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What is the Housing Ladder?

July 8, 2015 By Nick Kawakami

This week’s question comes from one of my friends who received my newsletter yesterday. He asks, “Why the increase in demand for condos but the decrease in median sales price?”

First, a little background for those that did not get my newsletter yesterday. Basically, it addressed the newspaper headline “Oahu home prices hit $700K,” in BIG BOLD LETTERS. My point was not to freak out and I gave stats and reasons why, including an increase in number of condos sold but a decrease in median sales price.

That’s where we get to my friend’s question, “Why the increase in demand for condos but the decrease in median sales price?” Part of the reason is the “housing ladder.” Imagine a regular ladder, with a top and a bottom, and rungs or steps in between. The housing ladder, with the bottom being the most affordable properties and the top being the most expensive, also has steps in between that represent different levels of properties. As you move up the ladder, factors like price, amenities, and location change. A one-bedroom walk-up in Makiki would be lower on the ladder than a single-family home in Kahala.

When a building like 801 South St. (which is priced one-step above affordably-priced condos) close, it frees up the units that the owners previously lived in. The owners in the new building take a step up, and open up condos in the lower step for others. Since 801 South St (which closed 600 units in June) just closed, it was probably one of the main reasons why lower-priced condos were more active than normal.

I hope this answers your question, and invite comments below! If you have a question, use the form to the right and I will answer it for you here on the blog! Otherwise, if you have any questions or would like help getting to your real estate goals, hit me up and let’s talk! 😊

Filed Under: Real Estate Tagged With: 801 south, equity, housing ladder, investments, real estate

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