For millennials, buying a home in Hawaii is still a possibility

Column by Jaymes Song
As seen in the Honolulu Star-Advertiser on April 20, 2019

Affording a home in high-priced Hawaii can be a challenge no matter what age you are. For millennials, it may seem downright impossible.

A new study ranks the Aloha State dead last in the nation in affordability for millennials, who are now in their 20s and 30s. Affordability has contributed to the islands’ “Brain Drain,” with young, local people leaving for better job opportunities and lower-priced living on mainland. In fact, Hawaii’s population declined slightly from 2017 to 2018.

The affordability study by WalletHub, a personal-­finance website, ranked Hawaii No. 36 overall best state for millennials, boosted by a No. 4 ranking in the education and health category. The top state overall was Massachusetts, and the worst was West Virginia.

Despite the hurdles of student debt, lower pay and some having to enter the workforce in the wake of the Great Recession, millennials still represent the largest share of homebuyers of any generation at 37%, according to a new report by the National Association of Realtors.

In Hawaii, we need to encourage our millennials to stay home. To keep our economy healthy and our families happy, we need them to have good-paying jobs here, buy homes here, have their children here and thrive here.

If you’re a millennial, here are some tips to help achieve homeownership in Hawaii:

1)  Put a financial plan in place to bring down debt and save money. We know you have massive student loans and it’s hard to save. Try to pay down those loans and avoid racking up more debt, such as credit cards and car loans. To buy a home, you’ll need to make some financial sacrifices, and we’re not talking cutting out avocado toast. Set a goal of how much you can save and figure out how long it will take. And keep your credit strong.

2)  Be realistic with your budget and expectations. Your first home likely won’t be your “forever home.” You have to start somewhere, so figure out your “must haves,” versus your “nice to haves.” You might not be able to afford a unit in that posh, new high-rise Kakaako condo with an infinity pool, yoga studio and theater just yet. But that older tower in Makiki, or that walk-up in Kapahulu might be manageable for your budget.

3)  Ask your family for help. If you are able to get financial assistance from family members, don’t be afraid to ask. Monetary gifts from your parents, grandparents or favorite auntie (which needs to be documented for the lender) could help you achieve homeownership, get a nicer place, qualify for a better rate or avoid paying mortgage insurance. And of all the reasons you could hit up your folks up for money, buying your own place (and finally getting out of their home) will probably be one of the most welcomed.

4)  Think monthly payment instead of price. Don’t set your limits based on solely price because two condos or houses with the same price could differ by several hundreds of dollars after factoring in the maintenance fees, property taxes and insurance. For example, Condo A and Condo B could both be $500,000. But the maintenance fee may be $400 a month higher for Condo A. That would make Condo B much more affordable than Condo A. Consider your total monthly housing payment instead of focusing on price.

5)  Understand low mortgage rates won’t be here forever. Ask your parents what interest rate they had when they bought their first home and you may be surprised to find some may have paid in the double digits. It’s like charging your home on a credit card. Granted, a modest home didn’t cost $800,000 when they first bought. While rates have moved above 4% in the past year, they have recently softened and are still very low historically.

6)  Find your Dream Team. Hiring the right real estate agent and loan officer early to help guide you through the homebuying process will make your search much more efficient and manageable. It will also save time and money. Ask a lot of questions. You will learn about neighborhoods, home values and the Hawaii Purchase Contract. Remember, there are no costs or fees in hiring an agent to help you find a home. Your agent gets paid at the close of your transaction from the commissions paid for by the seller.