Honolulu, Hawaii is one of the most unique places in America. Perhaps the closest earthly approximation to paradise, it’s the only genuinely tropical city in the United States and has long been a major destination for tourists, retirees and the rich and famous.
Honolulu has also long been home to Naval Station Pearl Harbor, and Marine Core Base Hawaii, two major installations of the U.S. military of historic strategic importance. Together, these bases house tens of thousands of military personnel, who are a common sight around town.
Honolulu has one of the most unique demographic make ups of any major U.S. city. The Asian population comprises a full 43 percent of the city’s residents are Asian, making them, by far, the city’s strongest plurality. Whites are 23 percent, Hispanics and Native Hawaiians are, collectively, about 21 percent. There are virtually no blacks.
This peculiar ethnic blend makes Honolulu an example of a truly high-functioning, diverse city. The city has a phenomenally low violent crime rate of just 2.8 per thousand. Murders in Honolulu are rare. The state of Hawaii has one of the lowest murder rates in the country, just 1 per 100,000 people. Compare that with Detroit, which often exceeds 40 to 50 times that figure. Property crime is higher but still relatively low for a city of over 500,000 people. This adds up to a city that has nearly utopian violent crime rates to match its idyllic climate.
These low rates of crime are reflected in the median home prices. The typical Honolulu home costs about $665,000. But the typical home also tends to be a vacation condo type of property. That means that the actual price per square foot of Honolulu homes is $650. This makes it a very expensive housing market, even by the standards of major U.S. cities.
Yet the Honolulu housing scene has proven incredibly resilient. In the wake of the 2008 housing crisis, many housing markets throughout the contiguous United States were ravaged by foreclosures and selloffs, losing half or more of their value, in some cases. But Honolulu was nearly bulletproof. The city’s housing market only lost about 10 percent of its value, at the worst point. This makes it one of the housing markets least affected by the 2008-2012 recession. Since 2012, the prices of homes in the city have skyrocketed.
Honolulu’s public schools are equally impressive. There are a couple of underperforming schools, but by and large, Honolulu public schools are among the best anywhere in the country. If you picked a home by throwing a dart at a Honolulu map while blindfolded, you would have a 90 percent or greater chance of ending up near a school with excellent standardized test performance.
All this adds up to a picture of Honolulu as being, perhaps, the single best city in America in which to live and raise a family, for those who can afford it, that is. Unfortunately, the cost of living is high, and that’s not just limited to the housing market. The island’s highly isolated location in the Mid-Pacific means all goods tend to cost more.
For those who can afford to live here, buying a home will almost certainly require taking out a mortgage.
What kinds of mortgages are best for Honolulu home buyers?
For those seeking to buy a primary residence, it’s almost always best to go with a mortgage that is as simple as possible. Generally, this will be a mortgage called a linearly amortizing home loan. These are mortgages with fixed payments, usually monthly, that have a definite start date and a definite end date. There is a fixed interest rate and no money is due at the end of the mortgage term.
Many other kinds of mortgages exist, including balloon mortgages, adjustable rate mortgages and bullet mortgages. There are many variations within these categories. However, it is strongly recommended that home buyers take out a simple, fixed-rate mortgage and leave the more complex loans to professional investors. This is important because the fancier loans often add significant risks, many of which are not readily apparent to non-professionals. What’s more, mortgage lenders and originators often have incentive to upsell these loans to new home buyers. They’re best avoided.