2006 Housing Policy Study by SMS Research & Marketing Services, Inc.

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FINANCIAL QUALIFICATIONS Of course not everyone who wants to buy or rent a new unit will be able to do so in the next few years. The Demand Survey typically includes many items to measure the relative ability of potential buyers or renters to purchase certain housing products. Although no particular product is being evaluated here, it will be useful to review the qualification factors and get an idea how they may affect purchasing capacity in the near future. Complete descriptions of financial qualification data are presented in Table A4 in the appendix. We have selected certain of those factors for presentation in Table 11. For this presentation we chose the levels for each factor that might qualify a potential buyer to obtain conventional financing for a home priced at about $450,000. Table 11. Financial Qualifications by County, 2006 Percent of current homeowners who want to buy another unit. All other percentages based on total households who want to move and will stay in Hawaii. Current homeowners' monthly payments for mortgage and utilities. Homeownership in Hawaii may involve substantial appreciation. Assuming the homeowner has been in the unit for three or more years, sufficient equity may be available for a down payment on a new unit. About 48 percent of all potential buyers own their own homes, and 60 percent of those have been living in that unit for more than three years. If home equity is not available, the prospective buyer may have sufficient savings to apply toward a down payment. Over 72 percent of all prospective buyers have at least $5,000 in family savings or investments. Nevertheless, by their own best estimate, only 39 percent of all would -be buyers will be able to gather $60,000 as a down payment. About 35 percent of all potential buyers have household incomes in excess of 140 percent of the County median. While there is no set income required for financing of this type, the 140 percent level is usually about right for borrowing 85 percent of $450,000. That may be offset if there is more than one person employed, and about 72 percent of buyers pass that test. But by their own estimate, 15 percent of buyers felt their current level of indebtedness would cause problems if they sought mortgage financing. Hawaii Housing Policy Study, 2006 Page 22 © SMS, Inc. February, 2007 State of Hawaii County of Honolulu County of Hawaii County Of Maui County of Kauai Factors affecting down payment Percent homeowners 47.5 43.0 59.1 50.2 62.4 Have adequate equitya 60.2 62.3 60.8 49.9 61.8 Have more than $5,000 in savings 72.3 78.3 54.8 69.2 71.9 Can get $60,000+ down payment 38.6 38.7 38.9 37.6 38.8 Factors affecting financing Income above 140% of median 34.7 34.0 38.0 34.0 35.6 Debt will cause financing problems 15.1 14.7 17.2 14.1 16.7 Factors affecting monthly payment Can afford to pay $2,000 or more 53.9 56.9 43.2 52.0 55.7 Currently pay more than $1,700b 56.9 63.1 38.9 60.0 49.3 Percent of current homeowners who want to buy another unit. All other percentages based on total households who want to move and will stay in Hawaii. Current homeowners' monthly payments for mortgage and utilities. Homeownership in Hawaii may involve substantial appreciation. Assuming the homeowner has been in the unit for three or more years, sufficient equity may be available for a down payment on a new unit. About 48 percent of all potential buyers own their own homes, and 60 percent of those have been living in that unit for more than three years. If home equity is not available, the prospective buyer may have sufficient savings to apply toward a down payment. Over 72 percent of all prospective buyers have at least $5,000 in family savings or investments. Nevertheless, by their own best estimate, only 39 percent of all would -be buyers will be able to gather $60,000 as a down payment. About 35 percent of all potential buyers have household incomes in excess of 140 percent of the County median. While there is no set income required for financing of this type, the 140 percent level is usually about right for borrowing 85 percent of $450,000. That may be offset if there is more than one person employed, and about 72 percent of buyers pass that test. But by their own estimate, 15 percent of buyers felt their current level of indebtedness would cause problems if they sought mortgage financing. Hawaii Housing Policy Study, 2006 Page 22 © SMS, Inc. February, 2007