price (if interested please do not hesitate to call me, I know which ones they are!).
B) Get your annual 3% CAP Rate (basically the annual return on your money).
C) You cover your resell costs through natural real estate asset appreciation (tends to be higher in Hawaii - See my Investors' Buying Guide article for details). You could possibly recover your resell costs after only holding a unit for 2 years (it would be helpful to negotiate the best price possible - feel free to ask me about that too!).
D) Understand buying an Ala Moana Condotel is a cash only proposition (normal mortgage financing is not an option for condotels).

The 3% CAP Rate (annual return on your money) is looking a lot like and a little better than 2 Year Treasury Yield of 2.71% with probably a bit more volatility but as long as you hold on to it for at least 2 years it would also provide some liquidity. You have the added benefit of actually staying in your own condotel the few times a year when you visit Hawaii (no free nights at the Treasury!:). In fact, even with 10 Year Treasuries at 2.94% you would still be beating those with your 3% CAP Rate (assumes you have a smart realtor who knows which are the best units)!

So what has happened in the last 3 months in the Ala Moana Condotel, our Hawaii Real Estate canary? For one, average days on market (on average how long it takes to sell one after putting on the market) has grown substantially to 76 days! In all of 2107 the average was less than 32 days. Why? It really has everything to do with interest rates. A year ago the 2 & 10 Yr Treasuries were 1.21% and 2.05% respectively. Compared to this a CAP rate of 3% and some free nights in the Ala Moana Condotel in Hawaii look fairly good. However, with the next couple of Fed Rate hikes even the 2 Yr Treasury will outperform a 3% CAP and we will only be left with those who really like free nights in Hawaii. I suspect at that point average days on market could reach 90 plus (still a very short time compared to the Hawaii Luxury Home market which is 14.7 months) and prices could soften a bit.

Also, our Japanese investors described in 5) above should greatly offset the general yield chasing investors who now decide to pass on buying in this building - since even a 2 Yr treasury may outperform the 3% CAP rate. Using round numbers, say a Japanese investor bought a unit with a really nice ocean view for $270,000. He or she would be able to depreciate almost this whole amount over 9 years or approximately $30,000 year which they can deduct from their yearly tax bill. On top of that our Japanese investor could sell after 9 years and realize some capital gains. On top of that they would have been earning a yearly 2% - 3% CAP rate per year (units with better views usually have lower CAP rates - if you want to know why please do not hesitate to call me, too much to explain in this already lengthy newsletter!)

In summary, with this recent development we are definitely past the halfway point on the Phase 2 (Expansion) part of the Real Estate Cycle in the diagram above. Interest rates are still somewhat low though increasing at a steady pace now along with inflation. Although the spread between the 2 Yr and 10 Yr treasuries is flattening, it could take a few (3?) more years to completely flatten**. I predict we get at least 3 more years out of this expansion*. 

Lastly, for reasons explained above, prices in condos can make a bit of a leap when they reach 47 years old*. Though our canary may start to look a little wobbly in the legs right now, it seems there is a Japanese canary paramedic standing by with some fresh oxygen:)! If you are interested in some of these buildings that are 47 years or older, please contact me.

I will leave you with an excerpt of the cover letter I recently wrote to the listing agent of the unit for which I put in an offer for my buyer client. In it I am justifying the somewhat lower offer:

Dear XYZ,

After careful consideration my client is hereby submitting the following offer for the purchase of your Ala Moana Hotel Condo. With all due respect, we kindly ask you to consider the following:

1) Average days on market for units in this building in the last 3 months has been 76 days. This is more than double all of 2017 which had an average of 32 days on the market. Significantly rising days on market means there is a surplus of units on the market which results in a decrease in prices.

2) Interest Rates are also increasing leading ot a softening of prices in general which also has an effect on the condotel market. It is also partly responsible for the rapidly increasing days on the market as in 1) above.

3) I have also included a verification of cash funds with this offer so as to fortify the strength and realiability of this good offer.

With all of the above in mind we respectfully request your due consideration of my client's fair offer.


Knowledge is Wealth!

Aloha!

