Hawaii Real Estate Daily

Hawaii’s real estate sales and lending community took interest yesterday in a drop in interest rates and the news that Fed Chairman Ben Bernanke had hinted about further cuts.

Bernanke said in a prepared speech yesterday that, “The Federal Reserve will need to consider whether the current stance of policy remains appropriate.”

If the Fed approves a rate cut on or before its next central bank meeting on Oct. 28-29, such a move could spur real estate activity in Hawaii’s wobbly market, Hawaii real estate and mortgage industry professionals said. Still, given the current credit crunch and historically low consumer confidence rate, it’s hard to gage how much influence a drop could have on the beleaguered market, they said.

Hawaii borrowers reacted yesterday when mortgage rates fell to 5.5 percent and will continue to react positively if they cycle lower, said Rusty Rasmussen, vice president for Castle & Cooke Mortgage.

“We had some bad news and some good news yesterday,” Rasmussen said. “The stock market lost another several hundred points, but the good news is that interest rates went down.”

Rasmussen said he expects a pick up in business as a result of favorable interest rates and the Building Industry Association’s Parade of Homes this weekend.

“It’s gets people thinking about homes,” he said. “And, they’ll want to take advantage of dropping interest rates because the difference in their loan payment could be huge.”

Given the current economic woes, Rasmussen said that he would not be surprised if rates dropped to 5 percent in the next few months.

“This is an historic time, it’s never been this bad,” he said.

Donald Lau, president of the Hawaii Mortgage Brokers Association, said Rasmussen’s projection is not out of line. If drop of this magnitude were to occur it would do much to inspire consumer confidence, Lau said.

“It would greatly alleviate consumer fears,” he said. “Rates are good now, but people aren’t moving. Another drop would get them out circulating their money around.”

Lowered interest rates were a major catalyst during Hawaii’s last real estate boom, said Harvey Shapiro, real estate economist for the Honolulu Board of Realtors.

Interest rates started declining in 2000 and bottomed out in 2003 at a 40-year-low, he said.

“The Treasury index went down to 1 percent in 2003,” Shapiro said. “Cheap money was probably the driving factor for many people who bought real estate.”

The market has been more volatile recently, he said. Last week the Treasury Index fell to 1.59 percent from 1.95 percent the week before, he said.

While a drop in the Treasury Index rate would help widen credit options to Hawaii homeowners and investors, not everyone will be able to get relief, said Stephany Sofos, a Honolulu-based real estate analyst and small business owner.

“There’s a credit crunch and money is less available,” Sofos said. “I’m not sure that we’ll see any discernible difference in the market.”

Credits: Star Bulletin

Some possible good news for Hawaii’s often overheated housing market, but on the flip side a possible huge tax hit for all of us. This after the federal government steps in, to bail out two of the country’s largest mortgage lender

The Dow jumped 290 points Monday, and most financial and housing stocks are up, but this bailout also means taxpayers like you and me end up paying for it.

When it comes to real estate, Freddie Mac and Fannie Mae are king and queen of the castle, controlling half of the country’s home loans, about $5 trillion worth. But that castle’s crumbling, and the federal government had to step in.

“It gets people who are really nervous about whether or not the financial system is going to implode, I think it helps us get over that hump,” said Bill Mason, certified financial planner.

And the impact has been instantaneous.

“The immediate boost is to the stock market, both the international markets and the domestic market today had huge rallies,” said Mason. “So it’s really reassuring to the investing public around the world.”

And it could help Hawaii’s real estate.

“I think it’s going to help investors and people who are looking to get into a home, feel more confident,” said Mason. “It’s also going to actually lower mortgage rates going forward, so housing will become a bit more affordable as well.”

The bailout could also help slow the credit crisis. Both Fannie Mae and Freddie Mac lost $14 billion last year, and could lose more if the economy doesn’t pick up soon.

So, financial experts applaud the government’s intervention, saying it’s giving the economy a much needed jolt.

“I think this is something that really needed to be done,” said Mason. “And I’m glad they jumped all over it and made it happen this weekend.”

So, this bailout has already had a positive impact on mortgage rates. A 30-year fixed rate dropped 0.3 percent, to 6.04 Monday.

But in the long run, taxpayers could be stuck paying billions of dollars because of this financial crisis.

Credits: KNHL

Honolulu’s banks didn’t invest in many subprime loans, says Rochelle Gregson, CEO of the Honolulu Board of Realtors. “Our business practices are conservative.”

And home foreclosure hasn’t been a major problem, either. In the second quarter, Honolulu’s foreclosure rate was the lowest of 100 major metro areas, according to RealtyTrac.com.

Although Honolulu’s housing market has fared much better than the mainland, its home sales have hit a snag.

“We’re seeing that homes have more days on the market and fewer sales,” says Margy Grosswendt, a real estate agent. “The prices are definitely not rising unless it’s a spectacular product.”

In the past, homes were on the market for about five days, Gregson says. Now, they tend to stay on the market 30 days, she says.

Inflation has shaken the confidence of home buyers. “The fuel prices have affected our lives,” Gregson says. “It not only affects our driving habits, but it also affects the cost of goods, such as food and produce, because everything is shipped in.”

And although Honolulu is known for a strong local economy with good job growth, this year it was hit by the shutdown of Aloha Airlines. That affected nearly 2,000 employees.

At least Honolulu’s high-end market, which they consider prices of $4 million or more, hasn’t slowed.

“High-net-worth individuals want to diversify out of the stock market and into trophy real estate,” says Grosswendt, who specializes in the high-end market. “It’s like a very fine piece of art, and jewelry.” High-end homes have been attracting investors from Australia and Japan, as well as the mainland, she says.

The area remains popular due to a mild climate, beautiful beaches and big-wave surfing. And the city of Honolulu is cosmopolitan, with museums, restaurants and an opera theater. It has several highly regarded private schools. Democratic presidential candidate Barack Obama, who was born in Honolulu, attended Punahou school.

“We’re very vibrant, we have clean air and water, and we have a friendly aloha spirit,” Grosswendt says. “Even when the market slows, we know that it will come back.”

Credits: USA Today