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The Honolulu Advertiser
Posted on: Monday, January 2, 2006

Hawai'i housing market likely to remain strong

 •  'Exotic' mortgages on the rise in Hawai'i

By Greg Wiles
Advertiser Staff Writer

While there may be a little slowing of mortgage activity, Hawai'i's lenders expect the market will remain good this year as interest rates remain below levels experienced during the 1990s and rising rents push people to consider buying condominiums.

"Overall we're still pretty bullish on the market in general," said John Gray, executive vice president of the mortgage banking division of Bank of Hawaii, one of the state's largest residential lenders.

The Mortgage Bankers Association, a Washington, D.C.-based trade group, forecasts interest rates on a 30-year fixed mortgage will rise during the year, from an average 6.2 percent in last year's fourth quarter to an average of 6.7 percent at the end of 2006.

While higher than rates during the past three years, the forecast is still less than the 8.11 percent averaged during the 1990s, according to association numbers.

"Historically rates are still very attractive," said David Quandt, regional director for Charter Funding of Hawaii, a mortgage lender.

Mortgage lenders said refinancing has slowed by homeowners seeking better interest rates, but there are still many people trying to buy homes. As property prices for houses in Honolulu increased to more than $500,000 in the past year, there was a swing to more people looking at condominium purchases, Gray said.

The median O'ahu home price was $640,500 in November while the median condominium price was $305,000, according to the Honolulu Board of Realtors.

"We're still seeing fairly good volume," Gray said.

Many renters are tired of landlords raising prices or selling the unit they live in, said Zobel Dela Cruz, sales manager of mortgage broker One-Stop Financial Services.

Last month the National Low Income Housing Coalition released a report showing Hawai'i is the most expensive state in the nation for renters.

"There's still people out there that want to buy," said Dela Cruz, who said many clients are seeking newer types of mortgages that can include 100 percent financing and interest-only payments for the first several years of a mortgage.

Still, buyers who seek these mortgages may find lenders are tightening standards for some potential buyers who have blemishes on their credit record, such as late payments or bankruptcies. They also may find appraisers taking a more conservative approach to how they value properties for mortgage purposes as real estate price gains slow.

"They're being much more conservative," said Stephany Sofos of Sofos & Co. Previously "lenders have said well we'll give this appraisal a benefit of a doubt because we all understand the market has been rising.'

Reach Greg Wiles at gwiles@honoluluadvertiser.com.

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