When The Best House Might Not Be The Best Investment
February 25th, 2009 categories: For Sellers, Rants & Riffs
With the upheaval in the Oahu real estate values, buying the best house might not be the best investment. Below are two fact sheets for homes that are priced just under $700,000. The Ocean Pointe home is 2,894 square feet, double wall construction and was built in 2007. It is a very nice house and it is priced at $698,000. The second home is located in Manoa on Sea View Avenue (about two blocks from the University of Hawaii); it is 1,900 square feet, built in 1980 and is priced at $685,000.
Ocean Pointe
Sea View
At first blush, one would assume that the Ocean Point home is the better buy. It is newer, larger and in a planned community. However, over the next 2 to 3 years, I would not be surprised to see its market value drop dramatically! Here’s why.
1. $698,000 is toward the upper end of the Ewa real estate market (the $300,000 to $400,000 price range appears to be the sweet spot in this market).
2. Since it is likely that a person who buys the home will be working in downtown, the drive to work could take an hour or more.
3. Over the next 10 to 20 years, Ewa and Kapolei are the areas where most of Honolulu’s major home development will take place. Therefore, as time goes on this home will compete against newer and possibly larger homes, for the foreseeable future competition will place a cap on the appreciation of this home.
Here’s why the home on Sea View should make a better investment.
1. It is in the core of Honolulu and this area does not have any significant parcels of land available for development. This means there will be less competition to suppress prices.
2. Believe it or not, in Honolulu proper, $685,000 is in the lower price range of single family residence demand. This means that there is a very large market for this price point.
3. Given the un-godly amount of traffic coming in from outlying areas (Ewa, Kapolei, Makakilo & Mililani), this creates ongoing long-term demand for housing within 10 miles of Diamond Head.
Why do this comparison? For buyers transferring to Honolulu (military, federal or private sector) for a 3 to 5 year stint, you want to be sure that you have a chance to have the best return on investment. Even though you get a lower quality, smaller home you will be better of purchasing in Honolulu proper, rather than the outlying areas.
If you would like to discuss your real estate needs, feel free to call me at 808-737-2093 or toll free at 877-737-2093. You can email me at keahi@lava.net
BTW, today’s vintage home can be found in Kapahulu about a mile from Diamond Head.
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Totally agree with this entire article! Good to give people this kind of comparison, especially if they don’t know the island.