Summertime Madness in the Real Estate Market? Oahu Market Update

One of the most common questions I get as a real estate professional is “Should I buy now or should I wait?”. Given the current climate, where home prices are at record highs and mortgage rates are skyrocketing, it’s an understandable concern. In this month’s market update, I hope to shed some light on this topic as well as some of the things you should consider before entering the housing market in 2022. 

As of May 12, 2022, the average interest rate on a mortgage is 5.3% – the highest it’s been in over a decade. At the same time, median single-family home and condo prices are near record highs as well, topping out at $1,111,000 and $510,000 respectively. It’s no wonder why so many prospective buyers are pumping the brakes on their home search, anticipating a market crash, or waiting for interest rates to come back down to earth. That begs the question, why do so many local real estate professionals still recommend that people go out today and buy property?

It goes without saying that accurately predicting the market’s next step is not a perfect science, however, there are a few major indicators that experts reference when determining future market conditions. These metrics should give us a better idea of what to expect in the coming months. The first stat they look at is months of remaining inventory (MRI), or the time it would take for all current listings to sell if no new listings came on the market. With only 1.1 MRI for single-family homes and 1.6 MRI for condos (both near record lows), we are deeply entrenched in seller’s market territory. People seem to be buying new listings just as soon as they hit the market, even with the higher interest rates we are currently experiencing.

The next indicator of a rising or softening market is the rate of bid-ups, or how often someone is willing to pay above list price for a home. Bid-ups surged in April, as over 60% of homes and 42% of condos sold for above the asking price, a clear sign of competitive market conditions. This puts upward pressure on home prices, as not only are people pouncing on newly listed properties, they are having to pay more in an effort to beat out multiple other offers too.

Oahu’s home market, like all others, is a product of supply and demand. While the Islands may be beautiful, they are limited, both in size and resources. Hawaii has lapsed in development of new homes to satisfy the constant buyer demand for years now, a problem that has only been exacerbated by the recent pandemic, low interest rates, and supply chain issues. Concurrently, the freedom to work remotely has opened the door for people to truly choose where they want to operate from, and who wouldn’t choose Hawaii? All of these factors contribute to the highly competitive market we’re up against, where time is of the essence.

For many, the window of opportunity is closing. Since January of this year, median single-family home prices have already jumped over $40,000 with no indication of slowing down. On top of that, buyers lost an additional $100,000 of purchasing power just from the interest rate increases alone. With prices still on the rise and more rate increases on the horizon, the time to buy is now, before your dream home is out of reach.