In Hawaii's unique real estate market, it's think locally, act locally
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HOME SWEET HOME: (from left to right): Herschel, Jayden and Shelea Boyd in front of their dream home. The Boyds defied the odds, closing on their Waianae property last December when the housing industry and the nation’s economy seem on the brink of collapse.
To say that Shelea and Herschel Boyd have defied the odds would be an understatement. Last December, while the Island real estate market was coming to a screeching halt and the country’s economy was buckling under the pressure of a historic housing slump, the couple closed on their 1,200-square-foot Waianae house — their first. In addition, two months earlier, the Boyds had applied for their $370,000 loan while the subprime mortgage crisis was still unfolding, possibly the worst time to be asking for money to buy a house. But they had a healthy down payment saved up, their credit was excellent and, as a result, their “vanilla,” 30-year fixed mortgage was approved without any bells and whistles, or hassles.
But what makes the Boyds’ story even more unlikely is that, just a year earlier, the couple and their young son were getting by with just the income from Shelea’s two part-time jobs and Herschel’s disability payments from Social Security.
“When we went to the bank, I started to get nervous. They told us that things were stricter now,” says Shelea, 33, who is the first in her family to buy a home. “But there were no problems. We were relieved, but we knew that we had everything in place.”
The Boyds’ story sounds too good to be true, more like one of the often-told cautionary tales that illustrates how we got into the subprime mess in the first place: inexperienced and overextended buyers meeting overzealous lenders with no one reviewing the books.
But the Boyds’ overnight success story took nearly three years to complete. They sought the help of real estate counselors, took care of any credit issues, they tracked their spending habits, set budgets and altered their lifestyles accordingly. And, of course, they saved religiously, setting aside $400 a month in a house fund that they would tap “when the time came.”
Although Shelea had enjoyed the freedom of having two part-time jobs, she applied for and was accredited as a full-time teacher and, after five interviews, got a position with the DOE. In addition, Herschel got a job as a greeter at Wal-Mart, just in case they needed extra cash. All the while, the Boyds dreamed of their new home – but always within the confines of their budget. Then their time came, even though it seemed like the wrong time for just about everyone else in the state and the country.
Fiddling While Honolulu Burns?
According to Prudential Locations’ Oahu Real Estate Report 2007 Recap, “Oahu’s median prices, despite foreclosure and subprime-mortgage worries, hit record highs again in 2007 with single-family homes up 2.4 percent from 2006 to $645,000 and condominiums up 4.8 percent to $325,000.” However, later on the report points out that the number and sales of both single-family and condominium markets fell 9.5 percent and 12 percent respectively. It goes on to say that the drop is much less dramatic than in 2006, when single-family sales dropped 15.8 percent, and condominium sales dropped 23 percent and concludes that “the current pace of sales is still healthy, matching 2002 levels.”
Overall, the Oahu real estate ship is on a relatively steady course. But narrow the view and analysis a little, specifically to the last two months in 2007, and it becomes apparent that the ship is indeed changing course. According to the Honolulu Board of REALTORS, in November 2007, the number of sales for single-family homes and condominiums experienced double-digit drops from the previous year. Single-family sales fell from 293 in 2006 to 245 in 2007, while condominium sales fell from 421 in 2006 to 379 last year, drops of 16.4 percent and 10 percent, respectively. December was even worse, with 2007 single-family sales falling 30.6 percent and condominiums 22.9 percent compared to the same period in 2006.
Is someone fiddling while Honolulu burns?
“Up until this time last year, local people were buying and there was good activity in Waikiki. But then everything came home to roost,” says real estate analyst Ricky Cassiday. “This year is hard, because it looks like the uncertainty and the expectation of recession has made it hard for anybody to buy at current value. Until prices go down for the properties that people want, you won’t see many sales.”
According to Cassiday, it’s all about perception, and nationally the perception is that everything is going down the toilet. Last January, the National Association of Realtors reported that 2007 sales of new homes fell a staggering 25 percent, the biggest drop since the U.S. Department of Commerce began tracking the statistics in 1963. In addition, the median price of those homes fell for the first time in 40 years.
If people aren’t buying homes, people aren’t building them and an important cog in the nation’s economy is stuck. But, in Hawaii, it’s a different story. While the slowdown in home sales will certainly have some effect on local home construction, the industry as a whole is healthy, busy with hotel renovation, commercial and industrial work and ongoing federal projects such as the long-term construction of privatized housing for the military.
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