Types of Hawaii Real Estate Investment

Real estate investments can be classified as either income producing or non income producing. Income producing real estate investments generate an income for their owners other than the amount that will be made when the property is sold. This income is usually produced through renting out the property. Non-income-producing real estate investment can be very profitable, but they do not generate a regular income.

The most basic form of real estate investment is the investment that people make when they buy their own homes. If the value of the property increases between the purchase and the sale of the property, then it will have been a successful investment as well as a home.

Another possible form of Oahu real estate investment involves buying residential properties without intending to live in them. These properties may be renovated, rented out or sold at a profit. Sometimes it is possible to buy a property and resell it quickly at a higher price. In other cases, it may be necessary to hold on to the property for a longer time before the increase in value will be enough to generate a substantial profit. The value of the property may simply increase over time, but it can also be increased by performing renovations or remodeling the property. Rather than selling the property in order to generate a profit, it may also be possible to rent it out in order to earn a steady income.

Investing in commercial property can be a profitable alternative to buying residential property. Commercial properties can be office, retail, industrial or multi-family residential properties. Commercial properties are often easier to rent out than individual residential properties, and they often generate a much higher income. The leases on commercial properties also tend to be longer than those for residential properties.

Successful Hawaii real estate investment depends upon choosing the right property, in the right location at the right time and not paying too much for it. It is, therefore, important to perform plenty of research before making an investment in a particular property. The quality of the property and the trends in the values of similar properties in the local area need to be thoroughly investigated. If the property will be rented out, the income that is likely to be generated should also be evaluated.

It is also possible to benefit from the profits that are to be made from property investments without having to be the sole investor. Various trusts and funds are available which generate profits for their investors through real estate investments.

The Sunnyvale housing market

The Sunnyvale housing market, a part of the larger San Jose and Santa Clara County real estate markets, showed strong signs of improvement in the most recent tracking periods. According to a May 31, 2010 article in the Mercury News, “The local housing market continues to show improvement in sales and value of homes, though overall home sales in the nine-county Bay Area and the state as a whole, showed mixed results during the month of April, according to [the] latest real estate sales and price reports.” The piece, written by Rose Meily, went on to note that “MDA DataQuick reports sales for all new and resale homes and condos in Santa Clara County rose 3.1 percent in April compared with the same period last year. A total of 1,656 homes sold in April, up from 1,606 homes sold in April 2009. The median home price for all homes jumped 20.7 percent from $405,000 in April of 2009 to $489,000 this year.”

The performance of Sunnyvale homes for sale was a substantial improvement over the rest of the Bay Area, which actually saw a decline in home sales in the month of 2010. According to a May 20, 2010 article in the Silicon Valley/San Jose Business Journal, “Bay Area home sales fell slightly below the year-ago level and remained well below average in April, according to a report Thursday by MDA DataQuick. In April a total of 7,003 homes closed escrows in the nine-county Bay Area, up 0.2 percent from 6,992 in March but down 1.9 percent from 7,139 in April 2009.” The piece continued to explain that “Some of April’s sales activity might have been delayed until at least May as buyers decided to take advantage of new state tax credits that became effective May 1.”

The Sunnyvale real estate market was actually cited as one of the most improved in the United States. According to Businessweek, “Of the 50 largest metros, San Jose saw the largest increase in home prices, 8.3 percent year-on-year during the first quarter, according to CoreLogic data. This was driven by a decrease in inventory – supply of single-family homes in Santa Clara County dropped 19 percent year-on-year in May…”

Tempe real estate market

The Tempe real estate market, a small portion of the larger Maricopa County and Phoenix area housing markets, showed signs of improvement in the month of May, as foreclosures began to taper off. According to a June 10, 2010 article from the Arizona Republic, “A new Arizona State University real-estate report shows home foreclosures may be leveling off, but the author says it’s unclear if the trend will continue because of the number of defaults and late payments still plaguing the market. Foreclosures were 33 percent of the market’s recorded activity in May, down 40 percent in March, according to the latest realty-studies report.” The piece, composed by John Yantis, went on to state that “A number of issues will continue to affect the real-estate market, he said. Defaults and late payments remain at record levels, and they could be a precursor to additional foreclosures. Income may not increase enough for people to hold onto their current homes, especially if they are confronted with a change in an adjustable-rate mortgage that could reset in coming months, Butler said.”

The report itself went into more detail about the challenges confronting Tempe and Phoenix-area homes for sale. The Arizona State University study quoted professor of real estate Jay Butler as saying “The key question is whether this is a harbinger of the future of steadily lower foreclosure activity or a ‘blip’ with a return to higher levels. Defaults and late payments are still at record levels and could be a precursor of additional foreclosures. The main issues center on whether income will increase enough for people to hold onto their current homes and whether they can maintain payments on their houses, especially if confronted with a change in an adjustable-rate mortgage that could reset in coming months.”

