Can Higher Mortgage Rates Cool Hawaii’s Booming Real Estate Market?
HONOLULU (HawaiiNewsNow) — The Honolulu Board of Realtors says the median price of a single-family home on Oahu fell slightly to $1,105,000 in April. The number of homes awaiting sale also fell – a sign that rate hikes by the Federal Reserve are starting to have an impact.
Mortgage rates have reached historic lows over the past two years, leading to strong demand for real estate and record house prices. Since the Federal Reserve began raising interest rates to curb soaring inflation, experts say the market may begin to stabilize.
“It’s high demand, low supply,” said Rex Alcubilla, who was outbid by other homebuyers who offered all cash, large deposits or well above the asking price. “When my wife and I walk around and try to look at these homes, sometimes you run into 10 to 15 families looking for the same thing.”
Jaymes Song, an agent for Better Homes and Gardens Real Estate, expects the bidding wars to continue.
“We’ve had the only best, best, strongest, most aggressive buyers who can buy homes. So there is still a big backlog of buyers still out there looking for accommodation,” Song said. “We are at near record prices and very low inventory rates. It is therefore a market that is still very unbalanced, mainly sellers, which should begin to change, due to the rise in interest rates over the next three to six months.
Mortgage rates jumped above 5% for the first time in more than a decade, almost double what they were a year ago.
“Everything they could afford before, they can’t afford now. Let’s say if you are able to buy $2 million up front with a lower rate. Now your budget is most likely down to, say, 1.5 million or 1.6 million,” said Vanessa Kop, executive vice president of NAI CBI Hawaii.
Although you may have missed the mark with a 3% rate, real estate agents advise people not to wait if they really want to buy.
“My parents had mortgage interest rates above 10% in the double digits. So from a historical perspective, maybe 5%, 6% still very low,” Song said.
For now, some savvy buyers say they’re waiting.
“I’m kind of watching the market to see if that will be the case, even if the interest is higher, we’ll see if that plays into the consumer mindset a bit, if there will be fewer buyers or not,” says Alcubilla.
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