We’re well on our way into 2017 and many people are hoping to make this the year that they make one of the most important and significant investments in their future—buying a home. It’s no surprise that so many buyers come to the Big Island in search of their dream home given that Hawaii was ranked the healthiest state in the U.S. for the fifth consecutive year. Whether you’re considering homeownership for the first time, you’re looking to sell and upgrade to a new place, or you’re simply wondering how your home’s value might change in the next year, here are a few insights on the 2017 market based on last year’s performance and leading indicators in Hawaii’s real estate market.
More buyers are entering the market
In 2017, we’ll see a significant influx in first-time buyers, which will continue to drive up housing prices until more supply becomes available. Why the significant jump now? The National Association of Realtors site two significant trends that are currently taking root and are projected to compound over the course of the year.
Millennials are beginning to buy homes
The first trend we see is that Millennials, who until now have been busy paying off student loan debt from their early to late 20’s, are beginning to settle down, start families, and buy homes. They are starting to enter their early 30’s which has been the typical home-buying age since the 70’s. In addition, these buyers had been barred from purchasing for many years after the housing bubble burst due to the significant increase in credit requirements for a bank loan. Since 2015, FICO scores of first-time buyers has begun to decrease as banks feel more comfortable with market conditions.
Renters are converting to home ownership
Another trend that is bringing more first-time buyers into the market is the surge of renters who are fed-up with the high year-over-year increase of their monthly payments. As the housing market has exploded in metro areas, rents in some major cities have grown by more than 50% in a single year for the same space. Which jumps like that, renters are looking for more stability and predictability in their monthly payments. A recent survey conducted by Fannie May showed that a majority of Millennials believe buying a home is more sensible than renting for both financial and lifestyle reasons.
New supply is coming soon
The NAR reports that new home construction will begin to compound over the next few years. In 2017, we’ll see approximately 1.22 million new homes on the market. While this is less than the 1.5 million new homes needed to keep up with demand, it will continue to ramp up over the next several years and average out at approximately 1.5 million new homes per year in 2024. If you’re in the market for a new home, now is a great time to start researching new projects in your area and financially prepare yourself to buy.
Home value will continue to rise even as prices taper off
As housing prices continue to rise, current homeowners will continue to build equity throughout 2017. The Case-Shiller index which measures repeat sales in single family homes found that some markets (particularly those in the Western and Southern United States) have recovered to pre-recession levels. Hawaii, in particular, has increased more than 15% above pre-2008 peak.
It is important to note that these pricing increases are not due to the credit bubble that would eventually come to burst in 2012, leaving many homeowners with mortgages worth more than their houses. Instead, the price increase in recent years is due to a relative shortage of homes available for the many buyers. Thus, we will not experience the extreme decline in the market we did in 2012. As the housing supply increases, home prices will taper off, but buyers will not lose significant equity in their homes as occurred after the housing bubble burst.
So, if you’re looking for a new home, don’t be afraid that the market will decline as soon as you make a purchase. The housing market has never been healthier or stronger.
Are you considering buying a home? Here’s what you should do:
- Consider your financial position.
Since the housing price increase, many homebuyers think that the market prices have surpassed their budget. However, The NAR Affordability Index actually indicates that a family earning the median income (approx $41,616) has 170.2 percent of the income needed to buy a median-priced home. Evaluate your financial position and get pre-approved for a mortgage (if necessary) so you’re in a position to purchase when the time comes.
- Move quickly
If you’ve found a home that you’re interested in purchasing, be prepared to make an offer quickly. Redfin reported that in 2016, homes were on the market for an average of only 52 days.
- Contact the experts
Navigating the real estate process can be tricky, and you’ll need someone in your corner to help get you the best possible price. If you want to learn more about any of the available properties on the Big Island, give us a call.
Are you considering selling a home? Here’s what you should do:
- Start making necessary updates/repairs.
Make your home move-in ready by prioritizing necessary updates this year. Simple fixes like new paint, replacing old carpet, and updating your appliances can go a long way in giving you a competitive advantage over other houses on the market. Invest a bit of money in making easy improvements and your home will sell much more quickly when the time comes.
- Set the right price
As you begin to consider the value of your home and how much you want to sell for, look at other homes in your neighborhood. Compare square footage and features to help you set your price. It will be much easier to sell your home if your price point is competitive with current market conditions.
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