The amount of land purchased in the Tempe housing market and other sectors of the Valley increased dramatically in recent months. According to a June 14, 2010 article from ABC 5 News, “Analysts say the Valley’s housing market could be showing another sign of making a comeback. Experts with Land Advisors, a Scottsdale-based brokerage firm, say home builders have bought $90 million dollars worth of land in the Valley so far in 2010.”

The East Bluff housing market

The East Bluff housing market, a subsidiary of the much larger Orange County real estate market, showed signs of strength despite a slight month-over-month decline in median price. According to May 24, 2010 article from the OC Metro, “Orange County’s median home price popped 13.7 percent in April, compared to the same time last year, according to a new report from the California Association of Realtors. The number rose to $491,120, up from $432,110 in the same month last year.” The piece, written by Kristen Schott, continued to say that “However, the median fell 0.4 percent from March, when the number hit $493,120. Statewide, C.A.R., which bases its figures on Multiple Listing Service data, is reporting that the median home price rose 21 percent to $306,230 compared to the same time last year. The number was $253,110 in 2009. The price also increased 1.5 percent from March.”

The average cost of an East Bluff real estate, compounded with other Orange County communities, saw a slight dip in the month of April. According to a May 18, 2010 article from the Orange County Business Journal, “Orange County’s median home price edged down $2,000 in April from March, but still stands $50,000 higher than the prices seen here a year ago. The median price of a home sold here in April was $430,000, a less than 1% drop from a month earlier, according to San Diego-based MDA DataQuick, a unit of Canada’s MacDonald Dettwiler and Associates.” The piece by Mark Mueller went on to note that “Median home prices are now about 13% higher than they were a year ago, but still are off nearly 33% from their highest level, seen in mid-2007.”

Despite this slight decline in median price, the East Bluff and Orange County real estate markets were still much stronger than surrounding counties. According to a May 18, 2010 article from OCLNN, “Orange County saw stronger gains in home sales and price compared to all other Southern California counties during April. The median home price in Orange County jumped 13.2 percent since April 2009, to $430,000…”

Aliso Viejo housing market

The Aliso Viejo housing market continues to face conflicting indicators, although most reports point towards an increasing median price. According to a June 10, 2010 article from the OC Register, “The latest home affordability calculations from the California Realtors Association show that for Orange County a minimum income of $69,770 is needed to afford a starter home ($413,680 median price in the first quarter.) Estimated monthly payment, including taxes and insurance, on an entry level home was $2,330.” The piece went on to state that “The recent “Paycheck to Paycheck” housing affordability report by the Center for Housing Policy suggests that $129,850 of income was needed in the fourth quarter to buy a median-priced O.C. home!…For the first-time buyers based on the number of households that can pay 85% of the median home price making a 10% down payment and assumes [the] buyer would spend 40% of his or her income on monthly house payments.”

The average price of an Aliso Viejo real estate increased significantly over year-ago levels in the most recent tracking periods. According to a June 4, 2010 article from the Orange County Register, “For the 22 business days ending May 18 – DataQuick’s latest real estate buying report – Orange County saw…$440,000 median selling price that is up 12.8% vs. a year ago yet -32% below June 2007’s peak of $645,000. A median of $440,000 was last seen in Orange County in August 2008.” The piece, posted by Jon Lansner, went on to say that “The most recent median is 19% above the cyclical low hit in January 2009 at $370,000 – a current bottom that was 43% below the peak…In this most recent period, Orange County shoppers bought 3,056 residences – that is +12.8& vs. year-ago buying activity.”

This same trend was observed across nearly three-fourths of Orange County communities such as Alison Viejo. According to a June 11, 2010 report from the Orange County Register, “57 of O.C.’s 83 ZIP codes had gains in their respective median selling price. Overall, prices were +9.9% vs. a year ago. Taking sales volume in consideration, home pricing is up in ZIPs representing 73% of the Orange County market.”

East Bay real estate market

The East Bay real estate market has been facing mixed signals in recent months, with some signs indicating the possibility of a renewed recovery and other pointing towards continued weakness. According to a March 11, 2010 article in ABC KGO News, “For the first time in a long time, some of the Bay Area’s hardest hit counties are seeing their foreclosure numbers drop compared with last year. In San Joaquin County, foreclosure filings have dropped 42 percent since February 2009; in Alameda, foreclosure filings are down 16 percent and in Contra Costa County, filings are down 3 percent.” The article, written by Laura Anthony, continued to say that “At least temporarily, fewer bank-owned properties are coming on the market. In some areas of Contra Costa County, there is intense competition for them among buyers.”

East Bay homes for sale are also showing contradictory signs, with home prices and home sales trending in opposite directions. According to a March 19, 2010 article in the San Francisco Chronicle, “The volume of Bay Area home sales dipped in February compared with a year ago, while the median price continued to rise, according to a real estate report released on Thursday. ‘The increase in the median reflects just how odd things were a year ago,’ said Andrew LePage, an analyst with MDA DataQuick, a San Diego research firm.” Mr. LePage continued to state that “Over half of the resales (then) were foreclosures, and the less expensive inland counties had an unusually high portion of the sales. With the more expensive counties now contributing more sales, it’s easy to post a double-digit increase in the median price. It does not reflect a 20 percent appreciation in the typical home.”

