September 2, 2008||Corporate: From the Executive Suite, Mortgages/Economy/Market

Principal Broker’s Quarterly Letter – 3rd Quarter

This letter along with a copy of Residence International Magazine was distributed to over 800 of our clients and friends this fall.

Putman D. (Putty) Clark, R - President and Principal BrokerFrom the desk of:
Putman D. (Putty) Clark, R – President and Principal Broker
Clark Realty Corporation


Autumn is historically a slow real estate season, one in which we reassess the market and prepare for the stronger winter market. It also is one of the best times of the year for buyers to take advantage of better selection and pricing. Of course, by the time you receive this letter, market conditions may have shifted yet again so we encourage you to give us a call for the freshest perspectives on the Big Island market. And you are always welcome at our website ( to check for market trends and updates from our MLS provider and other reliable sources.

With this in mind, I want to focus on a well-known but under-utilized index that is of significant importance to both buyers and sellers: the average 30 year mortgage rate. For example, if a buyer is qualified to purchase a $500,000 home today and the interest rate rises as little as 1%, he will only be able to purchase a $450,000 house with the same monthly payment. To purchase the same house at $500,000, (at the higher interest rate) he would need to spend an additional $329 per month (nearly $4,000 more yearly, or nearly $120,000 over the life of the loan). A 2% rise would, of course, double those numbers for a total cost of more than $240,000 over the life of the loan.

Clearly, the buyer’s monthly payment (as influenced by interest rates) rather than the sales price can be the critical factor in determining if this is a good time to buy. That seemingly modest 1% change in interest rate can amount to a total additional outlay of nearly 25% of the purchase price over the life of the mortgage. Therefore, if you are planning to buy or relocate, the pivotal question becomes: Where do you think interest rates are headed next year?

While we continue to enjoy historically low mortgage rates, most economists see a serious threat of inflation. Many of us can remember the days of double digit interest rates and, although we don’t foresee a return to this environment, the example above shows how any interest rate jump impacts the market. The not-unreasonable possibility of a 1% to 2% percent increase over existing rates makes a compelling case to act now and not to wait for lower prices.

By the way, if you have to sell one property to buy another property, this is the ideal market. In addition to the lower interest rates and greater selection of properties, any loss on your sale is matched by your gain in a better deal on your next purchase.

Please give us a call to check out the current market conditions or to answer any other questions you may have.


Putman D. Clark
President and Principal Broker

Leading Real Estate Companies of the World Luxury Portfolio

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