Buying Advice

Waiting for the Market to Drop?

The sustained, aggressive growth in the real estate market has many wondering when things will inevitably turn. For many, the memories of 2007/2008 loom large (for good reason!) and, as Sweet Brown once wisely proclaimed, “Ain’t nobody got time for that!” There’s plenty of noise about how today’s rising interest rate environment is the catalyst for the market to finally turn. But, historically speaking, what impact do rising interest rates have on Home Values?

According to data from NAR & Freddie Mac, periods of sustained interest rate increase (>1%) have led to a drop in the number of home sales, while maintaining average price growth of over 5%. I anticipate this trend to continue with our current uptick in rates for a few reasons:


Simply put, if you’re paying cash, you’re not too worried about what interest rates are doing. The number of cash buyers looking to purchase in Hawaii remains incredibly strong. 

Supply/Demand Imbalance

Historically, a balanced market has 5-7 months’ supply of inventory. Nationally, we’re at just over 2 months’ supply. To achieve market equilibrium, we’d need to see approx. a 40% increase in homes on the market AND a 40% reduction in Buyers.

Transcendent Desire for Homeownership

The motivation for homeownership most often has little to do with economics. More commonly, quality of life, provision for family/loved ones, stability, etc. are the primary drivers to Buying. That said, Buyers will simply adapt to new market realities. They can do so by adjusting their household budget to absorb the higher rate, delay the purchase so that they can make a larger down payment, or adjust their home search to different neighborhoods and/or home types.

Buying a home is a consequential decision and one that requires strategic bets. You’re betting on the continued growth in the market, neighborhood quality, income stability, and more. For this reason, make sure you’re looking at accurate data and obtaining sound council, versus reacting to whatever talking head or social media voice is espousing. The most fulfilling part of my job is being able to counsel, educate, and help people in this consequential decision. If you have any questions relating to Hawaii Real Estate, I’d love to connect!

Authors Note: C.R.E.A.M. is the title to WuTang Clan’s hit 1994 song. The title is an acronym for “Cash Rules Everything Around Me”. Thank you for indulging me, and know that my wife shakes her head at me for this reference. 

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Cherie Tsukamoto

May 26, 2022

Great article, Dave!

Mark Low

May 27, 2022

If I understand correctly, the government instructed the banks to re-finance over 4.5 million home loans that would have either forced owners to sell or have their homes foreclosed on. Some of these loans will be paid by the terms but many will go back into forbearance and the banks will be allowed to foreclose on home loans again. How do you see that impacting the housing market and prices? Mahalo!

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