As we close a memorable year filled with highlights and heartbreaks, I look to 2017 with optimism and concern in many areas, including real estate.
While we are in the midst of a strong real estate recovery in Hawaii and most of the nation from the depths of the Great Recession, there are several areas to watch next year and in the years to come.
Here are seven trends and issues to watch for in 2017:
Mortgage rates
Gone are the low- to mid-3 percent long-term mortgage rates that homebuyers enjoyed in 2016. The 30-year rate has surged since the Nov. 8 election to an average of 4.30 percent this week, the highest levels since 2014. And the Federal Reserve last week raised short-term interest rates for only the second time in a decade and signaled more hikes are coming down the road in 2017.
While the current rates are still amazing from a historical perspective, the pocketbooks of prospective homebuyers will be squeezed by rising rates, and some may even be forced to look at lower-priced options or pushed out of the market.
The National Association of Realtors predicts rates could climb to 4.6 percent by the end of 2017, which wouldn’t be the end of the world, but would further affect affordability in high-priced Hawaii.
The rail
Lawmakers are still scrambling to figure out how to pay for the mounting costs associated with Oahu’s rail project, now estimated at nearly $10 billion. The question, besides the money issues, is, Where will the train end up? Will the Love’s Bakery Express end at Middle Street? Or will we find enough funding to have the rail reach downtown or Ala Moana Center? The answer is critical as developers and condo buyers weigh and decide on investing along the planned rail route.
The strong dollar
The U.S. dollar is strengthening against the yen, Canadian dollar, euro and other currencies. If the dollar continues to rise, it could hurt foreigners looking to invest in real estate or to buy a second home in Hawaii. It could also have an impact on visitor spending, which affects the economic lifeblood of the islands, tourism.
Kakaako
As there was a gold rush in Kakaako to build new, posh condominiums in the past few years, developers are now refocusing on the local market with lower-priced and smaller units. Instead of high-priced Ala Moana Boulevard, developers will be looking a few blocks in and along the Kapiolani corridor.
Construction
Fast-rising construction costs in Hawaii are a concern for everyone from big developers to homeowners looking to remodel their kitchen and bathroom.
Construction costs in Honolulu are already among the highest in the nation, and an extremely tight labor supply makes it even that much more difficult.
The University of Hawaii Economic Research Organization says residential building is in transition from high-rise condo construction to single-family homes in Central and West Oahu.
Homelessness
In the shadows of the multimillion-dollar condo towers in Honolulu, there are men, women and children who go to work and school before going home to their tents. Homelessness touches us all in many ways, and shuffling people from neighborhood to neighborhood doesn’t solve the problem. With no easy answers, more low-income and public housing options are desperately needed.
Prices
Home prices on Oahu will finish around the mid-$700,000s for single-family homes this year. Prices are expected to rise and close in on the $800,000 mark in 2017. UHERO predicted home prices will grow in the 4 to 7 percent range over the next several years.
Jaymes Song is a top-producing agent with Better Homes and Gardens Real Estate Advantage Realty in Kahala. He can be reached at 228-3332 or JaymesS@BetterHawaii.com.
