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Observations in Hawaii Real Estate - Part 3

When I made the post Observations in Hawaii Real Estate - Part 2 on July 26, 2022, the average 30 year fixed mortgage rate was 5.81%. I predicted that interest rates were showing no slow down, and that we would continue to see interest rates increase to high 7% or even 8% by the beginning of 2023 before we would see it start to come back down. 


In the immediate weeks following, interest rates did end up going down. It dropped to a record low of 5.13% in the week of August 18, 2022. I thought my prediction was wrong. I stopped following the mortgage rate trends for a few weeks. 


This past week, to my surprise, it shot up once again to an average of 6.94% (Federal Reserve Bank of St. Louis


Despite the higher interest rate, Hawaii inventory remains low and thus median price remains steady. However, bid ups are definitely leveling off. 


In September 2022, according to brokerage Locations Hawaii, 38% of homes got a bid-up over asking price. While daunting for buyers, this is a significant decrease from September 2021, when an astonishing 62% of single family homes got bid-up above asking! 





As interest rates creep higher, I can only imagine that the number of bid-ups will slowly come down. 


The duplex that was featured in Observations of Hawaii Real Estate posts is finally on sale pending. In the last update I provided, the seller was asking for $1.15m. As of this week, it went on sale pending when the seller had dropped his asking price to $999k with additional offers of free property management for a year, and a buyer interest rate buy down. 




With these high interest rates, I would not be surprised if the prospective buyer negotiated a purchase price to $990k. Given how long this home sat in a hot market, I can only guess how desperate the seller would be, especially if he had to finance both the original purchase and renovation costs! And with higher interest rates, there will definitely be a smaller pool of interested individuals. Better just take what you can get and learn from the experience.


Prepare for a bumpy ride


Despite POTUS’s attempt at reassurance that inflation has peaked, I believe it hasn’t. It’s difficult to be soothed by the POTUS when the Fed has made contrary statements and actions to try to tame it. 


Some economic models are predicting that the US economy will 100% enter a recession within the next 12 months.


To me, that means we need to prepare. 


Prepare for inflation getting worse, and prepare for losing our jobs. 


This may mean saving more, and working more productively to avoid the next round of company layoffs. Remember that working more productively does not necessarily mean working harder! 















 


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