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The housing market has shown remarkable resiliency and has been one of the rare bright spots in a Hawaii economy battered by the COVID-19 pandemic.
Besides providing shelter and protection during the coronavirus lockdowns, the residential real estate industry has provided a rare source of stability and tax revenue in a state reeling from high unemployment rates.
As the dumpster fire year of 2020 continues to smolder out, we continue into 2021 with hope and healing. While uncertainty and economic pain still exist, another robust year for housing is expected in 2021, lifted by record-low interest rates. Here are six trends and issues to watch out for in 2021 that would affect the real estate market in Hawaii:
Mortgage rates
Astonishingly low mortgage rates have helped provide stability to the real estate industry and fuel strong demand.
Long-term mortgage rates have plummeted to record lows with the benchmark 30-year rate falling to 2.73{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} — down from 3.47{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} a year ago, according to the most recent data from Freddie Mac.
Mortgage rates are expected to remain low this year as the Federal Reserve has indicated it would not be in a rush to raise the interest rate it controls to help the economy recover. This is welcome news for homebuyers in the market or homeowners looking to refinance.
More space
A series of lockdowns forced us into our homes for exhausting stretches of time in 2020. For many, it revealed and magnified how much we appreciate our homes and neighborhoods — or, on the flip side, how desperately we need to move.
Many found out that they need more space — room for their home office, areas for their kids to virtual-school and a backyard to stretch and enjoy. This desire for more breathing room from other people has fueled strong demand for single-family homes in Honolulu and cities across the nation, including San Francisco and New York. Many have sought homes in suburbs and farther distances to the urban areas.
While working from home may have become permanent for some, it will be interesting to see whether this trend continues and what happens when we become comfortable with being close to people again and slowly return to our offices downtown and more to our “normal” lives that we had about a year ago.
Home prices
It is an overwhelming seller’s market on Oahu for houses. Despite high unemployment, prices and demand for single-family homes on the island have surged in recent months to a record $883,000 last month, 14.7{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} higher than a year ago.
If inventory remains low while the fierce competition and bidding wars continue, median prices could touch the $900,000 mark in 2021.
Homes on Oahu are spending a median of just nine days on the market, almost four weeks faster than a year ago.
Multiple-offer situations have become the norm for houses, pushing prices up above asking price. For example, a house in Mililani recently received more than 40 offers. Recent listings in Kailua and Hawaii Kai have received more than two dozen offers each.
Oahu condo prices, meanwhile, have remained relatively stable despite the low rates. Demand for condos might get a bump as the economy recovers or when single-family home prices become out of reach.
Lawrence Yun, chief economist for the National Association of Realtors, said the consequent rise in home prices has boosted wealth accumulation for homeowners.
“But the opposite side of this will mean the continued decline of housing affordability and will limit future homeownership opportunities for young adults if housing supply is not greatly increased,” he said.
Homelessness
On the flip side, Honolulu’s homeless crisis and families in need of free or affordable housing have only worsened because of the pandemic. The city, state, the private sector and the community must work together to address the issue before the issue gets out of hand and more families fall into homelessness.
Besides getting more help out to businesses and people, more projects and partnerships are needed like Kahauiki Village, which is expected to help house more than 600 people when completed. The village off Nimitz Highway is a planta-tion-style community to help provide homeless families with long-term affordable housing and social services. It is a development led by the state, the city and the aio Foundation.
Exodus of locals
One of the unfortunate trends expected to continue is the exodus of locals fleeing the islands for a lower cost of living and better employment opportunities in other states, mostly in the West.
Hawaii’s net population declined by 8,609 residents in 2020, the fourth straight year of decline. According to the Grassroot Institute of Hawaii, it was the third-fastest level of economic flight per capita in the nation.
Keli‘i Akina, president and CEO of the organization, said Hawaii’s policymakers cannot ignore the numbers. In a statement, he said, “Not only does it represent a loss of state revenue that will deepen our budget problems, it also means the loss of vital workers and professionals.”
“The people of Hawaii are our greatest resource,” Akina said, “and we must work to make the state a more competitive place to live through policies that will reduce the cost of living and improve the economy.”
This pandemic revealed how fragile Hawaii’s one-trick pony economy is. In a matter of months, Hawaii’s unemployment rate went from among the lowest in the nation to the highest.
And Hawaii has been much slower to recover than the rest of the nation. The pandemic should serve as a wake-up call to change, reevaluate, evolve, innovate and diversify the economy in hopes of weaning from our dependency on tourists and military spending.
Hawaii should take this opportunity to look to help local businesses and farmers, cut the red tape and expand growing sectors such as renewable energy, sustainability and the sciences while strengthening our business ties to Asia.
Mortgage programs
Eviction moratoriums and mortgage forbearance programs have prevented evictions, short sales and even foreclosures, but we could start to see some when these programs end.
A forbearance agreement is between the lender and a borrower who is struggling to make mortgage payments. It allows the borrower to pause or reduce mortgage payments for a set time until they are in better financial condition, avoiding foreclosure.
Borrowers now have more time to apply for forbearance or file for an extension. Communicating with your lender is critical for those in forbearance. Update the lender on your financial situation and see what options they can provide.
Also, renters who are late on payments and their landlords should also communicate closely and work out payment plans and avoid costly legal battles.
Last
There is still a lot of uncertainty as we continue our journey together into 2021. So far, it’s looking better than what is in the rearview mirror.
Jaymes Song is a top-producing agent with Better Homes and Gardens Real Estate Advantage Realty in Kahala. He can be reached at 228-3332 or [email protected].