Market Trends

Interest Rates Continue to Climb…Will the Market?

Interest rates are climbing, hovering close to 5% recently. Wow! Historically speaking, interest rates are still attractive, but given that we’ve seen rates as low as 2.65% in recent history, 5% is a bit hard to swallow. Higher rates mean you will have less purchasing power if you are a buyer. And, if you are a Seller, it may mean less competition for your home. Or, will it?

Will bidding wars continue?

Last year we witnessed one of the hottest and most competitive housing markets in history. A market that was largely driven by record-setting low mortgage rates and one where most buyers found themselves competing for properties. So, will bidding wars continue now that interest rates are increasing? Maybe. It’s certainly normal to see Buyers pull back when higher rates make buying a home less affordable. It’s reasonable to expect that some of the competition will wane. But, here’s the thing. We have a shortage of available housing in Hawaii and demand for a home in one of the most beautiful places on the planet hasn’t seemed to wane. At least not yet.

All real estate is local.

So, whether you are a Buyer or Seller or just someone who likes to follow the real estate market, it’s important to look at your own market dynamics. On Oahu, we are still experiencing multiple offer situations in most neighborhoods. It’s still not unusual to hear stories of desperate Buyers aggressively competing for property. Purchase contracts still contain very attractive terms for Sellers and many are often over the asking price. Well.Over.Asking.

It’s logical to expect that as the Fed raises interest rates in an effort to curb inflation, demand for real estate will decline, thus putting downward pressure on prices. But, only time will truly tell us how higher rates will impact our market. “Time” is the operative word. For now, we are seeing fewer transactions, but not softer prices, at least not in most neighborhoods.

So, will prices continue to rise in spite of higher interest rates?

In the short run, we think it’s likely. Strong demand and limited supply will continue to buoy prices and those with the ability to buy in spite of higher rates will fuel our market and spur prices upward.

Stay tuned and continue to watch the market response to higher interest rates, but remember, watch your market because it’s your market that matters most.

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Kathy Awai

April 7, 2022

I think if prices continue to rise even a little, Hawaii will be a place where only wealthy people will be able to live. Once that happens, local and kamaaina people will continue to leave as they are already doing. Then, the question remains, who will clean hotel rooms, wait on tables, work retail jobs and hundreds of other little businesses that can only pay their employees X amount of dollars that won’t sustain them in this type of atmosphere. Drs keep leaving in droves, especially outer islands because Medicare and Medicaid doesn’t reimburse them enough. Coupled with the fact that it’s so expensive to live here, Drs go back to the mainland as it’s more lucrative for them. The fact is, there is only so much room on an island and they aren’t building more and even if they do, when is enough enough? How will it change all our communities in the long run? The people that are buying properties 2 mil and up? Most don’t live here full time and they can go back to the mainland for any medical treatment. It’s become a real problem; housing, health care and making a living wage. Not great. Yes, we live in a beautiful place but if you can’t afford to buy a home or provide for your family and have to work several jobs, how is that even enjoyable? What’s happening to the quality of life in Hawaii?

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