Year End Wrap Up 2008

Market Overview December

We are happy to see 2008 in the rearview mirror

But will 2009 be the Year of the Bold Buyer?

As usual, the stats aren’t telling the truth.  It is a fact that sales are down in all categories significantly.  It is also a fact that inventories are up.  Ergo, prices should be down.

Overall, we see the median selling prices of single family homes was down by 8%.  But what is not evident is the impact of affordable homes sales.  You’ll see that the median is not down as much as indicated.

We see the median for condos didn’t change in 2008 indicating stable pricing.  Wrong again.  We’ll show you how that number is skewed and what we really have to look at for comparison is the WAM (Wailea Adjusted Median). 

At the beginning of 2008 real estate sales seemed pretty stable in all categories and held through the first quarter.  In April, however, we hit the beginning of what would be an economic trifecta for Hawaii.

• In April we lost 2 airlines, ATA and Aloha.  Fewer flights meant fewer visitors.  Less competition led to increased airfares which again resulted in fewer visitors and real estate buyers.

• By July, the price of oil was over $140 a barrel, once again impacting the price of air travel and many other things.  Would-be tourists and buyers opted to do something closer to home.

• In October as you started to get some relief on the price for filling your tank, the economic markets tanked and would-be buyers decided it was a good time to hang on to any cash they had left and just wait and see.

Welcome 2009!  With more inventory in all categories, some of the lowest interest rates ever and some prices dropping back to 2004 levels…

It’s a great time to buy real estate in Maui.

Condo sales shrivel on Maui

And the market for sellers is worse than the numbers reveal – Buyers, are you sensing an opportunity yet?

While a 33% decline in condo sales seems rough enough, it is actually worse.  The logical question is, “if sales are that slow, if demand is that low, why didn’t prices come down.”  The answer is prices did come down, you just couldn’t see it.

That’s because a large number of sales in Wailea skewed the statistics.  This has the effect of misleading us in 2 ways:

• First a large number of the Wailea condo closings were the result of contracts executed in a prior year.  That made sales activity appear more robust than that dictated by current demand.  I’m told a lot of people who were committed to those deals wanted to get out, but couldn’t.
• Second the median price of those closings was well in excess of $2 million which resulted in skewing both the average and median prices up.

To adjust for the Wailea effect we developed the WAM (Wailea Adjusted Median).

This reveals that in 2007 the WAM was $495,000.  In 2008 the median didn’t remain static as indicated by the overall results, it actually declined to $433,166, down by 14%.

The other thing that is lost in the numbers is the appearance that condo sales are off by just 33%. While the stat is accurate, the trend paints a more woeful picture for Maui.

In the first third of the year there were 370 condo sales.  In the second third of the year, after losing the airlines, there were only 254 condo sales.  In the final third of the year, after the trifecta, there were just 164 condos sales on Maui.  The final third of the year was 56% off the first third.

2009 Predictions and advice

We will continue to see selling prices decline in certain types of condominiums.  There are bargains to be found in

• Oceanfront garden view units
• Properties where maintenance fees have gone up and occupancy has gone down
• Properties in which owners are being pressured to implement expensive renovations
• Anywhere that the 4 D’s are in play: death, divorce, disease and desperation.

Prices will hold in properties that are:

• Newer
• Renovated already
• On the ocean with great views
• In a unique location (think Napili Bay, Kapalua Bay, parts of Makena)

A word to Buyers

If you have ever been in the market for Maui property, now is one of the best times ever to be a buyer.  There are certainly bargains to be had at certain properties.  Your Realtor can root them out.

And even where prices are holding, now might be the time.  Otherwise in 5 years you will walk into my open house and say, “Lee, I remember back in ’09 when I could have picked up this oceanfront 2 bedroom unit for under a million dollars.”

There’s that rearview mirror again.

A word to Sellers

People are still buying.  So if you are selling now you have to be smart about pricing. 

If you are in the first group of properties I described, the ones where buyers are likely to find bargains, be strategic.  Prices are declining, so pricing at the top or above what condos are selling for means you are going to continue the pride of condominium ownership on Maui.  And worse, if you need to sell you will be doing what we call chasing the market down.  You will be reducing the price over and over but you will always be just behind the price point at which your condo will sell.  Listen to your Realtor and get ahead of the curve.

If you are an owner in the second group of condos I described and you want to sell don’t get greedy or you too will continue to experience the pride of Maui condo ownership.  Sooner or later people will pay for quality, but in this market they are deathly afraid of overpaying.  Price your condo fairly, in line with the market and look for offers.  If you are not getting showings or offers in a few weeks, consider a price adjustment.

Complexes to watch in 2009

Kaanapali Shores – If you are an investor, K. Shores continues to deliver high occupancy rates.  And with the mandated Resort Quest renovations some disgruntled owners are wanting out and we are seeing some bargains. 

Honua Kai – The first of the 2 towers is finished and buyers are closing on their units.  However, some of the closings are being delayed as buyers scramble to find financing in this post-subprime era.  The developer may get some of these pre-sold units back.

Kapalua – Occupancy is down and pressure to renovate is heavier than ever.  Some of the old timers are mad as hell and they’re not going to take it anymore.  Who can blame them?  Big changes create big opportunities and Kapalua is a bargain right now.

