Sound advice for terminal renters - Bubble proof your life by locking in your house payment

 

Part 1 of 2 series

 

HONOLULU ADVERTISER , August 28 2005

BY LISA SCONTRAS

Custom Publishing Group

 

Ten years ago, today’s median priced house of $599,000 on Oahu would have cost around $349,000. And 10 years before that, it would have cost around $158,600. 

 

If you are watching and waiting, trying to decide whether to jump into the real estate market yet or not, consider this:

 

Locally respected research analyst Harvey Shapiro at the Honolulu Board of Realtors says “In Hawaii, prices historically go up steeply and then they go flat for a number of years. That’s what happens here.” 

 

And while he says “we’re currently still in the up phase of the market, my gut feeling is that prices won’t go down — at some point they may level off.”

 

An analysis of the rental market shows a similar track — averaging roughly $1,000 per month for a single-family home in 1985, around $1,500 per month in 1995 and well over $2,000 per month today.

 

According to Michael Healey, broker/partner of Prudential Locations Maui branch, it’s the renters who get hit the hardest, especially the demographic group he calls the “terminal renter.”

 

“That’s what they are, they’re terminal,” he says, “and we just can’t get them to change their mind.”

 

He describes the terminal renter as being in their 40s or 50s, they live in nice neighborhoods like Aina Haina, paying low rent — usually $600 or $700 a month, been there a long time and generally have a good relationship with their landlord.

 

“But remember, those landlords are probably in their 70s now and that situation is not going to last forever. When the landlord decides to sell, you’re going to be in trouble.”

 

Healey reports that the worst cases of tenant displacement are retired people on a fixed income.

 

“You’ve got to start somewhere,” he recommends.

 

It used to be that the down payment held renters back from buying, but new low-down programs have answered that need.

 

And don’t be scared off by the fact that the mortgage amount exceeds what you’re currently paying in rent, even if it’s double.

 

“Most of that will be interest and tax deductible,” he says. “Talk to a tax professional, and get into the game.”

 

 

The argument for buying versus renting is made clearest when looking at how average rents have increased in neighborhoods over the most recent 35 years.

 

 

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