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State of Real Estate 2009

State of Real Estate 2009

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Published by Hawaii Real Estate
Prudential Locations released it's 2009 "State of Real Estate" report
Prudential Locations released it's 2009 "State of Real Estate" report

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Published by: Hawaii Real Estate on Dec 19, 2008
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05/09/2014

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nowing what surprises the housing market has in store for us in 2009 isanybody’s guess. Will the economy begin to show signs of improvementnext year or will sales continue to besluggish? While it’s true that Hawaii’s sales haveslowed and inventory has edged upcausing prices to slip, it is equally truethat mortgage rates are at historically low levels and the very same increasein inventory that is frustrating sellershas opened the door for many buyers.For some — those who like to flipproperties, for example — it is probably  wise to sit 2009 out. But if your family is expanding, shrinking or you’rethinking of buying your very firsthome, you might do well taking advan-tage of the lower interest rates and low prices 2009 may have to offer. Moving into a large home, downsizing from anempty-nest or trading down to a moreaffordable home are all realistic goalsin this market. If you’re a renter, this isa particularly good time to get out of the “rent rut” and finally make yourfirst purchase. Perhaps you’d like tostart investing or, if you already owninvestment property, maybe you’d liketo upgrade it. There are bargains to befound and low-interest mortgagesavailable to finance them. If the time isright for you, 2009 may be exactly theright market for you. Whatever yourplans are for the new year, an under-standing of what drives the real estatemarket to its peaks and valleys canempower both buyers and sellers.
WHERE WE’VE BEEN — 2008
 According to Bill Chee, president andCEO at Prudential Locations, 2008 willend with 27% fewer sales than a yearago, with overall median prices forcondominiums flat and single-family homes down 3.1%. “Fourth quarterstatistics will end with a record breaking decline in the number of sales primarily caused by the loss of consumer confi-dence triggered by the historic turmoilin the financial markets,” says Chee.
WHERE WE’RE GOING — 2009
Buyer confidence will be an influentialfactor in 2009 as well, causing prices todecline an additional 6% to 10% by mid-year. Chee also foresees a declinein the number of sales, down 25%.From neighborhood to neighborhood,the market forces will likely vary, withsome price declines exceeding 15%.“The wild card emerging in the creditmarkets is the impact of lower interestrates,” he says. Because of the struggling economy, the Federal government islooking for ways to stabilize and
 A Special Report
2009
stimulate the housing market and low-ering interest rates is one way to dothat. Such a move would effectively make homes more affordable andcould infuse the housingmarket withbuyers. Similar plans to stem the tide of foreclosures could help the marketrebound further by helping people torefinance their current loans — possibly avoiding foreclosure — as well as helpothers buy homes from distressedsellers. Such loan products could havea tremendous impact on the Hawaiimarket, making forecasted pricereductions less drastic.
THE LOSERS
Certainly, everyone won’t win in thismarket. Developers with excess inventory or in areas where housing supply isalready abundant, such as parts of Leeward Oahu, will have to adjust theirproducts, pricing and/or terms toattract buyers.Those who purchased real estate in2008 with hopes of reselling in 2009 willbe disappointed. And anyone who isforced to sell, due to divorce or jobchange, and not repurchasing will havea more difficult time recovering any equity.
THE WINNERS
Buyers and investors may have anopportunity to take advantage of lowerprices and low interest rates. With aknowledgeable Realtor’s helping handand suitably armed with informationabout the neighborhood where you’reshopping, you can make home ownershipa reality or improve your investmentportfolio this year.“Buyers will be fine in 2009,” says Chee.“Sellers will wish they’d sold in 2008.Interest rates could benefit everyone.”
Some will win& some will losein 2009
 
