Forget the Easter bunny.
Rigoberto Gomez and Tara Gomez were searching for a unicorn on Easter — a three bedroom, two bathroom home with solar panels at a price they could afford.
Over the past month the couple looked at about a dozen properties and they were poised to look at four on Easter Sunday, but only visited three because one had gone into escrow before they could view it.
Their search continues.
The couple owned a four- bedroom home in Ewa Beach, but sold it a year ago to prepare for military retirement and to downsize with only one of their three children still living at home. They initially planned to use the gains from the sale of their home to move to the mainland, but ultimately decided to stay.
Rigoberto Gomez said, “If you look at the mainland, the prices might be attractive. But look, in Hawaii, we have the community, the culture and the weather.”
The couple are at peace with their decision, but remain stuck between Oahu’s tight inventory of homes for sale that they can afford and rising rental market.
At the next signing of their yearlong lease at Kapilina Beach Homes, their rent will rise from $2,900 a month to $3,280. If they rent month-to-month, the cost could top $4,000.
And finding a home to purchase comes with a lot more sticker shock then when they bought on Oahu in 2020.
“Our last house was affordable because of the interest rate, which was 2.5%,” Tara Gomez said. “We wouldn’t even be able to afford our last house now.”
During the pandemic, they qualified for $1.3 million and bought in the $800,000 range. Now, the couple are looking at properties in the $600,000 to mid-$700,000 range, and the difference in today’s higher interest rate and home prices means that properties that are half the size of their former home will cost much more per month.
To find a property in this market, the Gomezes have realized that they must sacrifice some of their wants — maybe they’ll have to buy a two-bedroom to get solar or compromise on the open layout that they desire. Still, the couple are better off than many buyers nationwide, and especially in Hawaii, where the average wage earner cannot qualify to buy a home.
Real estate data provider ATTOM examined the median home prices during the first quarter for roughly 590 U.S. counties in a new report released Thursday and found that median-priced single-family homes and condos remain less affordable in 95% of the counties for the average U.S. income earner, who makes $71,708 a year.
ATTOM deemed the portion of average local wages in the U.S. consumed by major home ownership costs, including typical mortgage payments, property taxes and insurance, as “unaffordable” during the first quarter of 2024 in 425, or 72%, of the 590 counties analyzed in the report, based on the 28% guideline preferred by mortgage lenders.
Not surprising to those who live in Hawaii, Honolulu County, Hawaii County and Maui County also fell into the “unaffordable” range. Data was unavailable for Kauai County and Kalawao County as ATTOM researchers only analyzed counties with a population of at least 100,000 and at least 50 single- family home and condo sales in the first quarter of 2024.
ATTOM estimated the median sales price for single-family homes and condos in the U.S. during the first quarter at $336,250 — up 5% from first quarter 2023. The average income needed to afford major homeownership costs in the U.S. now is $82,708, according to ATTOM, which assumes a 20% down payment and a front-end debt to income ratio of 28%. Right now, the average U.S. wage earner needs to use 32.3% of their wages to buy, which exceeds some lending guidelines.
The gap is even more pronounced in the Hawaiian islands where ATTOM estimates that the annual income needed for major homeownership costs is $145,151 in Honolulu County, $118,454 in Hawaii County, and $208,806 in Maui County. But the average wage earner in Honolulu County makes $65,715, and the average is $54,561 in Hawaii County, and $58,201 in Maui County.
ATTOM estimated the median price for single-family homes and condos in Honolulu County during the first quarter at $640,470, which was flat to the first quarter 2023. However, the median price for single-family homes and condos in Hawaii County rose 8% during the same period to $515,000 and in Maui County it rose 4% to $904,527.
At those prices, ATTOM estimated that Honolulu County buyers would need 61.8% of annualized wages to buy; it would take 60.8% in Hawaii County and 100.5% in Maui County.
