Have you been wondering how inflation is affecting your property value? In this episode of Aloha O'ahu, I’m going to share some insights on what inflation means to property values here on the island of O'ahu.  We’ll talk about everything from home prices to supply and demand and see if a future market crash is coming.



Asking Questions

When it comes to inflation, people have a lot of questions. Is inflation affecting my property value? Is right now a good time to buy a house? Is now a good time to try to upscale or downscale? Is a house a good investment against inflation? Should I cash out now, or should I hold on to my property? Does this mean a crash is coming? Let's go through a few things you may want to know.

Inflation And Property Value

The first question is how is inflation affecting home prices here on O'ahu? O'ahu is seeing the effects of inflation just like the rest of the country. Home prices and other costs have been rising over the last year, so right now, things may seem to be slowing down a little.

As we have seen interest rates rise quickly, you would expect to see a slowdown or a decrease in home prices—but that's not the case here on O'ahu. We are driven more by supply and demand. There are a large number of buyers right now looking for homes, and we continue to not have enough inventory. This supply and demand effect has continued to increase home values, even as our interest rates go up.

The trend does not appear to be slowing down and is expected to continue through at least the end of 2022—if not a five-year projection out. Inflationary pressures are keeping home values rising, but they are highly influenced by the lack of available properties compared to the number of buyers on the island of O'ahu.

Should You Buy?

So, is right now a good time to buy a house? This is a complex question. While interest rates are significantly higher than they were just a couple of months ago, prices and values continue to go up. Values are still outpacing the interest rates, so people are trying to get into the market as fast as they can.

While you need to look at your individual situation, if the right home is available now, it may be the right time for you to buy. If interest rates continue to go up and you got into the market where they are now. you can always refinance later if they go back down again.

Is buying or owning a home a safe investment against inflation?

The answer to that is a resounding yes. Homeownership is a hedge against inflation. As prices and rents continue to rise, mortgages and mortgage payments will continue to remain the same—if you don't have an “ARM” loan. But that's another story for another day.

None of the experts that I've read or heard from are projecting depreciation in home values anytime within the next five years.

Cashing Out?

If you have a property, you may be asking yourself if you should hold on to it or if you should cash out. This really depends on your personal situation and what you're looking for in your next property. Values are expected to continue to appreciate—just maybe not at the same rate that we've seen over the last year or two.

If you decide to sell, make sure that you have a solid plan in place for finding that next property to live in before you decide to sell. If you have an investment property, you're going to need to look at the long game. Values are expected to continue to increase over the next five years, just not as much and as quickly as we've seen over the past two.

Are we predicting a Crash?

The question I get often—and the thing that everybody wants to talk about—is if there is a crash coming. The answer is likely no. Here on O'ahu, even during the 2008 housing crash, home prices did not decrease much. Additionally, much of it was dependent on where the property was located on the island.

While values plateaued for a period, they never significantly decreased. The reason they never significantly decreased was because of our limited inventory and lack of available land. You have to be able to build new homes at a significant rate to fill that demand. For a crash, we would need this demand to disappear quickly. We don't see that coming anytime soon.

I’m Here To Help

As inflation rises, the market is continuing to become more complex. Make sure you partner with a real estate professional who can navigate you through these complexities. If you have additional questions, please feel free to reach out so that we can discuss your specific situation.

For more information, be sure to subscribe to my channel so you never miss an episode of Aloha O'ahu, my show all about living on the island of O'ahu. Until next time!