O'ahu Market Update - October 2023

Every month, we dive into the numbers and hope that they tell us a story of what happened and what will happen. Last month, prices shifted upwards because the drop in homes for sale was greater than the drop in demand for those homes. When there is less inventory as compared to demand, prices rise. In October, we saw pending sales drop by 3% while active inventory dropped by 4.6%. The result was an increase in both the median price and the average price for single-family homes. The median price rose to $1,100,000 a 4.8% increase, and the average price jumped to $1,304,757, an increase of 4.9%. Condos did the opposite. Active inventory rose by 9.4% while pending sales dropped by 5% resulting in a drop in median price by 1% ($550,000) and a drop in average price by .9% ($670,805).

October also saw mortgage interest rates rise and fall. For most of the month, interest rates soared, reaching the highest levels we have seen in over 2 decades, followed by a decline in the last week of the month. The driver of the market over the past 2 years has been mortgage interest rates, putting a strain on demand and affordability. Interest rates began to rise 2 years ago, resulting in a drop in closed homes sales by 41% over that 2 year span. Will the shift we saw at the end of October end the 2 year stretch of choked demand? While we won’t know until it actually happens, it is something we must keep an eye on.

The other indicators reported in October continued the 2-year trend we have been seeing. Months of inventory continued to rise (2.9 months) and the sales price to list price continues to drop (98%).

Read the full report from the Honolulu Board of REALTORS® here.

6 External Influences That Lessen Home Values

Home prices are still near record highs, so if you’re purchasing your next home in a cheaper or unfamiliar area, be aware of outside influences that can lower your property values.

Noise. Traffic noise, sirens, construction, and other noise pollution can impact home values. Areas to avoid include next to a freeway, on a busy thoroughfare, or across the street from a school. 

Danger. Crime statistics can be found at USA.gov. You can search the Office of Justice Programs for known sex offenders living in your area.

Industrial pollution. Builders often look for land in industrial areas where the parcels are cheaper and larger to construct apartments and houses. Visit The Environmental Protection Agency and enter your address to learn how emissions and releases from industry are impacting your neighborhood.

High number of rentals. If you’re buying a condominium or house managed by a homeowner’s association, you have the right to see all governing documents and financial records. High turnover rates make it more difficult to get mortgage loans and expose you to transients who may not care about their neighbors since they don’t own the property.

Bad neighbors. You’ll have to introduce yourself to potential neighbors and ask them what the neighborhood is like, but you can also tell a lot from the state of other properties near your next home. Rundown homes around your home make it less desirable.

Your Berkshire Hathaway HomeServices Hawai'i Realty agent will be able to help you research the home and neighborhood.

Should Sellers Help Buyers With a Mortgage Buydown?

In August 2023, the average 30-year mortgage interest rate hit its highest level since 2000. At 7.48%, they were nearly triple where they were during the pandemic when they reached a low of 2.65% in January 2021. Meanwhile, median home prices rose for 10 consecutive quarters beginning in fall 2020, only declining for two straight quarters to $416,100, which is still 26.4% higher than the quarter just before the pandemic.

The National Association of REALTORS® reported that existing home sales volume in July 2023 slipped 16.6% from the previous year, even as home prices rose to $406,700 from $399,000 a year ago. While many markets are still robust, others have slowed considerably. How can sellers bring more homebuyers to the table?

As a concession, the seller can offer to pay discount points to the homebuyer’s lender to help the homebuyer get a lower mortgage interest rate. Called a seller-paid mortgage rate buydown, these discount points are typically 1% of the homebuyer’s loan amount and every discount point paid reduces the mortgage interest rate by 0.25 percentage points. If the mortgage amount is $400K, a discount point would be $4,000, and the monthly principal and interest payment at 7.5% would be $2,797. A seller-paid discount point would lower the interest rate to 7.25% and a monthly payment to $2,729. Over the life of the loan, the borrower would save$24,535.

Talk to your Berkshire Hathaway HomeServices Hawai'i Realty agent about seller-paid mortgage rate buydowns and see if they can benefit your transaction.