The same basic trend for East Bay real estate for sale was noted in a March 19, 2010 article in Housing Wire, which said that “In the San Francisco Bay Area, home sales improved from January to February, but remained below last year’s level. However, the median price paid continued a five-month-long run of year-over-year increases, according to MDA DataQuick. There were a total of 4,987 new and resale houses and condos sold in the nine-county Bay Area in February.”

Diamond Head Real Estate

Diamond Head, Hawaii, refers to the area on Oahu near the volcanic tuff cone, so named because explorers in the 1800s thought calcite crystal in the rock were diamonds. Today the area is one of the islands’ most popular tourist spots and is a U.S. monument. Diamond Head real estate tends to be rather high-priced, as the area is in high demand, and it consists of both single-family homes and a number of condominiums.

According to statistics published by the Honolulu Board of Realtors, the Diamond head area residential real estate sector has continued to struggle a bit into 2010. In March, there were 23 new listings of Diamond Head homes for sale, down 28% from a year earlier. There were 22 homes sold in March, better than last year, when there were just 20 sold. The median sales price for homes in March was down 4% to $710,000, and the average price was down 27.5% to around $722,000 from more than $994,000. Homes are selling more quickly, though. The average number of days homes spent on the market before selling was 42, down 57% from a year ago, when that figure was 97 days. At the end of the month, there were still 97 homes on the market for sale, down from 124 one year ago. Thus far in 2010, however, the median price of homes in Diamond Head is up 5%, at $775,000, though the average year-to-date is down 8%.

The condo market shows similar trends and is, on the whole, showed much room for optimism in March. There were 21 new listings in the month, the same figure as last year, and at the end of March, there were 82 condos still left on the market for sale, down by four from a year ago. There were 10 condos sold in Diamond Head in March, up from just four sales in March 2009. The median sales price was off just a slight 0.8% from a year ago to $470,000, while the average sales price was up more than 40% to around $769,000. Condos for sale spent an average of 72 days on the market once listed, a decline from last year of more than 45%, when condos spent 131 days on the market, on average, before selling. So far this year, the median condo price in Diamond Head is up 13% to $396,500 and the average price is up 70%. There have been 23 condos sold in the first three months of the year, up from only eight at the same time last year.

Rocklin, California Real Estate

A mid-sized city in the Sacramento area, just north of that city, Rocklin, California, is home to around 55,000 in Placer County and is home to a population with a median household annual income of almost $85,000. Though the Rocklin real estate sector initially suffered many adverse effects from the withering national real estate market that onset in 2008, it has since begin to show some new signs of life and that i may be out of the worst period.

According to statistics from local Re/Max realtors, near the end of January (as of Jan. 27), there were 265 Rocklin homes for sale, a decline in inventory of 6% from four months prior, in September. Of these homes, 25 were bank-owned, 48 were active short sales and 108 were short sale-contingent. The homes ranged in price for as little as $138,000 to as much as $1.7 million.

The average asking price at the end of January was $444,225, a more than 11% increase from four months’ earlier, when it was just over $397,000. The median asking price was $349,000, a 4.6% improvement from four months earlier, when it was $333,687. The fourth quarter of 2009 saw sales activity in Rocklin improve. From October through December, there were 196 homes sold, versus just 181 from July to September. The sales prices, too, were higher.

The average sales price during the fourth quarter was $338,653, up 6.25% from the third quarter, while the median sales price was $310,000, up 3.7% from the third quarter. Despite the increased sales activity, however, homes spent four more days, on average, on the market before selling than in the previous quarter, at 80 days. Sales activity for the year’s final quarter was an improvement of more than 18% from the same quarter in 2008, but both median and average prices were down for the year, by 5.5% and 7.3%, respectively.

What’s going on in lending

The Mortgage rate is the single most important factor considered by potential homeowners looking to purchase a new property. The rate determines how much and how quickly a person must repay bank loans. But what make mortgage rates rise or fall? Is it the Fed? The economy? Inflation? The banks? The President? Fannie Mae or Freddie Mac? Funding for mortgages can come from many sources, commonly from deposits at banks and brokerages, but typically comes from investors through “capital markets.” These markets are where investors interested in purchasing bonds come to purchase them.

In order for investors to be interested in lending their money, they must be attracted by high interest rates that will yield large returns when the loan is paid back to them. However, in the tightening economy, not only are lenders keeping more money for themselves, they are also turned off by the low return for what can be deemed a considerably higher risk. Unless the interests rates return to their former high rates or the market conditions make lending less riskier, mortgage woes will continue to plague the United States. However, for people with money to invest in real estate, this is the perfect time to snatch prime properties for fractions of the cost.