First-Time Homebuyers ~
O
ne of the largest growing segments of today’s local market is first-timehomebuyers. The current combination of a slow market and low mortgagerates has put homeownership within reach again. With an increase in inventory,less competition from other buyers, and motivated sellers, renters have morebuying power in 2009.Interest rates are still at historical lows, andif Hawaii’s real estate market is poised for arebound anytime soon, single and marriedrenters of all ages are determined not tomiss the boat again this time and aremotivated to discover what they can buy  with the rent check they write every month.Buying a home is a long-term investment.Rents historically go up, but unless you’rethe landlord, that rent check is going towards building equity for someone else.Many renters are surprised and empoweredto find out how much house they canafford. This market gives them options.Sure, maybe that dream home isn’t in thebudget the first time around, but the peopleliving in your dream home probably startedout in something smaller too.It’s a smart time to buy. Not only have pricesstabilized and interest rates remained low,but for home purchases that close beforeJuly 1, 2009, first-time homebuyers may beeligible for a $7,500 federal tax credit.
Roles In Today’s Market 
~
Your circumstances determineyour strategy to buy, sell or hold
Are you Credit Challenged?
For starters, make a resolution to goon a debt diet. The turmoil in thefinancing and credit industries hastightened lending standards — meaning lenders are scrutinizing everyone’scredit history like never before. But with interest rates still at historic lows, you can still get more house for yourmoney than you could several yearsago, if you can put yourself in ahealthy financial position. A poor credit history is notinsurmountable, however latepayments or too much debt canseriously jeopardizefinancing options.Building your home-buying foundationstarts with reviewing your credit score.Scores range from 500 to 850. Thehigher your score, the more options you’ll have. If it turns out that youhave credit problems, you can work on fixing them now. A good loan officer (if you need arecommendation, ask your Realtor)can offer advice on what can be doneto improve your credit score. You may need to have inaccuracies removed,pay down some debt, or go 12 months without being late with a payment.This may take a couple of months or itmight take a year.
Are you Cash Challenged?
This is not an uncommon problem,especially now when lenders havetightened their policies. Don’t haveenough money for a down payment?Get yourselfa good old-fashionedpiggy bank, make a commitment andsave for it.Cash-strapped buyers can also look into FHA and VA financing options,both with low down-payment require-ments. Other options include asking the seller to give you a credit for closing costs, go in on a hui with a friend orrelative, or make a rent-to-own offer. Ask your Realtor for other creativeoptions for your down payment.
“We were surprisedat how much wepre-qualified forand now, we areshopping for ourfirst home.”
17%16%15%14%13%12%11%10%9%8%7%6%5%
1971 1975 1979 1983 1987 1991 1995 1999 2003 2008
30-
YEARFIXEDMORTGAGERATE
Unless you’re planning to pay with cash,interest rates are a paramountconsideration. A one point increase cansignificantly affect your buying power.A look at where rates have been overthe last 30-plus years shows they areat historically low levels.
Source: St. Louis Federal Reserve Board
 
Moving Up ~
 A 
t first glance, it might seem counterproductive to list your home now with headlines1clamoring about the market. But if you’re considering finally buying that dream houseor are in need of a few more bedrooms or a yard for the kids, now is the time to upgrade.Though you may lose some of the equity in the home you plan to sell, the truth of thematter is move-up buyers will likely recover their equity by buying an upgraded homethat has been affected by the same market forces as your current home. A Realtor can givesome insight in this regard by providing a comparative market analysis for your home, your neighborhood, as well as for any new location you’d consider moving. By taking aninformed look at the sales data, you’ll be able to fully take advantage of the currentmarket conditions.Historically, low interest rates are another reason to move into your dream home this year.Many buyers have tunnel vision when it comes to home prices, but unless you’re a cashbuyer, mortgage rates are a paramount consideration. The ideal time to buy isnow, when prices are trending down and interest rates are low.Interest rates are one of the biggest reasons why move up buyers are acting now and waiting can prove to be very expensive. If rates rise even 1 point, you loseabout $10,000 per $100,000 in buying power. So if you qualified for a $600,000loan and rates go up 1 point, now you only qualify for $540,000 — and that canhappen in less than a day.In 2009, expect to spend a little more time than usual selling your home. Thatmay mean getting started sooner. Remember, the “bottom” is truly definedonce the economy begins showing signs of improvement and prices begin torebound, at that point, it’s too late. Move quickly and get your next home attoday’s prices and today’s interest rates.
Downsizing ~
L
ifestyle change is one of the most common reasons for people to consider buying a1new home and trading down has become a trend, especially among baby boomerslooking for less maintenance, proximity to social town centers, and more amenities.If you anticipate capital gains being a part of your downsize plan, stay abreast of thepossible changes in the tax code. President Barack Obama is considering raising thecapital gains tax from 15% to at least 20%. While it’s not advisable to makeinvestment/financial decisions strictly for the tax advantage,it might be worth considering if you’re planning to downsize soon anyway.For many, a big chunk of their net worth is tied up in their home, making it difficult to tapinto that lucrative resource. With the slumping economy and tremendous losses in thestock market, homeowners are opting to sell their big 4-bedroom homes to buy something smaller, enabling them to have access to that money for living expenses, for emergencies,to pay for college, or just peace of mind.For home owners who have lived in their home at least two of the last five years, a portionof their profit is tax free ($500,000 for a married couple; $250,000 for single). It’s unclearhow long this capital gains benefit will be offered, so many people will take advantage of it while it’s here.If you’re an empty-nester with a low or paid off mortgage and the desire to fully enjoy yourretirement, downsizing is a smartoption. That equity in your home is yours so unless youhave some other plans for it, consider taking advantage of the benefits now. Whatever your lifestyle change may be, downsizing your home doesn’t mean downsizing  your quality of life — quite the opposite is true. Many islanders have happily traded intheir 3-no-longer-used dusty bedrooms, yard work, or a long drive to work, in exchangefor a new condo suited to their equally new carefree lifestyle leaving time to enjoy family and friends.
“When we retire,we really want tospend our moneytraveling morerather than makingrepairs to our50-year-old house.”“We’d outgrown ourtownhome and reallywanted a yard for the kids.We negotiated such a gooddeal on our new home,it more than made up forany equity lost in thesale of our townhome.”

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