I sat in a Broker's Forum last week. One of the speakers was the economist from Bank of Hawaii, Paul Brewbaker.
He said something I did not expect to hear. Well let me start by sharing a little background for my surprise first. For the last year or so, bankruptcies have been up nationwide in most markets. Hawaii has consistently been among the lowest. In my practice I rarely see buyers doing sub-prime, ARMS, stated income/ stated assets, 1% negative amortization or such. I assumed that in Hawaii we had fewer foreclosures because we write less subprime loans.
After sharing his statistics and projections for our market Paul made a comment that blew my mind. We in fact have as many subprime mortgages as the other markets. We have even more than some parts of the country, that the most foreclosures. That blew my mind.
So why is that? Is it cultural? Are the people in Hawaii just better at paying their bills?
When you consider:
- The average wage in Hawaii is lower than many parts of the country.
- The median price of a home is higher than all but a couple of markets.
- The cost of living is among the highest.
What else could it be?
- Possibly we do a better job of putting people in loans they can afford
- We match up our buyers with the appropriate loan program.
- We have less mortgage fraud.
- Our appraisals are closer to reality.
- We are not as influenced by bad practices from other places, because we are so removed.
- Our local lenders are better at what they do.
- We have less out of state loan officers doing long distance hit and run lending.
So the next question:
Is it fair to our buyers that they will have fewer mortgage products and stricter lending requirements because of the abuse from other parts of the country?
Hi Randy
Ther seems to be a more stable environment in Hawaii.
Would you agree?I think I have a referral coming your way in a couple months
sincerely
tom braatz
Tom - Our market has been more stable. Let me know how I can help them. Thank you!
Marlene - We lost a lot of military troops to Iraq and Afghanistan and tourism has been off. Yet we seem to keep plotting along.
One idea a friend gave me tonight was that he reminded me that in Hawaii we have more multi-paycheck households than anywhere else. Both husband and wife work sometime 2 jobs each and then the grandparents or other family members also live with them and have income. Because of the high cost of living and lower wages many families have to do this to survive.
Randy,
Interesting assumption...maybe you had less mortgage fraud and the appraiser were appraising correctly unlike here where we have one if not the worst statistics when it comes to that.
Neal - It does seem like the areas that are heavy in foreclosures are also the same areas where I read the most stories about mortgage fraud rings.
I do my do diligence when helping a buyer prepare an offer. We know what the property is worth before they decide to write an offer. My buyers are not over paying for their properties or getting socked with bad loans.
The unfortunate part is that even if your buyer did everything right, they are still effected by what the other buyers and sellers may or may not have done wrong down the street.
Randy,
Sounds like the people there are just more responsible. The subprime debacle should never have happened. Lots of people buying homes that really could not afford to.
I suspect that all of this has to be put in context of what is the percentage of home owners to renters. Also offshore owners are often cash.
But, by any measurement, it's a stable market. Our market is stable too when compared with other areas.
In fact, when I read some of the posts about defeults, etc., I know that we don't face those types of problems.
Randy I was surprised to find out how many Subprime Loans Connecticut had. At the end of last year we had about 70,000, that is far more than I expected.
As far as for the reason why Hawaii has less foreclosures, I would suspect it is because:
"Possibly we do a better job of putting people in loans they can afford"
"We have less out of state loan officers doing long distance hit and run lending."
And very likely because "people in Hawaii are better at paying their bills".
Mike - It just reminds me so much of the Dot Coms a few years ago in several ways.
Mary - We have a saying here,"Lucky we live Hawaii."
Lenn - It will be interesting to see how the experts explain why some areas have so many more defaults than others. I can understand places like Michigan where they are hurting because of one industry, but what is California, Florida and Las Vegas's reason?
George - Those reasons do sound logical to me anyway.
Gary - I did see several of the large mainland owned brokerages close down. The closed because of their mainland divisions, not the local operations. Our local primary lenders all seem to be quite solid.
Mary - We have our share of unethical, but it appears to be a smaller percentage than many places.
Charity - I am working with a couple of clients myself who are in areas that prices went down a little and they need to sell. Not fun at all. Fortunately they have been making all of the payments and have stellar credit.
Justin - We have next to no unemployment.
Hi Randy,
Interesting info. I was surprised by "average wage in Hawaii is lower than many parts of the country", is that because of the large military influence?
And I would certainly hope that people who make more prudent choices would not be penalized by those who didn't, yet I doubt that's the situation.
It helps that most married couples both work. I think our market is very different from the mainland situations because we have families living in a house that don't just consist of mom, dad, and the kids. We have households here that consist of grandma, grandpa, mom, dad, uncles, aunties, kids, and grand kids. I pick the brain of most locals I meet and have always found that the ohana here in Hawaii is the key.
Sally - A large percentage of households in Hawaii are similar to yours. Many others are multi-generational.
Rob - I agree that Ohana is a factor.
Eric - I do not think we have as many retirees as Arizona and Florida. According to the stats we do have a lot of development, but not as overbuilt as other parts of the country.
Ronnie - i think for the neighbor islands the dollar exchange rate has been the blessing. When I was on Maui it seemed like the Canadians where buying like crazy. I am expecting a copy of Paul's presentation after he has a chance to scrub out anything confidential. Great meeting you, also congratulations on your C21 Award.
Cindy - That is true.
Ronnie - Good points.
We live in paradise most of those areas have warm weather.
I think you're lucky to live in Hawaii for the same meteorological reasons as we have in San Diego! We've seen un uptick in Canadian shopping as well due to the strength of the Loonie. I don't know how difficult it is to move money into the US to purchase property due to the Patriot Act. That had shut down large downpayment international transfers in the past....anyone know whether that is still a problem?
Prices are holding up. Only in a few isolated cases where a Seller needs to sell, are the prices below market. But, there are many other closed sales that keep the comps up.
Overall, prices are flat. Inventory is high. Average DOM is 90-180. But, most sellers do not need to sell- which is why inventory is high while prices are holding.
John - I haven't heard of there being much of a problem from Canada. Most of the transactions I am aware of were financed locally.
Rick - Price and inventory levels vary on Oahu from community to community and types of properties. In general the days on market are reasonable and prices holding. There are a few communities not doing as well.
Ronnie - I am also seeing more short sales in a couple of communities. Fortunately they are still in a small minority.
Kelly - I am sure that plays a part.