Living the Hawaii life is about to get more expensive
Median home prices in Honolulu expected to reach $700,000 for the first time ever
Hawaiian home prices and mortgage rates are expected to increase over the next two years, making it a little more expensive to live the “lei’d” back lifestyle.
The latest forecast by the University of Hawaii Economic Research Organization projects that single-family home prices on the Oahu island, where Honolulu is located, will break the $700,000 barrier for the first time ever and reach $710,500 in 2014, a 9.8% increase over 2013’s median of $647,000.
The figures were included in UHERO’s Hawaii Construction Forecast report, which was released Friday. “On Oahu, prices have now eclipsed their pre-recession highs, but, on the Neighbor Islands, they have recovered less than half of the decline,” the report said. The report explained that prices have been rising because of low housing inventory, low mortgage rates and an improving job market.
To compound to the affordability challenges for working families, mortgages rates are expected to creep up. Gone are the days of sub-4% mortgages we saw just a year ago.
“One factor supporting strong current demand for homes is historically low interest rates and the anticipation that those rates won’t be around much longer,” the report said. “Mortgage rates began to turn upward last year and are running a full percentage point higher than they were at the end of 2012. We expect rates to continue to rise gradually over the next several years.”
UHERO projected the 30-year conventional rate to average 4.6% this year and edge up to above 5% in 2015. “Low mortgage rates along with falling home prices boosted home affordability in the islands during the recession and early recovery period,” UHERO said. “As rates and prices rise, affordability will begin to erode, although healthier family incomes will moderate this impact.”