Opportunity Knocks In 2010

By Bill Chee
Wednesday - April 28, 2010
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By Bill Chee
Prudential Locations CEO

The question on every-one’s mind is: “Have we hit bottom yet?” For the answer, we turn to the data.

The beauty of statistics is that they remove the emotional factor. By setting aside fear and panic (or undue optimism), the data reveals that what has recently happened to our local market, though unsettling, is normal and well within typical cycle limits. It is, indeed, showing signs that this phase has bottomed.

In short, I believe 2010 offers opportunity. Here is a summary of what we can expect in the months to come.

Odds are that interest rates will rise in 2010, bringing some urgency to act early in the year. Government tax incentives and low inventory have boosted the markets on Oahu during the first half of the year. Shortages of listing inventories, especially in the affordably priced markets, will bring competition among buyers in many neighborhoods. Although I expect overall Oahu prices to remain stable or flat, increasing velocity (activity) indicates more neighborhoods will be increasing in median price than declining.

The Prudential Locations executive team: (from left) Brenda Ching, Dan Tabori, Tracy Behler, Bill Chee, Mikio Sato and Scott Higashi

Unprecedented low interest rates bring obvious advantages to both first-time home buyers and move-up or -down sellers/buyers. This, combined with free money from the government and lower prices, make this a very a rare event in the market. Opportunity is knocking.

Not all sellers are advantaged in this market. Those who purchased their homes in the last four years may have little or no equity, depending on their neighborhood. Add a “must sell” situation such as death, divorce or job transfer out of state and, for those residents in these situations, 2010 may cause a financial hardship.

Neighbor Island off-shore owners will continue to be the most adversely impacted and may continue to account for the majority of the foreclosure activity in the state. A quick recovery here is clearly not in the cards for so many reasons, primarily the current national economy and its very slow recovery.

In short, let interest rates be your friend in 2010.

Using median sale prices dating back to the 1970s, the line graph depicts a definite staircase-like pattern, with abrupt upward movement followed by extended sideways movement. Based on the historical data, it is this sideways movement that we are likely to see in 2010 and for a few more years to come.

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