There are at least a dozen sound reasons why you should buy Oahu real estate now, but I’ll keep it simple and share five with you. You are smart and can think up another seven on your own. We are in the midst of one of the strongest economic expansions in Hawaii’s history!
Tourism is surpassing pre-recession levels, real estate valuations are increasing rapidly and consumer confidence is high relative to years gone by.
View from the Kakaako Amphitheater during the 2013 Mayjah Rayjah Music Festival
On the morning of October 16 I attended a presentation by a respected local economist, Paul Brewbaker of TZ Economics. He said that if the current pace of Oahu real estate growth is sustained until 2017 the length of the cycle will rival that of the Reagan expansion period; if it continues into 2019 it will be the longest economic expansion in U.S. history!
This is where you pause, read it again and say, “Wow!”.
Then you ask yourself, “What am I going to do about it?”.
What I recommend you do about it is buy Oahu real estate…now.
The longer you wait, the more likely you are to regret it.
Let me briefly share one of my regrets about Hawaii real estate. I was finishing up my business degree in early 2003, had been married for one year and had a baby boy who was 6-months old. We we had little money, but had BIG dreams for our future.
Me and my wife Rachel after my graduation ceremony (July 2003)
We would look at real estate for fun. We loved the new homes being built in Mililani Mauka. It was a great location, a family-friendly community and we felt it would be a good place to own long-term. The problem was that the homes were a whopping $400,000! We didn’t have that kind of money and couldn’t quite grasp how families could afford to buy something that “expensive”.
Had we figured out a way to make it work, in less than 10 years our home of choice would have nearly doubled in value to the $760k-$790k range they are selling for now. We definitely regret not making it happen ten years ago when we had the chance.
Without further ado, here are five reasons why I recommend you buy…now.
This Mililani Mauka home sold for $789,000 on June 28, 2013 (Purchased new for $441,850 in 2003)
1. Prices are expected to continue to rise
Oahu real estate prices show no signs of slowing. With only a few months of available inventory (properties for sale) and demand through the roof, values are being driven up month after month. The longer you wait the more you should be prepared to pay.
Yes, there is definitely some buyer frenzy going on, and for good reason.
2. Interest rates are good
While not as low as they were earlier in the year, at 4.25% or less for a 30-year fixed mortgage, there are still great deals to be had on financing.
Current rates are updated frequently by the Honolulu Board of Realtors (HBR).
Heavy equipment in Kapolei for extension of Kapolei Parkway road near Foodland towards Costco
3. Raw land is limited
No explanation needed here. Barring some unexpected volcanic eruption on Oahu we have a finite amount of land that can be developed. The appeal of oceanfront lots, for example, is illustrative of this. There are only so many and prices are driven by supply and demand.
4. New construction is not happening
There is the illusion of adequate new construction to supply the housing needs for Oahu residents and investors alike. However, that is simply not the case. Brewbaker pointed out that home-building on Oahu over the past 10-15 years was one-third of what it was during the Great Depression years of the 1930′s. Wow.
The last time so few homes were being built on Oahu was during World War II (1939-1945). There is simply not enough new construction going on to keep up with the growing demand. This market dynamic naturally pushes prices up even higher.
While there may be a lot of planned developments, that is no guarantee that they will ever come to fruition. There is so much red tape, not-in-my-back-yard (NIMBY) mentality and environmental opposition to new homes and condos being built on Oahu, that the nature of the free market is further skewed as demand compounds and supply continues to be seriously constrained.
This is simple Economics 101: limited supply and increasing demand leads to price increases.
New homes nearing completion in D.R. Horton project in Oahu’s “Second City” of Kapolei
5. Babies are born every day
Population growth is a real factor to consider when looking at the supply and demand of Oahu real estate. Families are growing, which I think is great, but there are not enough new homes being built to keep up with the rising demand. Only so many people can fit in one home!
(This article was originally published on October 16, 2013)
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Munro Murdock is a specialist in Ko'Olina Resort Real Estate and Vacation Rentals, and leads a team that provides real estate services throughout the State of Hawaii. He resides in Kapolei, Hawaii with his wife and three children and enjoys kayaking, stand-up paddle boarding, SCUBA diving, surfing, hiking, traveling and enjoying the great outdoors with his family. You can reach Munro at (808) 492-6242 or by email at firstname.lastname@example.org.