Historically, Honolulu real estate prices have not been this low for many years. In the past, individuals, who desired to purchase Honolulu real estate, may have found it more challenging to find a deal in the area. Currently, the prices are down overall in Honolulu. Therefore, buyers are more likely to find a good deal now, than ever before. However, according to CNN Money, if you are moving into an area that has a median housing price over $300,000, it may be better to rent than buy. Of course, that number also depends on your income bracket as well.
According to HousingPredictor.com, tourism is down in Hawaii. Furthermore, the number of foreclosures is rising. However, Honolulu real estate is still more stable than in most areas of the country. The first time home buyer’s tax credit has prompted some individuals to purchase homes in Honolulu. Many of the sales have consisted of foreclosures, where buyers found deals that were too good to pass up. HousingPredictors.com estimates that the median home value to decrease by 9.7 percent in 2010. However, this does not mean that people are not purchasing homes. The buyers are just getting unbelievable deals due to foreclosures.
Even with all of the housing turmoil, Honolulu’s housing market decline is moving much slower than the rest of the nation. This is good news for investors. This information indicates that in the future, Honolulu home values will sustain longer than other places in the United States. This is another reason why investors may consider buying in Honolulu.
Before making the plunge to rent or buy in Honolulu, consider the following:
The Average Rental Prices in Honolulu
The average rental price in Honolulu is over $1500 per month for all types of rentals. For one bedroom rentals, the average price is over $1200 per month. For two bedroom apartments, the average home price is over $1500 per month. The rental prices in Honolulu are on a slight upward trend; however, they have remained fairly consistent over the years. If you are faced with a $1600 rent bill plus a deposit and utilities, it may be worth it to find a condominium in an area where the home prices are more favorable and purchase.
Three areas showing promise last year were Leeward Coast, Makakilo, and North Shore. The median prices for condominiums in these areas were $135,000, $245,700 and $255,000, respectively.
Leeward Coast
Considering those three median home prices, the mortgage payment for a Leeward Coast condominium with a 30 year fixed loan at 5.125% interest would be $652 per month, assuming a 20 percent down payment.
Makakilo
The mortgage payment in a median Makakilo condominium would be around $1,132 per month with a 30 year fixed loan at 5.125%, assuming a 20 percent down payment.
North Shore
The mortgage payment in a median North Shore condominium would be around $1,161 per month with a 30 year fixed loan at 5.125%, assuming a 20 percent down payment.
Each of these mortgage amounts of $652, $1,132, and $1,161 are significantly lower than an average rental price of $1,500 per month. Overall, it is smarter to buy a condominium in Honolulu than it is to rent a property.
Is the move short term or long term?
If the move is short term, less than 1 year, renting may be a better option than buying unless you vacation often in Honolulu. If this is a frequent location of choice, purchasing a vacation condominium by the beach may be a smarter investment. The home may be rented out weekly when you are not vacationing there and managed by a management company. Long term, it may be a smart investment and a source of income, if you can find travelers who desire your accommodations on a frequent basis.
If the move is more than 6 years, buying may be a smarter solution. As stated earlier, the housing prices are lower on average than they have been historically and foreclosures are on the rise. Therefore, if you find a good deal on a foreclosed home, now may be a good time to purchase rather than rent.
What are the Maintenance Costs?
If the single family home or condominium requires significant renovation or yearly maintenance, the savings may not outweigh the rental costs in the short term. However, over the long term the renovation costs may average to be the same.
Condo Fees and Property Taxes
Ask yourself, what are the condo association fees and the property taxes on this property averaging yearly? Include the cost into your monthly mortgage payment. If the cost significantly exceeds your cost to rent, you may want to consider renting instead. However, most people do not desire to waste $1500 or more in rent per month. A condominium is considered an investment and asset. Rent is just consumed and nothing is gained from the exchange of funds except a temporary shelter.
