Now or Later – Timing the Real Estate Market

Pictured home: 15-1835 1ST Avenue, Keaau

The concept of “timing the market” has implications for first-time home buyers, home sellers, and veteran real estate investors alike. The idea that the market will adjust significantly downward allowing sellers to sell high today and buy low later, or the notion that a home buyer should delay their purchase in hopes prices will recede requires a bit of almost impossible in-depth analysis. Such analysis must be done within the context of our local marketplace to be complete.

Talking Bubbles

Not a day passes that I don’t hear “bubble talk.” If there is a bubble (and many still believe there is not), it will likely take several years before we are able to truly confirm it exists.

Rising Rates

Many anticipate interest rates will soon rise. This means that delaying a purchase could actually cost more even if prices decline. Here’s why. A payment of $1,789 will purchase a home of approximately $300,000 in today’s market. If interest rates rise only 2%, buying power is reduced over $50,000 to $245,500.

A delay normally means paying someone else’s mortgage payment (renting) for an indefinite amount of time. Knowing when the bottom has been reached will be difficult to assess. A seller’s profit might quickly lag behind rent payments as they sit and try to determine when the market has hit its peak.

Off-Island Buyers

Keep in mind that many high-end buyers, those who typically buy in Hawai`i, are not normally impacted by market fluctuations. This group of buyers, comprised largely of relocating buyers with tons of equity in their current home and even a tidy retirement portfolio, account for much of our current activity. This factor alone could likely insulate Hawai`i from the normal effects of any national housing bubble. Their search for a home outside the city, second or retirement homes will be timed by a clock (such as years to retirement) other than local housing conditions. Those about to enter the market should not feel left behind.

Local Buyers

Being a local purchaser has distinct advantages over mainland buyers. Local buyers have the luxury of being here. Decisions aren’t quite as rushed. Local folks know the area. When something new pops on the market, it can be viewed immediately. Buyers across the board are feeling constrained by lack of inventory so being able to view and make an immediate purchasing decision is huge.

Get Professional Help

Working with a real estate professional who will help prepare you to compete with mainland buyers is essential. Watching the market go back down isn’t going to be any easier to monitor than watching it rise.

Pro Tips:

• Visit one of our websites regularly.
• Contact an agent with a heavy listing portfolio. As I mentioned before, they are in the best position to know what’s coming on the market.
• Watch for price adjustments or properties returning to the market.
• Watch interest rates.

Luckily, changes in the real estate market are not as erratic as the stock market so while it’s possible to take a deep breath and watch, trying to time the market is probably not a great strategy for buyers and sellers alike.