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October 2022 - President's Message

 Summer came and went, and so did the lower interest rates.  According to Freddie Mac, the benchmark 30-year fixed rate mortgage average is now north of 6 percent.  The Honolulu Board of Realtors reported that in August, the number of single-family homes sold was down 26.1%, and condos were down 24.7% compared to last year.  However, this stat is a little misleading because although the number of units sold was drastically lower, the median sales price for a single-family home is up 7.2%, while condo median sales prices were down by only 0.3% from a year ago.  The Honolulu Board of Realtors also reported that new listings for single-family homes and condos were down 17.2% and 15.7% respectively compared to the same time last year.  When mortgage rates went up, affordability decreased, ultimately decreasing the number of units sold.  However, home prices did not experience the same dip because the demand for quality homes remains higher than the supply.  This is evidence that lack of supply continues to prop up value.

In a speech on August 26, 2022, the Federal Reserve Chair, Jerome Powell said, “We are taking forceful and rapid steps to moderate demand so that it comes into better alignment with supply, and to keep inflation expectations anchored.”  Can anyone find me a mortgage chiropractor so we can have a better alignment of supply and demand already???  Okay, bad mortgage guy joke, but it is evident that demand is outpacing the supply of homes coming to market.  While some markets are experiencing falling prices, they are not falling at the same furious pace we saw them rise.  

For example, per the Honolulu Board of Realtors, the median sales price for a single-family home on Oahu was $789,000 at the end of 2019.  As of August 2022, the median sales price of a home on Oahu was $1,125,500.  This is a 42.65% increase in approximately 2.66 years!!!  That my friend is unhealthy and dangerous growth and is not sustainable.  So as much as we love lower interest rates, we all need to understand that we were not living in the real world these past 2.5 years.  During the pandemic, the Feds over-reacted and created this fantasy land of lower rates that we all got used to.  They then sorely underestimated the consequences and were slow to react, thus bringing us to this high inflation world we live in today.  I, for one, would love for rates to go down again, but I also understand that rates need to be higher to maintain stable growth.  So what do we want?  Do we want lower rates and higher prices, or do we want higher rates and price stabilization?  Whatever your answer, real estate continues to be a good investment in the long term.  My sentiment remains the same.  Instead of waiting to buy, buy and wait.  History repeats itself, showing that home prices continue to rise over time.


Mahalo,

Daryn Ogino

Smart Money Hawaii - President, NMLS #278557

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