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The Honolulu Advertiser
Posted on: Wednesday, March 24, 2010

Honolulu rents still 2nd priciest in U.S.

by Andrew Gomes
Advertiser Staff Writer

A modest increase in rent for a typical two-bedroom home in Honolulu last year helped the city maintain its ranking as the second most expensive rental market among 210 U.S. metropolitan areas, according to a national survey.

Fair market monthly rent for a two-bedroom home on O'ahu, or Honolulu County, rose 4.5 percent in the fourth quarter of last year to $1,704 from $1,631 in the same period a year earlier, according to the Washington, D.C.-based Center for Housing Policy.

The organization, a research affiliate of the nonprofit National Housing Conference, reported that rents rose in 187 of the 210 markets surveyed.

Honolulu's rent increase was the 53rd highest. Rent rose the most in Knoxville, Tenn., where the increase was 9.8 percent.

The most expensive market, San Francisco, saw rent rise 6.2 percent to $1,760. The least expensive market, Wheeling, W.Va., had a 1.9 percent increase to $588.

The report contrasts with assessments from local property managers and housing experts that Honolulu's home rental rates dipped last year under pressure from high unemployment, softening home prices and a weak economy.

A survey of classified rental ads in The Honolulu Advertiser compiled by local housing market researcher Ricky Cassiday suggested that the average asking price for apartment rentals from January through October 2009 declined 12 percent from a year earlier, while average asking rent for townhouses and homes declined roughly 5 percent and 3 percent, respectively.

The Center for Housing Policy's rent data are based on a survey of recently occupied units and the U.S. Department of Housing and Urban Development.

Not surprisingly, the study concluded that typical wages in Honolulu for numerous occupations including accountants, carpenters, firefighters, legal secretaries and police officers don't support a two-bedroom rental.

Only six occupations of 72 included in the survey had a high enough wage to afford the rent civil engineers, construction managers, dental hygienists, registered nurses, physical therapists and software programmers.

Only three other jobs librarians, paralegals and secondary school teachers had wages supporting a one-bedroom home based on fair market rent of $1,397 a month, the study said.

The Center for Housing Policy used the standard measure of affordability limiting rent to no more than 30 percent of income. Wage data were from November 2009 and provided by Salary.com.

The report also assessed home prices, and said Honolulu had the third most expensive median home price among 208 metropolitan areas, which was one spot higher than its 2008 ranking.

The report's median price is based on new and previously owned single-family homes and condominiums, meaning half of all the homes in the group sold for more and half for less. Hono- lulu's median was $450,000 in the fourth quarter, up from $400,000 in the 2008 fourth quarter. The rise runs counter to lower median home resale prices last year reported by the Honolulu Board of Realtors, but could be due to the inclusion of new, generally pricier, homes in the mix.

Home price data in the Center for Housing Policy survey is from the National Association of Home Builders or the National Association of Realtors. Of the 208 metro markets, the median was higher in 77 markets.

Based on Honolulu's median price and interest rates, it would take an annual income of $134,328 to afford such a home assuming a 10 percent down payment and conventional mortgage underwriting guidelines that suggest no more than 28 percent of household income be used to pay the mortgage, property taxes and insurance.

Based on the affordability guidelines, none of the 72 occupations in the study had wages high enough to buy a $450,000 home.