Should You Wait For The Hawaii Real Estate Market To Cool Off?

Sometimes we get comments like:

This market is too crazy.  I’m going to wait until the prices come down before I buy.

This started a discussion between us that looked through the facts of Hawaii’s market history to see if indeed waiting is a good idea.

This short clip came from our Aloha Friday Hawaii Real Estate Show which goes live every other Friday on our Hawaii Real Estate YouTube channel or our Living in Hawaii Facebook page

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Show Transcript:

i think there’s an important thing here
which is you know a lot of times people
go hey man i’m this is too busy of a
market i’m going to wait what are you
waiting for our price is going to come
down let’s
and you got to look back at what partly
fueled this so
if
when interest rates dropped
right at the beginning of covid they
dropped from like four percent to 2.75
that was the equivalent
in order to keep if you were to buy
pre-covet and post covid at the same
mortgage payment which
95 plus percent of people
buy on a mortgage payment well that’s
what that’s what we’re looking at here
right with these with with these rates
this rate chart kind of shows all shows
all that right yeah you know i more or
less equate buying a house for most
people to having a netflix account you
pay a monthly subscription fee you just
happen to do it for 30 years and you
lock in your monthly subscription fee to
today’s cost of living and you pay that
same netflix account you know payment
for 30 years
well if you were to buy pre-coveted
you know
that 4.25 or 4 interest rate and then
things dropped afterwards
you know during cova they dropped 2.75
percent all of a sudden your
affordability and your buying power just
went way up in order for you
to have to um
basically pay the same monthly payment
you would have had to spend
17 percent more on that that house price
with it with the drop in the interest
rate so in other words you just got the
biggest deal the biggest price discount
you could have well we’re up 22 percent
on housing right now so how much of a
premium are people really paying right
now five percent
less than five percent so okay what
happens if interest rates go up
let’s say they go up from three percent
to four percent because they’re right
around three percent right now what
what is that gonna do
to to the um
you know to your monthly payment
uh
prices if you were how much would prices
have to drop to keep that same monthly
payment if interest rates went up one
percent it’s 10 percent so if you bought
a million dollar home the price has to
go down to 900 000. during the 2008 to
2009 downturn it took two years for oahu
to drop 11 percent and that was during
the one of the worst times ever so if
yeah let’s say prices go down how much
are they gonna go down yeah how much are
they gonna get down and if they do
they’re because the interest rates go up
and your house your monthly payment’s
gonna be more expensive anyway look let
let’s not let’s not even let’s not
further the discussion about will prices
go down ain’t going to happen i i’m just
kind of thinking okay now that we’ve you
know and you’ve got to make your own
decision as far as you if you’re going
to buy or not but it don’t make the
decision based on you thinking that
prices are going to come back down
that’s not going to happen that’s a
loser’s game the only question is you
know is there anything else you guys
want to talk about and add in terms of
okay now that i’ve decided now that i’ve
realized is there anything else you guys
want to share to me it’s all about those
relationships well let’s show that last
slide to illustrate what you pay over 30
years in a you know on top of the cost
if you do wait and the interest rates go
up one percent so you know i i’m okay
i’m going to show it but i don’t want to
show it because we don’t need the show
because this this is a this is a
no-brainer oh wait what happened up here
uh
i think this thing got wait a minute
hold on a second technical difficulty
okay
there you go so so so if if the if you
buy
at a one percent higher interest rate so
if you wait a year and the interest
rates go up one year it’s roughly a 500
500 a month increase in your mortgage
payment but over 30 years it’s gonna
cost you a hundred and eighty thousand
dollars more right so is it better to
pay 20 grand extra for the house now or
a hundred eighty thousand dollars over
the life of that
loan and so there’s all kinds of ways
where it costs you the money just to
wait right so all the things you wanna
factor in and take it to a call it’s
like forget the weight issue it’s i mean
we’ve we’ve beat that we’ve beat that
horse and that horse is dead that is a
dead horse we are beating a dead horse i
mean any