How’s the Market? A Macro Perspective Amidst a Global Pandemic

 
Despite the existence of a global pandemic, economists say the housing market across the state is relatively stable — especially on Kaua‘i and Hawai‘i Island.

Hawai‘i economist Paul Brewbaker projects an extended trajectory of modest, single-digit annual price appreciation and sales volume growth.

“This trajectory will be disrupted by the sudden stop associated with the novel coronavirus, but it can still service as a reasonable longer-term benchmark for housing market returns on investment during the inevitable recovery,” Brewbaker said.

According to Brewbaker, the sudden emergence of Hawaii’s coronavirus infectious threat precipitously decreased new home listings for sale, international and domestic travel, and interest rates, and has also disrupted supply chains and clouded the investment outlook, even for ongoing construction and development.

The natural reaction is to look back to the economic crisis of 2008, in real estate we spend a great deal of our time looking back to forecast how we’ll move forward – a dicey proposition at best, but here we go.

Here are five real estate differences between 2008 and 2020:

Annual Home appreciation in 2004 & 2005 were 12.5% and 11.4 % respectively fast forward to 2018 and 2019 and the appreciation rates were 4.8% and 4.7% in 2019 according to Black Knight.

Mortgage Credit Availability Index is a monthly measure by the Mortgage Bankers Association gauges the difficulty to secure a loan, the higher the index, the easier it is – in June of 2006 it was 868.7, today it’s 152.1, a dramatic change.

Inventory, in 2008 there was an oversupply of homes for sale with an 11 month supply, today there is an undersupply and only 3-months’ worth of inventory available according to the National Association of Realtors.

The use of Home Equity, in 2008, consumers were harvesting equity from their homes (through cash-out refinances) and using it to finance their lifestyles. Today, consumers are treating the equity in their homes much more cautiously. According to Freddie Mac, there was $321 Billion cashed out in 2006, in 2019 that number was estimated to be $74 billion.

Home Equity today, 53.8% of homes across the country have at least 50% equity. In 2008, homeowners walked away when they owed more than what their homes were worth. With the equity homeowners have now, they’re much less likely to walk away from their homes. 37% of homes in this country are owned free and clear according to Bloomberg and 26.7 % of homes have more than 50% equity according to Attom Data.

The CV-19 crisis is causing different challenges across the country from the ones we faced in 2008. That was a housing crisis, this is a health crisis. What we know now is that housing is in a much stronger position today than it was in 2008. It is no longer the center of the economic slowdown, conversely it could be helpful in pulling us out of the downturn.

On Kauai, we currently have 100 residences in escrow or under contract and there are 435 active listings island-wide, which is a reasonable ratio. There has only been 42 residences withdrawn from the market by sellers since April 1, 2020. We’ve recorded 82 sales since April 1st, much of that was pre-CV19. Still we are heartened by the activity we are seeing and frankly Realtors were deemed “non-essential” back in mid-March, when Kauai was shut tight and we were unable to practice until today, May 7th where we are now deemed “low-risk”, so to have 100 residences under contract is a pretty encouraging sign.

- - - - -

For more information about local happenings on Kauai, or to inquire specifically about Kauai real estate, you can reach us at:

Sean Ahearn & Jim Karlovsky
[email protected]
(800) 808-6373


 

WORK WITH US

Our team of professionals is among the most active, experienced and respected on the island of Kauai. We’d value the opportunity to work with you on your purchase or sale of Kauai real estate. Please reach out any anytime with comments, questions, suggestions or concerns. Mahalo – The Team

Contact Us

Follow Me On Instagram