Aug
25
What trouble instead of a bubble?
Filed Under Sunrise on KGMB9
For months I explained why Hawaii won’t have a housing bubble this time around, but what I didn’t know was what we would have instead. Now, I think I do know.
We will have a drawdown in housing prices caused by two factors, both related to the mortgage default crisis, and the result could be a window of affordability for people who have delayed becoming first-time homebuyers because they couldn’t afford anything decent.
Here are the two factors:
- Gravitational pull of declining West Coast prices. We’re a separate market, but part of our market is California buyers, and California buyers may find it difficult to pay $600,000 for Hawaii home X when they see a similar mainland home Y going for less despite also have a garage and a huge yard.
- As foreclosures increase, along with short sales (selling a house for a firesale price to AVOID foreclosure), current prices in some neighborhoods will become untenable. How can you insist on $600,000 for your home, X, when the home down the street, Y, is offered in foreclosure sale for $500,000?
There is not yet much evidence of these factors being in play much in Hawaii, doubtless in part because Hawaii has a really low foreclosure rate. But on the mainland it is estimated that more than a third of ALL home sales are now foreclosure sales, and that total foreclosure sales over the next year could top 2.5 million, or half of all the homes slated to be sold this year.
Any would-be first-time homebuyer who intends to have a shot at buying a home if prices ease further needs to start saving NOW. Pay down your credit card debt. Talk to a banker who will crunch numbers to figure out at what point you might actually qualify for a mortgage. Key factors will be your credit card debt and how secure your income in — not just how much, but how secure.
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