Question: What’s happening in the real estate market right now, and how could it affect me?
Answer: The residential and commercial market is on fire, basically due to increasing taxes and low interest rates. Since last October we’ve been seeing a lot of people pulling cash out of stocks and bonds and buying real estate. The trend is accelerating, and it’s caused prices to go up exponentially because there are a lot of buyers but not a lot of inventory. Before, the buyers were bottom feeders, looking for the best deal.
Now with the market hardening up, sellers want their prices and they are getting them. But buyers are looking for a finished product. Before, in the mid-2000s, people would buy fixer-uppers; now they just want to bring their toothbrush. If you are selling a fixer-upper, it can’t be at the top of the market because the buyer wants some value. A house that normally would sell for $500,000 will need to be priced at $450,000 if it needs $50,000 worth of work. However, if the acceleration continues, maybe by summer, buyers will be less discriminating.
Q: If you are a buyer, how do you navigate the current market?
A: The market is hardening. Before October it was a buyer’s market. Now it’s a seller’s market because there is such limited inventory that the sellers are commanding the prices. Get a good real estate agent; they are worth their weight in gold and will do the best job of helping you figure out the best deal for you. Try to find someone who specializes in the neighborhood where you want to buy. Interview them, look at their sales history and find out how long they have been in the business and their reputation.
Q: Do you always need a full-service agent?
A: It depends on what you are looking for. If you are the seller and you have a thin cushion because your property value has gone down, maybe you should go to a discounter or an agent that is willing to negotiate on commission. But I always tell people to focus on the person and not on their commission. A good agent will get you a price that justifies their commission. It’s really about what this broker or agent brings to the table to help you get a property for the best price or to sell a property in a reasonable amount of time, usually 30 to 90 days. If you are the seller, the commission is a tax deduction. It’s the cost of doing business.
Q: If you have a property that has been on the market too long, what should that tell you?
A: The sales price might be too high for the neighborhood, or certain improvements may need to be made. Current buyers don’t want to spend the time fixing it up. Electrical, plumbing and roofs — all of those have to be in good shape. There also are smaller things that you can do to impact the value of your property. If you have trees growing out of your gutters, clean them out and get your landscaping cleaned up. Make sure your kitchen and bathrooms are shiny and spotless. A new coat of paint goes a very long way. If buyers see that there is deferred maintenance, they will probably be more cautious about making a deal.
Q: Do you think median home prices could reach $800,000 during this up cycle?
A: The federal government is printing $85 billion a month, so it’s only a matter of time before inflation kicks in. It costs you more for your staples, so it’s absolutely going to cost you more for your house. The concern is that if the median goes to $800,000, that would price most local people out of the market. The average family of four lives on $65,000. I think it is possible that we could get to that price point, but I would hate to see that. We would see more and more families grouping together.
Q: How are real estate buying trends affecting the rental market?
A: The rental market is going up. It’s getting tighter and tighter because many people can’t afford to buy. Also, many landlords are selling their rentals because the market is higher so it’s taking units out of inventory. The cost of renting has gone up about 10 percent in the last year.
Q: If you are renting, how can you get a better deal?
A: It’s tough because the landlords are in control now. You can try for a longer-term lease to hold your price point, but you should only do that if your economic situation is stable, because you will be obligated for the rent during that period of time. If you are willing to maintain the unit by doing some landscaping and minor repairs, some landlords might be willing to give you a break on rent.
Q: What’s happening in the commercial real estate market?
A: Commercial real estate is on fire, too. Hawaii is considered a very safe environment, and it’s a controlled environment because you have 7.5 million tourists and 1.2 million residents, so if you have product in a good location, it will sell. If you build it, people will come. National and international buyers are looking, and mom-and-pops are having to compete with the bigger guys. Costs to do business are going up. Still, if you can afford it and you have a good concept, you can make money here.
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Interviewed by Allison Schaefers
