November 2011 E-Mail Update

This is my 11/9/11 E-Mail Update. I send an Update out each month after the statistics for the preceding month have been posted on the Honolulu Board of Realtor’s website. If you want to be taken off the distribution list, hit reply and send me an e-mail stating that. Please include your first and last name to make it easier to identify you.

Total housing sales in October were slightly lower at 544 compared to 564 a year ago. Looking at total sales for the ten-month year-to-date period (January through October) total sales were nearly the same at 5,780 compared to 5,805. Sales prices, though, were a different matter, particularly for houses. The median (midway) sales price for houses fell from $596,500 to $570,000 (-4.4%) while condos fell from $305,000 to $302,790 (-0.7%)

Paul Brewbaker, former Chief Economist for the Bank of Hawaii, believes that a general sideways movement in housing prices might persist in Hawaii for few years until a more robust economic growth takes hold. The University of Hawaii Economic Research Organization (UHERO) released a report last week predicting that the median sales price for houses will continue to slip this year and then grow slightly in 2012 to about +1.5% before making increases in 2013 of about +8.5%.

The following article appeared in the Wall Street Journal in mid-October; it was titled: It’s Time to Buy That House. It reflects national data vice Hawaii data. I edited it considerably to reduce the length.

U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression. Two key measures now suggest it’s an excellent time to buy a house, either to live in for the long term or for investment. First, the nation’s ratio of house prices to yearly rents has been nearly restored to its pre-bubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.

Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody’s Analytics. The average from 1989 to 2003 was about 10, so valuations aren’t quite back to normal. But for most homebuyers, mortgage rates are a key determinant of their total costs. And, rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren’t hitting new lows. The 30-year mortgage rate rose to 4.12% in mid-October down from a record low of 3.94% the previous week. The rates assume 0.8% in pre-paid interest, or “points.”

As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index’s historic average is roughly 120. A reading of 100 would mean that a median income family with a 20% down payment could afford a mortgage on a median-price home. So, many of today’s buyers can afford handsome houses.

A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody’s Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. “If the economy slips back into recession, however, we could easily see a 10% drop,” Ms. Chen says.

And property “flipping” can be dangerous even when prices are rising, That’s because, absent a real-estate boom, house price gains simply aren’t that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods. Houses aren’t the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should consider jumping into the housing market.

On to other matters . . . Hawaii had the nation’s 20th worse mortgage delinquency rate in the third quarter as 5% of the state’s homeowners missed two or more payments during the period. The state, however, still fared better than the national average at 5.88%. Hawaii’s average mortgage debt per borrower of $334,606 was the third highest in the country behind the District of Columbia and California.

There’s magic stirring in the jungles along the coast from Kahana Bay to Waimea Valley but it’s not the bright and friendly kind. It’s magic with menace, the kind so terrifying you can’t turn away. And, if the creators of ABC-TV’s new series, “The River,” deliver on their promise to scare viewers, the midseason replacement could become a terrifying ratings hit. “The River” is the story of the search for a wildlife expert who has vanished deep in the Amazon. To fund the search, his family agrees to allow a documentary crew to come along. The show’s creative team includes movie mogul, Stephen Spielberg, and is scheduled to begin airing in March. ABC has considerable experience using Hawaii as a background, as their mammoth TV hit “Lost” was shot in Hawaii.

A record four Hawaiian monk seals were born on Oahu this year. They are an endangered species with only about 1,100 remaining. About 200 of them live on various Hawaiian Islands. This is the first time four seals have been born on Oahu since experts started keeping records 15 years ago. An ongoing problem is young pups interacting with people and becoming overly friendly. At 300 pounds, people-friendly monk seals are a threat to swimmers and to themselves because they have trouble foraging for food and defending themselves from sharks. The high traffic Hawaiian monk seal corridor is between Rabbit Island and Sandy Beach.

Hawaii will become the first state to have official high school surfing championships in 2013 when competition begins. After years of bureaucratic ping-pong and wait-‘til-forever thinking, surfing will finally become a reality and join the other 17 sports offered in 45 public high schools statewide. There’s even talk now about adding body surfing and body boarding down the line. Since statehood there has been talk about a homegrown sport that would add another hook to keep at-risk students who have little interest in other scholastic or extracurricular pursuits in high school. Thanks to some enterprising thinking and long-needed hustle it will finally become available.

Governor Abercrombie (D), with less than a year in his position, is now the most unpopular governor in the nation according to a poll by Public Policy Polling. Abercrombie’s approval rating has dropped from 48% in March to 30%. Even Democrats have turned on Abercrombie. The poll showed that only 43% of Democrats approve of his job performance, down from 66% in March. In October, Abercrombie’s four top young advisors, including his chief of staff and deputy chief of staff, resigned in a mass departure.

This week’s Asia-Pacific Economic Cooperation (APEC) will be in full swing from November 7-13 with 21 heads-of-state participating. An estimated 20,000 attendees will be present creating an estimated economic boost to Hawaii of $123 million. An estimated 120,000 hotel rooms will be filled.