Maui County’s current percentage was so high that it earned the dubious distinction of being the third highest county in the nation where major ownership costs require the largest percentage of average local wages. Kings County in Brooklyn, N.Y., required 109.5% of annualized local wages to buy a single- family home and Marin County, Calif., outside of San Francisco, required 102.8%.
Sean Ryan, a loan officer with Hawaii Mortgage Experts, said he has seen more Hawaii borrowers are qualifying at closer to the maximum debt-to-income ratio of 50% for a conventional loan than previously, and that the percentage of people who can’t qualify at all is rising, too.
“When you have a single- family home priced at right around $1 million on Oahu, people just can’t afford an $8,000 mortgage,” he said. “I’m seeing people that were buying single-family homes three or four years ago trying to downgrade to a condo or a town home.”
Ryan said elevated interest rates are driving up costs. They rose from about 3% to 3.5% in March or April of 2022 and are now running from 6% to 8%. He said the average for a conventional loan now is about 6.75%.
Chris Fidelibus, owner of RE/Max Honolulu, said, “Payments are just out of reach for a lot of people. We’ve had so many contracts fall out over the last year and a half because interest rates would rise just a little bit from when they were pre-approved.”
Fidelibus added that interest rates combined with Hawaii prices, which haven’t really corrected, have kept some buyers on the sidelines. However, he said more Hawaii buyers are becoming resigned to the rates as evidenced by business in March, which was about the best month in a year and a half.
Ryan said once mortgage rates come down, prices are likely to go up so he recommends buying now to those that can stomach the rate.
“You can always refinance later,” he said.
A positive development in ATTOM’s report was that nationwide major homeownership expenses have required a smaller portion of wages for the second- straight quarter, inching historical affordability upward. Still, with home prices staying close to all-time highs, both measures nationwide remain near the worst in 15 years.
Nationwide buyers are finding home values and major homeownership expenses still outpacing gains in wages, despite a bit of relief in the second half of last year that has continued into the first quarter of 2024.
Rob Barber, CEO for ATTOM said in a statement, “The picture for home buyers is brightening a little again as affordability measures have improved for the second quarter in a row. For sure, it’s not like things are coming up roses for house hunters. Affording a home remains a financial stretch, or a pipe dream, for so many households. But with mortgage rates coming down and home prices growing only by modest amounts, it’s gotten a bit easier for average wage earners to afford a home so far this year. The upcoming Spring buying season will say a lot about whether home prices remain stable enough for this trend to continue.”
Still the market remains tough for many buyers as evidenced by ATTOM’s estimates of changing monthly payments based on the median sales price. Its first quarter 2024 estimate for Honolulu County was $3,677. It fell 8%, or about $290, a month from fourth quarter 2023 to first quarter 2024. But it rose year over year by 4%, or about $146.
The median sales price monthly payment in the first quarter of 2024 in Hawaii County was $2,836. It was down about 3%, or about $72 a month, from fourth quarter 2023 to first quarter 2024. But it rose year over year by 13%, or about $307.
The median sales price monthly payment was $4,936 in Maui County. It fell 1%, or about $64 a month, from fourth quarter 2023 to first quarter 2024. But it rose year over year by 10%, or about $441.
Realtor Shannon Severance of RE/Max Honolulu said the market is tough, but has slowed from the frenetic pace of years past, and that has allowed estate agents to help buyers negotiate more concessions than in the past.
“Buyers can get interest rate buy downs, they can get a reduction in the price, and they can get credits from sellers right now,” she said. “Another way some buyers can reduce interest is by finding a loan with an assumable interest rate, but there aren’t that many eligible properties. An assumable loan takes more time to close and buyers will have to come up with cash to cover the difference in the purchase price and the loan.”
MOST EXPENSIVE AREAS TO BUY A HOME
Percent of annualized local wages needed to buy a single-family home:
>> Kings County, N.Y. (Brooklyn): 109.5%
>> Marin County, Calif. (outside San Francisco): 102.8%
>> Maui County: 100.5%
>> Santa Cruz County, Calif.: 97.3%
>> San Luis Obispo County, Calif.: 95.3%
Source: ATTOM
