“I’m going to wait for rates to go down before I buy.” I’ve been hearing this statement a lot these days. While there is nothing wrong with waiting for the right time to buy your home or investment property, I feel it is virtually impossible to time the market. However, this statement led me down a rabbit hole, and I started to research historical rates and home prices on Oahu. Freddie Mac has a site that tracks 30-year mortgage rates all the way back to 1971. The chart does show that since the early 80s, mortgage rates have trended downward until the present day. It is crazy to think that mortgage rates got as high as 17% during the Reagan Era! I am so grateful we are not there again. Next, I went to HiCentral.com to look back at almost 40 years of sales data on Oahu since 1985.
While we could spend hours debating how interest rates and other external factors will lead us into another housing crisis, I thought we’d take a more simplistic look at historical data in 5-year chunks. I also included the last three years of data to illustrate what has happened during COVID as well. The majority of Smart Money clients are long-term investors, either buying a primary residence or long-term rental. When looking at this in 5-year chunks, you’ll find that there were times that prices did not change much within a 5-year time span. However, if you take a step back, you’ll see that there have been major increases over a 10-year period no matter what the starting year is. Obviously, this data will not apply to short-term investors, such as professional house flippers or those who may have to sell short-term.
|
March |
Oahu SFR |
|
|
2022 |
4.170% |
$
1,150,000 |
|
2021 |
3.080% |
$
950,000 |
|
2020 |
3.450% |
$
830,000 |
|
2015 |
3.880% |
$
700,000 |
|
2010 |
4.970% |
$
592,750 |
|
2005 |
5.930% |
$
590,000 |
|
2000 |
8.240% |
$
295,000 |
|
1995 |
8.460% |
$
349,000 |
|
1990 |
10.270% |
$
352,000 |
|
1985 |
13.170% |
$
158,600 |
My personal opinion is this. While it is undeniable that current appreciation is due to the lowest mortgage interest rates in history, other factors such as low inventory, the energy crisis, war, and supply chain issues to name a few, also play a big role. It is never just ONE thing that moves the housing market. Even so-called investment professionals cannot time the market, so the chances that we are able to are very low. If you look at real estate as a long-term investment vs. one of instant gratification, then history shows that a longer time horizon is probably your best bet. So my advice is, instead of “Wait to buy” let’s “Buy and wait!” Have a wonderful Aloha Friday!
Freddie Mac average 30-Year fixed mortgage rate since 1971.
https://www.freddiemac.com/pmms/pmms30
HiCentral.com historical resales data for Oahu.
https://hicentral.com/oahu-historical-data.php
Mahalo,
Daryn Ogino, NMLS #278557
President
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