Kona Coast Shopping Center
74-5586 Palani Road
NOW OPEN!
Kona Crust is an authentic NY Style Pizzeria.
Order in advance for pickup by phone, through our
website, or with our mobile app.
Find out more at KonaCrust.com or call to place
your order now 731-7553.
Debbie Parmley (B) CCIM
Vice President | Hawaii
License No. RB-21953
Leasing Services – Island of Hawaii
Direct +1 808 987 7722
Main +1 808 524 2666
debbie.parmley@colliers.com
Consulting Sales/Leasing Services Property Management
Available Units:
• 1,395 sq ft offi ce
• 3,090 sq ft offi ce
with 2,000 sq ft warehouse
Great location, coastal views.
is the leading full-service Commercial Real Estate fi rm on
the Big Island. TCG is looking for potential qualifi ed tenants
as well as commercial property owners who need leasing
services for their property or a Leasing Agent and Property
Manager. They also offer consulting services for commercial
real estate issues.
Monique Peacock, (PB)
• Consulting
• Sales/Leasing Services
• Property Management
is the leading full-service Commercial Real Estate fi rm on
the Big Island. TCG is looking for potential qualifi ed tenants
as well as commercial property owners who need leasing
services for their property or a Leasing Agent and Property
Manager. They also offer consulting services for commercial
real estate issues.
Monique Peacock, (PB)
RB-19825
PO Box 908, Kailua-Kona, HI 96745 • Offi ce (808) 329-1111
www.TCGKona.com • email: mp@TCGKona.com
West Hawaii Real Estate | December 21, 2018 13
Housing has peaked. Here are the reasons the market has cooled.
The housing market is one of the
key sectors in the economy. When
housing booms, many segments of
the economy are pulled along. But
this sector is now slowing.
Are we in for a new housing market
meltdown? Probably not, but that doesn’t
mean the future of the housing market
is bright. Factors are in place that imply
housing has entered a new phase that will
not be as strong as in previous cycles.
Housing has peaked. Since spring,
housing starts and new and existing home
sales have trended downward. Home
prices, which had been surging, are now
rising more slowly and in some cases are
declining from 2017 levels.
A variety of factors have created the
deceleration, the biggest being the decline
in affordability.
There are three segments of
affordability: income, housing price, and
mortgage costs. All have been moving in
ways that have made it more difficult to
buy a house.
In many parts of the country, prices
have risen sharply. With mortgage
rates increasing, the monthly cost of a
mortgage has surged. Unfortunately,
income growth has not grown fast
enough to offset the higher costs.
When you combine higher monthly
payments with limited income, you get a
market that had to weaken.
But it isn’t just affordability that
is weighing on the housing sector.
Demographics are playing a major role,
as well.
When considering housing demand,
cost is just one factor. The potential size of
the market has to be taken into account.
With housing, it’s how many people/families
might be interested in buying a home.
The key, then, to housing sales is
attracting younger buyers — millennials
— into the market.
And there’s the rub. When it comes
to home ownership, millennials are
behaving markedly differently than
previous generations.
According to a study by the Urban
Institute, in 2015 only about 37 percent
of those in the age group 25 to 34 own
homes. In comparison, 45.4 percent of
GenXers, when they were that age, lived
in their own unit, while Baby Boomers
had an ownership rate of 45 percent.
The gap in ownership rates has been
created by both preferences and financial
factors.
The so-called American dream of
homeownership is not as much a priority
for millennials. While their parents aspired
to buy their own home, millennials have
an attitude of “been there, lived that.”
They have other dreams and they prefer
to spend their money on other things,
especially technology.
They are also forming households
later. The marriage rate for younger
individuals has dropped precipitously —
from 52 percent in 1990 to 37 percent
in 2015, according to the same Urban
Institute study. That leads to more groups
living together in rental properties and a
lowered need for individual housing.
Millennials are also under financial
pressure. Disposable income growth has
been minimal during their working years
and that has led to low, if any, savings.
Down payments are a major hurdle.
As long as incomes grow slowly and
preferences for non-shelter-related
products remains high, the savings rate
will stay depressed.
Finally, millennials are saddled by
school loans. While other debt can be
discharged through bankruptcy, it is
extremely difficult to do so using the
standard bankruptcy rules. And defaulting
or underpaying can lead to even greater
debt burdens. Millennials can wind up in
a student-loan repayment trap that could
lock them out of home ownership for an
extended period.
While millennials should eventually
move more extensively into home
ownership, it could be a while before
they do so. For the next few years, the
potential demand for homes will be
lower than would be expected, given the
demographics.
There is good news and bad news in
the reduced millennial involvement in the
housing market.
Consider the current situation. While
the housing market is cooling, sales
and starts never soared. Thus, the good
news is that the economy is not facing
a housing bubble. Yes, there may be
metro areas where prices climbed too
high, but with sales and construction at
moderate levels, the economic impact of a
slowdown should not be great.
On the other hand, as long as
millennials show disdain for home
ownership, builders will be operating in a
lessened demand environment. They will
need to adjust to that lowered sales pace.
Housing is fading, but the sector
doesn’t pose the same threat to growth
that previous downturns have had on the
economy. However, don’t expect housing
to lead the way going forward, as it may
be years before millennials become fully
engaged in the market.
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