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Market Trends Show 18 Months of Stability in Real Home Prices

One of the blogs we follow is that of economist, Scott Grannis. In a recent blog, he showed the following Case Shiller graph:

The chart shows inflation-adjusted home prices in the top 20 metropolitan markets being essentially flat for the past 18 months. He argues that home prices have fallen 35% from their peak in early 2006.

He also notes that 30 year fixed-rate mortgage rates have declined from 6% in early 2006 to 4.5% currently. That equates to an effective decline in the monthly cost of purchasing a home of about 50%. During the same time period, real personal incomes are up over 6% since 2005.

He uses this next graph, which takes the inflation-adjusted index all the way back to 1890 to show that current prices are not out of line with historical trends. His point is that while a further decline in home prices can’t be ruled out, he thinks it unlikely. The article in greater detail is worth a read.

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Jeremy Stice

December 4, 2010

Aloha Dan and Marion,

I like the strong financial info from reputable sources that you utilize to educate individuals about our real estate market. There is no question that with the decline in prices combined with historically low interest rates, that now is the time to invest in one’s future in Hawaii.

One important note on your blog, I think it is important to understand that it is the combined effect of prices dropping 35% as well as the interest rates lowering the cost of home ownership another 15% that leads to the monthly cost of homes being about half the amount as at the peak of the market.

Live the Hawaii Life!

Jeremy Stice

December 4, 2010

Aloha Dan and Marion,

I like the strong financial info from reputable sources that you utilize to educate individuals about our real estate market. There is no question that with the decline in prices combined with historically low interest rates, that now is the time to invest in one’s future in Hawaii.

One important note on your blog, I think it is important to understand that it is the combined effect of prices dropping 35% as well as the interest rates lowering the cost of home ownership another 15% that leads to the monthly cost of homes being about half the amount as at the peak of the market.

Live the Hawaii Life!

Katie Minkus, R(BIC)

December 5, 2010

Aloha Dan and Marion… did you catch Paul Brewbaker’s remarks at the West Hawaii Association of Realtors General Membership Meeting?? His graphs are awesome, too, and he’s a very funny man, for an economist! It’s interesting to note, for example, that here in Hawaii our tourism economy is dependent on airline “lift” (essentially, seats on a plane) and for about 18 months we had no additional lift to the islands. Now that Alaska Airlines has come into our market (and there are rumors about Southwest too) and added lift, more people can enjoy coming to Hawaii – and take advantage of great prices and lower cost of homeownership on our islands. Thanks for the great post!

Katie Minkus, R(BIC)

December 5, 2010

Aloha Dan and Marion… did you catch Paul Brewbaker’s remarks at the West Hawaii Association of Realtors General Membership Meeting?? His graphs are awesome, too, and he’s a very funny man, for an economist! It’s interesting to note, for example, that here in Hawaii our tourism economy is dependent on airline “lift” (essentially, seats on a plane) and for about 18 months we had no additional lift to the islands. Now that Alaska Airlines has come into our market (and there are rumors about Southwest too) and added lift, more people can enjoy coming to Hawaii – and take advantage of great prices and lower cost of homeownership on our islands. Thanks for the great post!

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