Market Indicators To Keep An Eye on
Every month, the Honolulu Board of Realtors® tracks and reports real estate sales activity on Oahu. Reports are seasonally adjusted, comparing current figures with those from the same month year-to-year, and charts trends going back two years. HBR’s reports contain so much data, making sense of what is behind the numbers can be overwhelming.
We asked three experts what market indicators they watch to get a true sense about what is affecting the market right now. Here’s what they said.
Months of Remaining Inventory
The months-of-remaining inventory (MRI) is a statistic that combines supply (inventory) and demand (closed sales) into a single statistic, to snapshot the pace of sales and available inventory.
“The months-of-remaining-inventory indicator is a great way to determine if supply/demand balance is changing,” said Kalama Kim, Realtor and principal broker at Coldwell Banker Pacific Properties. “If supply exceeds demand, prices soften. If demand exceeds supply, prices increase.
“Over the past four years, we have seen MRI in the two-month range, meaning, at the current rate of sale, if no other homes came on the market, everything would be sold out in 60 days. Over the past year, that measure has been increasing, signaling a more balanced market.”
Each month, sales volume is tallied in two categories, closed sales and pending sales — sales in escrow but not yet closed. Both these year-over-year stats are trending down. The latest HBR stats show total combined (single-family and condos) closed sales figures are down in February for the seventh consecutive month, while pending sales have dropped for the 14th month.
James Chan, Realtor and partner at Locations, mentioned a link between the rising mortgage interest rates and lower sales volume is possible.
“The power of the interest rates is more than people realize,” said Chan. “Rates determine how much it costs to borrow money. The fluctuation of rates can impact how much you’ll be able to borrow. Prices will not change as quickly as rates, so if rates increase but prices don’t decrease at the same rate, you’ll start to see an effect on affordability.”
Because mortgage interest rates affect affordability, rising rates may be a factor in the decline in sales volume and also the subsequent rise in inventory.
“When rates jumped to nearly 5 percent last year, we saw a segment of buyers pull back and therefore you can see how inventory can end up sitting a bit longer,” added Chan.
The number of total active listings (single-family and condos) on Oahu increased year-over-year for the 19th consecutive month, according to HBR.
“While interest rates have ticked up a bit in the last two years, they remain historically low at below 5 percent,” said Jo Frasier, Realtor and partner at Locations. “Interest rates in February were actually lower than a year ago, giving would-be homeowners a little breathing room to get their foot in the door, perhaps without multiple offers to compete with.”