Will Rising Interest Rates Cool the Market.

Reproduced with the permission of Mortgage-X.com

The rapid rise in interest rates over the last 2 months from a low of around 3.5% to the current level at approximately 4.25% will have a somewhat dampening effect on rising home prices according to many economists.

The big question is how much? No one can know for sure, but we feel the effect will hardly be noticed unless interest rates rise to around the 6% level. At 4.6%, the rates are historically low, and homes are still quite affordable.

One other thing that we don’t see many of the pundits mentioning is the CASH factor. Year to date on Maui, there have been 1399 transactions totaling $910,411,240. Of those transactions, 50% of the volume, or $455,772,496, was from cash purchases. Cash buyers are much less influenced by fluctuations in interest rates.

The world is still awash in cash, and this is especially true in countries such as Korea and China who have been major beneficiaries of the huge trade imbalances we’ve been running in the U.S. for so many years.

Hawaii’s location and ideal climate is becoming more an more alluring to Asian buyers. Canada is still the number one country buying up real estate in Hawaii, but in coming years, we expect that Asia, and especially China will become a major player in our real estate market.

Aloha,

Ken

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