Damon

 
*Disclaimer: Any opinions expressed in this newsletter are that of Damon Rhys only and do not necessarily reflect the views of his brokerage firm, Sachi Hawaii Pacific Century Properties. Though knowledgeable including Management Science / Quantitative Economic Decision Science & Master (MPIA) Degrees from the University of California, Damon Rhys is a licensed Realtor in the state of Hawaii. He is not a licensed Financial Advisor. For any specific investment decisions, it is advised that one consults with a licensed financial advisor.
** This is called the Yield Curve and when it becomes flat it usually corresponds with an economic recession.
Sunday Open House Info for Oahu! - Open House info for most of Oahu is now updated every Friday after about 8PM at night in time for Sunday Public Open Houses. Use the link above to find the upcoming open houses in the areas and neighborhoods you are interested in.

60 Second Open House & Great Value Luxury Property Video - Check out some of the thumbnail links to these great videos either above or on the Hawaii Damon YouTube video site!
Oahu Real Estate Statistics July 2018
Oahu Hawaii Real Estate Statistics & Analysis

Aloha! Here are the September 2018 (July Data) Oahu Hawaii Real Estate housing statistics courtesy of the Honolulu Board of Realtors – Hawaii Housing Stats, May-2018. In 2018 the housing market on Oahu continues to break median sales price records on a monthly basis with overall prices still increasing unabated compared to last year (June was the only anomaly) for both homes and condos - so far (the notable exception would be the luxury home market). However, from Feb thru Jul of 2018 (last 6 months) we have seen the actual numbers of sales for homes decrease - compared to the same month in 2017 - for 5 out of 6 months.  Conversely, for condos during the same 6 month period we have seen an overall increase of sales compared to last year. This is partly due to some buyers being priced out of the home market and choosing a condo as the only viable alternative. Just after a long term real estate cycle peaks the first indicator is a decrease in sales of homes (currently happening) followed by an increase in inventories (no sign of this happening yet). Once that continues prices inevitably start to flatten. However, with the US expanding Economy it could take up to several more years for all of this to play out. We will will be watching the trend closely to see if it is just an anomaly or if it continues. Though interest rates are still low, they are increasing and will start to play a significant role in the housing market. With a shortage of median housing on Oahu, pressure on the condo market will most definitely continue. As for this months detailed stats we have, in summary:

Overall Oahu Real Estate Sales have decreased by -1.5% in July for Single Family Homes while increasing by 5.7% for Condos compared to the same month last year. The YTD (Year-To-Date) data shows an overall sales decrease of -1.6% for Single Family Homes while, conversely, an increase of 1.9% for Condos compared to last year. The overall combined trend for the year thus far is trending downwards for homes and upwards for condos (the downward trend for homes could become statistically significant if it continues - we will continue to monitor and update you accordingly).  

Median Oahu Real Estate Prices have increased by 5.3% and 1.1% respectively for Single Family Homes and Condos compared to the same month last year while YTD median prices have increased by 4.3% and 6.3% respectively. The overall trend is still upward (the notable exception would be the Hawaii luxury homes areas).

Oahu Real Estate DOM (Days on Market) YTD (Year-To-Date) indicator stayed the same at 16 days for Single Family Homes compared to last year (5 out of the last 6 months DOMs decreased with only June being a big anomaly). YTD DOMs for Condos increased by 2 days to 18 days compared to 16 days for the previous year, probably not statistically significant. As mentioned above, we did see a drop in sales of homes in the last 5 of 6 months compared to the year before. Though no sign of it yet, once we see inventories increasing for about 6 months it could be indicative of having peaked during this real estate cycle. We will definitely be watching this indicator closely for the next several months. (Note that Luxury Home areas are still experiencing large inventories - avg 14.7 months (July) but slightly dropping from 15.8 months a year ago for homes over $1.9M - though definitely and finally decreasing, we are still in extreme Buyers’ Market territory for some of these Oahu Luxury Home neighborhoods).

For the detailed report with a breakdown by neighborhood please see: Oahu Neighborhoods Real Estate Statistics (July 2018 Data). Please note that the overall stats for Luxury Homes in Hawaii are very different from that of the Median Home Areas whereas Luxury Home inventory - though coming down- is still high pushing downward pressure on prices in those neighborhoods i.e. Buyers’ Market (Median Home areas are Sellers’ Markets). On the other hand, the fear of rising interest rates are creating pressure on prices in the median neighborhoods where the majority of homes are purchased through financing.

Hot Tip – If you are thinking of upgrading to a Luxury Home from a Median Home, now would be a great time to sell your current home and upgrade to a Luxury Home neighborhood. Please call me for details.