Hoolei – This complex is new and had several closings last year.  A lot of buyers wanted to get out of the deal but couldn’t.  Look for bargains in here from frustrated owners. 

Opukea – This is a new complex still being sold by the developer.  Developers need cash flow so watch for bargains and incentives at this complex.

For more information send an email with your request to lee@alohapotts.com or, visit our website at www.alohapotts.com.

Homes sales were not as robust as they appear

Prices however are more stable than the stats say

Home sales were up and down all year and finished off about where they started.  There were 57 homes sold on Maui in January and 54 in December. 

In an odd development, single family homes outsold condos for the year.  Still sales were off by 21% compared to 2007.  That number would have been worse if not for the almost 200 “affordable” homes that were sold.

Current Maui regulations require that anyone building a new development must provide a certain percentage of homes at below market prices, sold as affordable housing to those who can qualify.

While the “affordables” propped up the number of sales, they dragged down the median selling price.  The affordables had a median price of just over $290,000 compared to the overall median of $577,867.

If we eliminate the affordables and recalculate the median it turns out to be $642,700.  That is actually up 2% over the median selling price in 2007. 

Area Trends

The Central area of Kahului/Wailuku accounted for almost half of all the homes sold on Maui last year.  It was the only market area where the selling price was below $500,000.  More affordable prices and lower interest rates should key sales in the area, but the economy is still the trump card.  

Kihei was the second busiest market for home sales.  There were 140 sales in Kihei which is down 23% from 2007.  However, the median price in Kihei was off only 2% on the year.

While sales were off a bit in those large markets resulting in a lower overall median decline that was by no means the rule for the island.  In several markets the median selling prices were up!  These included:

• Hana up 15%
• Kapalua up 6%
• Kula area up 15%
• Lahaina up 15%
• Lanai up 4%
• Molokai up 7%
• Napili up 7%

The big losers in terms of median price included:

• Haiku down 22%
• Kaanapali down 30%
• Makawao down 22%

For more information send an email with your request to lee@alohapotts.com, or see all of the listings on Maui at www.alohapotts.com.

Land languishes

New lots are easy to find, buyers are not

Land has been the hardest hit category during this Maui real estate slow down.  Lot sales were down 57% from 2007.

The biggest case of “the slows” hit Maui’s central area and the west side.  Lot sales in the Kahului/Wailuku area dropped 76% from 2007’s 71 sales to only 17 in ’08.  I looked at that and thought I had dyslexia.

Maui’s west side also slowed to a near stop.  Lahaina sales, previously powered by Launiupoko, fell from 20 sales in ’08 to only 3 last year.

Kaanapali was almost as bad falling from 20 sales to 5.  Kapalua sold 14 high end lots in ’07, but only 2 in all of 2008.

For more information on vacant land, see all of the listings on Maui at www.alohapotts.com or send an email with your request to lee@alohapotts.com.

Distressed property

Yes, we do have short sales and foreclosures in Paradise

A lot of people are coming to Maui intent on getting killer deals.  They’ve heard the stories about some of the California or Florida markets and the deals in Vegas and Phoenix.  When I have to inform them that we are not experiencing that same kind of melt down on Maui, some people simply don’t believe me.

That said, we do have foreclosure auctions which I attend regularly and we have short sales.  The numbers are climbing and I expect they will continue to climb well into 2009. 

This time, I’m not using a crystal ball or my powers of deduction to predict the future.  I have some inside information.

At a recent auction I struck up a conversation with a fellow who turned out to be a process server.  He’s the guy that knocks on the door and tells you your home is going to be auctioned off. 

He told me he is handling just 3 banks and he is serving 30 notices per week.  That struck me as a large number so I asked how that compared to last summer, June or July. 

He said he is serving triple the number he was doing last summer and the number is going up.

If you are interested in learning more about distressed properties on Maui, send me an email lee@alohapotts.com and I’ll send you a list and some details.

If you are coming to Maui this year, let us know, we would love to say, hello.  Meantime, here’s looking at a fine 2009.

A hui ho!

Get more information and details

To get more information on property and trends, you can search all properties listed for sale at www.alohapotts.com.  If you can’t find what you’re looking for there, send us an email at lee@alohapotts.com, and we’ll do our best to get an answer for you.  As we get more requests for information, we’ll add new sections to the website, newsletter or both.

About The Aloha Potts Team

Aloha Potts is a team comprised of L. Lee Potts, MBA, REALTOR® R(S) and Barbara S. Potts, MBA, REALTOR® R(B) and former California CPA.  We are business people, and we treat our clients with the same care and service attitude that we would like to receive when we do business.  We are in business for pleasure and profit.  We expect that most of our clients will enjoy the property they own in Maui (pleasure), and it would be nice for everyone if your property performs well for you (profit).  Real estate can be highly speculative, and profits are never guaranteed.  So if you are buying property

in Maui, it’s a good idea to surround yourself with a professional team.

Lee Potts is the former President of an international software company and former Marketing VP of a publicly traded franchise organization.  Lee and Barbara are both licensed under Alohapotts.com Inc. in Lahaina and affiliated with Keller Williams Realty Maui, Kihei, Hawaii. 

Barbara Potts was a CPA with Ernst and Young before joining Apple Computer back when both Steve’s were there (Jobs and Woz).  She was also Director of Strategic Marketing for Grass Valley Group, a division of Tektronix, and a business broker in California.