Hawaii Mortgage Payments Chewing Up Chunks of Borrowers’ Budgets
Hawaii mortgage payments are eating up an increasingly bigger share of household budgets across Oahu.
Families have been spending more than half of their monthly salaries on home loans, as housing costs reach their highest level since the early 1990s, according to the Honolulu Board of Realtors.
Bankers say families typically should spend 25 percent to 30 percent of their gross income on home payments. But many Honolulu homeowners easily exceed that amount as they scramble to cover their mortgages.
More sacrifices
That has meant doing everything from foregoing vacations to pulling children out of private schools to even paring down contributions to 401(k) accounts.
“People are doing what it takes to stay in their homes,” said Russell Miyashiro, president of the Mortgage Bankers Association of Hawaii. “It entails a lot of sacrifice.”
At Bank of Hawaii, the state’s largest local home loan producer, the average mortgage amount in 2006 rose 23 percent to $458,000, from $372,000 in 2005.
That means the typical monthly payment on principal and interest jumped to $2,841 from $2,190, an increase of almost 30 percent in that 12-month period.
To enable more people to buy, lenders have rolled out a host of innovative mortgage products, such as interest-only loans and loans that back-load payments on interest and principal.
Such creative mortgage financing has allowed just about any buyer with good credit to buy houses with price tags that used to appeal mainly to the wealthy.
As a result, half of the single-family households in the Oahu housing market were spending at least 52.6 percent of their gross income on home payments in 2006. That is the highest percentage since the late 1990s, when payments peaked at 59 percent of income, said Harvey Shapiro, research economist for the Honolulu Board of Realtors.
By comparison, half of the homeowners on Oahu were spending at least 30.1 percent of their monthly income on mortgages in 2001, Shapiro said. Driving the upward trend is the rising median price of an existing single-family home.
Last year, the median Hawaii home price rose about 7 percent to $630,000, from $590,000 in 2005, Shapiro said.
Stretching budgets
The rising housing prices have some families stretching their budgets.
“If you need to work three jobs to keep up with housing costs, you can find three jobs in this economy,” said Wendy Burkholder, executive director of Consumer Credit Counseling Service of Hawaii. “But my concern is that we could see an increase in defaults this year.”
SOURCE: Hawaii Business Journal