In this week's edition of the Island Land Company Blog, we will analyze and review this year's Hawai’i Housing Factbook, put together by The Economic Research Organization at the University of Hawai’i. To begin I will list out some of the major fact points that I found to be interesting. I would like to preface by saying that these facts are provided by an Academic Institution, the opinions on them however, are mine, and are best to be treated as such.
“Median housing costs are 2.7x the national level… (and have) more than tripled since the mid 90’s.” Per Hawai’i Housing Factbook, 2023.
This statistic is something that I think catches us off guard, and yet makes sense to those of us who call the Big Island home. This statistic is also part of the reason why we see so many of our loved ones move away from the island, the discrepancy between cost of living and household income makes affordable housing opportunities fewer and further between. I do feel that this statistic can and should be looked at through an optimistic lens. What I mean by this is; that it is very easy to develop a victims mentality upon reading this statistic initially. It is very easy to think “I am a working class individual, I cannot afford a home in the price ranges that you currently see single family residences at.”
This may not actually be the case, “opportunistic” buyers are very heavy in the market right now as we are in a bit of a more aggressive spike in what is a market that naturally trends upwards at a more aggressive rate due to the overall lack of land and new housing opportunities. What is the difference between a buyer who says, “I cannot afford a home in this market,” and an opportunistic buyer? Simply put: mindset. Seeing the overall trend of the market can make an individual think, “if the statistics prevail, if I buy a single family residence for $800,000 today, that would be worth upwards of $2 million in 30 years, the lifespan of a long term home loan.
Oftentimes home prices and interest rates work on inverse scales, when one goes up the other goes down. This is not necessarily the case right now however, but lending institutions have a job to do as well. It has been my experience that there are a lot of local lenders who are able to get very creative to get good people in homes. While rates may be incredibly high right now (between 6.5-7.5% day to day) lenders are finding new ways to create more favorable loans all the time. Even as simple as 3.5% down. That means that in theory, someone could buy an $800,000 home with just $28,000 down. There is a lot of equity that can be made from just $28,000 down in 30 years.
“Before the pandemic, the median single-family home price in the state was $650,000. Between 2019 and 2022, prices rose by 35%, before leveling off in 2023. Median condo prices saw a 30% pandemic increase, jumping from $453,000 in 2019 to $587,000 in 2022, and have since risen further to $600,000.”
I’ve included this statistic merely for the spectacle. While another pandemic is both unwanted and unlikely, it caused a whirlwind of supply and demand on the Hawaii housing market. This reminds me of a talk I had with a buyer of mine the other day. She told me, “I don’t want to go over this number because I do not want to be house poor.” This made me think, what is house poor? It seems to me, the term house poor is a mentality as well. Seeing your home as something that could be an opportunity vehicle rather than a liability is the difference between an investor and someone who is “house poor.” The opportunities that can lie within a property and the structures that exist on that land are oftentimes more extensive than meets the eye. In these situations, it becomes critical to partner with the correct real estate professionals in order to find out about the opportunities that lie not only in owning your own home, but developing the property that you have purchased!
Statistics Taken From:
The Economic Research Organization at the University of Hawaii. “The Hawai‘i Housing Factbook.” The Hawai’i Housing Factbook, 28 June 2023.