Please check out January's newsletter's very important article: Tax Reform vis-a-vis Hawaii Property Prices and Your Bottom Line. If you have a family, school and education should be a priority so please do not miss February's: Best Schools on Oahau - Private vs Public & Property Values. For finding great value in Kakaako check out July's: Kakaako Update. For more information about whether your neighborhood is in a Buyers’ or Sellers’ Market (or if you are a Buyer – the neighborhood you are interested in) please check out my previous blog/newsletters here: Buyers’ or Sellers’ Market? Absorption Rate is the Key  and The Latest Buyers & Sellers Market Data on Many East Oahu Areas - Know Before Buying or Selling! (Just Updated May 2018!)

For more analysis of what all this means for Real Estate in Hawaii in 2018 – including tips and marketing strategies for both Buyers and Sellers – please sign-up (it's free!) for Hawaii Damon Real Estate 101 Newsletter. Previous months' newsletters can be found on the Blog section of my website: hawaiidamon.com/blog

Lastly, please also check out this site’s easy to use Search Tool to find current listings of Hawaii Real Estate now on the market. Homes for sale in Oahu and condos for sale in Honolulu (Waikiki, Ala Moana, Kakaako, Hawaii Kai etc.) can all be found here using the Hawaii Condo Search or Hawaii Home Search tools.

Aloha!

Damon Rhys

For previous issues of the Hawaii Damon Newsletter please either visit the blog section of the Hawaii Damon Website / Blog or check out the following great links:

·  07/10/2018 - The KakaakoTide Ebb & Flow to SE Corner - Update & Strategies | How to Price a Penthouse | Great Value Luxury Props |Video, Tips, Stats & More!

·  05/19/2018 - Latest Oahu Buyers/Sellers Market Inventory Data - Strategize Accordingly | Great Value Luxury Props + Video | Interest Rates, Advice, Stats & More!
 
·  03/31/2018 - US-China Trade  vis a vis Hawaii Real Estate & Japan's Mitigating Role? | Great Value Luxury Props + Video | Interest Rates, Advice, Stats & More!
 
·  02/08/2018 - Best Schools on Oahu - Private vs Public & Property Values | Great Value Luxury Props + Video | Interest Rates, Advice, Stats & More!
 
·  12/27/2017 - Tax Reform vis-a-vis Hawaii Property Prices & Your Financial Bottom Line | Great Value Luxury Props + Video | Interest Rates, Advice, Stats & More!
 
·  11/03/2017 - The Latest Buyers/Sellers Market Inventory Data on Many East Oahu Neighborhoods | Great Value Luxury Props | Advice, Stats, Video & More! | Damon Rhys
 
·  09/30/2017 - Hawaii Real Estate: QT is Here! | What is your investment CAP Rate? |Best Value Properties | Latest Oahu Stats | 60 Sec Open House & More! |Damon Rhys
 
·  08/29/2017 - Hawaii Real Estate: Ward Village Condo Development |Great Value Properties | Latest Oahu Stats | 60 Sec Open House Video | Advice & More! |Damon Rhys
 
·  07/26/2017 - Hawaii Real Estate: Market Strategies for Buyers & Sellers II | Best Value Properties | Latest Oahu Stats | 60 Sec Open House Video & Info| Damon Rhys
 
·  06/25/2017 - Hawaii Real Estate: Market Strategies for Buyers & Sellers | Best Value Properties | Latest Oahu Stats | 60 Sec Open House Video & Info| Damon Rhys
 
·  05/20/2017 - Hawaii Real Estate: Should I Renovate or Move? By the Numbers | Good Value Luxury Home & Condo | Investor Guide | Open House Info & Video | Damon Rhys
 
·  04/22/2017 - Hawaii Real Estate: Kakaako Rising & Interest Rates Falling! | Great Value Luxury Property | Investor Guide | Open House Info & Video | By Damon Rhys
 
·  03/17/2017 - Hawaii Real Estate: Air vs Dirt - Lifetime Investment Challenge | Great Value Luxury Properties | Investor Guide | Open House Info & More | Damon Rhys
 
·  02/19/2017 - Is Trumponomics Inflation Coming? | Protect Your Wealth | Great Value Luxury Real Estate | Investors' Guide | Open House Info & More! | By Damon Rhys
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Copyright © 2018 Hawaii Damon (Sachi Hawaii Pacific Century Properties LLC - Brokerage Firm), All rights reserved.


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