It’s January and this is the time of year when pundits make predictions for the year ahead. Well, not being a pundit, but knowing a thing or two about the local housing market and keeping our fingers on the financial markets, LUVA Real Estate would like to share our crystal ball with you.
Buyers Head to the Condo Market
As we mentioned last fall, West Hawaii real estate prices plunged after the eruption, but started to pick up in November and December as buyers on the fence through the summer and early fall saw that the island was not going to sink or tip over and that real estate was still a great investment on Hawaii Island.
However, the single family market in North Kona has been slowing down and in December prices fell year over year 5%. This is tracking some of the news coming from the mainland where buyers are wary about affordability and financing, as rates had continued to rise and salaries are not keeping pace with how fast home prices have been rising.
However, in the mostly luxury second home market in South Kohala, single family home home prices increased 7.34% year over year from $579,000 to $621,000.
As we predicted when the price of single-family homes topped $600k, more buyers would flow into the condo market. That is exactly what happened as condo prices in both South Kohala and North Kona saw price increases year over year. In South Kohala, the median price for a condo rose 20.65% year over year, and in North Kona, condos rose 15.35% year over year from $285,000 to $328,750.
Prediction: Strategy Counts
Now that we are coming off of the holidays and heading into the spring market, where “snowbirds” start to leave the island in April, serious sellers need to price their homes accurately when they first come on the market instead of pricing with the hopes of finding buyers who are here on vacation. Getting your home to show its best as with more competition from sellers thinking now is the time to sell, your home has to shine a little brighter.
Will Rising Interest Rates Slow the Market?
The Federal Reserve increased interest rates a full percentage point between July and December and promised more for 2019. The interest rate hikes were geared to slow the market down and they did just that when buyers had 10-12% less buying power and had to choose less house, a different city or sitting on the fence waiting.
Mortgage Applications Are Popping
For 2019, economists have warned that changes to the tax code will have a negative effect on buyers with loans between $750,000 and $1,000,000.
The good news lately is that mortgage rates have actually FALLEN to a new 9 month low and homebuyers and homeowners are not wasting their chance to grab these savings. Total mortgage applications rose 13.5 percent from the previous week to its highest level since February 2018, according to data from the Mortgage Bankers Association’s applications survey for the week ending Jan. 11. Purchase applications climbed 9 percent — the highest level since April 2010 — and refinance applications jumped 19 percent over the previous week. This signals that homebuyers are willing to jump off the fence if the right conditions exist.
Will Sellers Flood The Market With Inventory?
In 2018, inventory remained tight, but as the summer market plateaued, more inventory remained on the market for longer and some sellers, thinking that the market had hit its peak, quickly put their homes on the market, giving buyers an edge for pricing. Will this continue as a trend in 2019? If buyers are hopping off the fence to take advantage of a dip in the interest rates, it could re-energize the market this spring, bringing home prices up and inventory down which would help sellers who thought perhaps they missed the top of the market.
As our crystal ball can only forecast so far, we think that the spring market in West Hawaii will remain strong for the condo market. Single family homes that might have been sold to investors looking for short term vacation rental opportunities have been thwarted by the new ordinance that prohibits new vacation rental activities outside of the resort zone. This also may lead to some investors unable to see a monthly net profit and sell in 2019.
As we all know, West Hawaii is always a desirable location for lifestyle and there are no market indicators right now that would signal an impending recession.
If you would like to discuss the market further and get specific pricing on what your home is worth and a strategy to get it onto the market, please contact LUVA Real Estate today.