Year End Wrap Up 2009

Market Overview December

Signs of a turnaround?

Bold Buyers or just savvy?

Last year we bid good riddance to 2008 when both the number of sales and selling prices plunged, serving no one.  Staring into our crystal ball we asked if bold buyers would return to start scooping up Maui values in ’09.

As it turned out 2009, was the year of the bargain hunter and first time home buyer, but sad news for homeowners and “investors” who were in over their heads. 

Distressed properties make the market

According to John Anderson, Maui now has one of the highest foreclosure rates in the nation.  There were 483 foreclosures pending on September 1.  That number has been increasing at a rapid clip since April, when there were only 297 pending. 

With that many foreclosures on the market or coming soon, and about 4 times more short sales than foreclosures, the so-called distressed properties are making the market.  Anyone wishing to sell has to price their property competitively, which now means competing with short sales and foreclosures.

Good news – bad news

So the good news is that anyone who wanted to sell in 2009 and heading into ’10 was and will continue to be able to sell as compared to ’08.  The bad news is you have to price the property at the market level, which is being dictated by distressed properties.  We don’t see that trend changing in 2010. 

Buyers have been spurred on by good values and low interest rates – if they can get a loan.  Since lenders are once again underwriting loans and requiring proof of creditworthiness, it’s been tougher for some to take advantage of those low rates. 

Once again cash is king, especially for those looking for an oceanfront condominium, sometimes referred to as a condo-tel. 

In addition to being the year of the bargain hunter, 2009 was also the year of the Maui Wowie shopper (i.e. we wondered what they had been smoking).  I had several, not a few calls from mainlanders looking for oceanfront condos for $100,000.  When I told them there was nothing for sale in that range, I swear some of them thought I was just lying.

The Outlook

It appears that we have hit bottom on Maui, but I don’t expect to see prices start gaining much until the spring or even the fall of 2011, especially for condos.

The first time buyer credit is scheduled to end, again.  First timers will push to find properties, creating an artificial surge and a subsequent artificial decline once the tax credit expires.

Interest rates are forecast to increase.  I’ve heard lenders say rates will begin to climb after March when the fed stops buying T-bills.  I’ve heard others, including Warren Buffett, quoting a forecast of a rate increase prior to June. 

While that may sound like bad news for buyers, there is an offset.  Short sales and foreclosures will rise through 2011 as rates on the “junk loans” will still be re-setting and unemployment remains high on Maui, forcing some people to sell at very low prices. 

However, tourism will start to come back this year.  It was recently announced that air lift from the mainland to Hawaii has come back to the level it was prior to the loss of Aloha Air and ATA. More airlift means more competition and more seats to Maui.  That means more tourists and more tourists means higher occupancy rates for everyone and more jobs. 

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

Condo sales looking sunnier

Prices are holding, but watch for modest increases overall with a chance of bargains

In November of ’08 we sank to a record low of only 28 condos sold on the whole island for the month.  A year later 69 condos were sold in November and another 80 in December.

That is a marked improvement, but still a far cry from the high of 229 in July of 2005.

Overall, sales in 2009 were up 4% over 2008.  However, if you pull out the new development sales for properties like Honua Kai and others, which actually went under contract 3 years ago, sales appear to be about even on a year to year basis.

But it’s the trend that counts.  The low water mark for Maui condo sales in 2009 came in April with 41.  Since then we have seen a steady increase with the aforementioned 80 in December.  If that level holds, that would indicate a 22% increase in 2010, eating up a lot of existing inventory and beginning to push prices up.

Price increases would be a welcome sight for some strapped sellers. The median price of a condo declined almost 20% in ’09 and the average declined over 22%.

It appears selling prices almost hit bottom in October of ’08.  After that they had a bit of a rebound, but in September of last year had a sharp one month decline to $307,500.  However, take out that dip and one spike and prices have been flat at around $400,000 for the last nine months.

If you need to sell, then price your property appropriately based on the research and analysis of your Realtor and get on with it.  Don’t price it at the top of the market, “because mine is better” buyers and their Realtors won’t respond to that.  Price your condo at market or maybe a bit lower.  We’ve seen some “attractively” priced properties ignite an auction mentality, like the Kaanapali Shores 1 bedroom condo listed at $330,000 that eventually closed for $404,000.  When it was listed near $400,000, before a huge price reduction, it got no offers.  Get the picture?

If you are a buyer intending to use financing you need to make your move before rates go up.  If you’re a cash buyer, be clear about what you want.  Make sure you are clear with your Realtor and be ready to make your move.

For great deals, watch Kapalua.  This once proud name has fallen on hard times but it will be back.  The golf course units in Wailea are giving some big bargains.  In Kihei look at condos across the street from the ocean or the residential condos.  On the west side look at aina nalu in Lahaina and the ocean front developments in Honokowai and Kahana.

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

Prices for single family homes post double digit declines for second straight year

With price and unit sales down we may still be looking for the bottom

Single family homes got a double whammy in ’09 with declines in both the number of homes sold and the selling prices.

The central area, often considered Maui’s most affordable area, was the hardest hit in terms of the number of homes sold and drove that trend downward.  There were 242 homes sold in Wailuku/Kahului in 2009 compared to 448 in 2008 for a huge 46% decline.

The “bright” spot for Maui’s central area may be pricing.  The median price was down just 4% and the average selling price actually increased by 5%.

That is much better than an island wide average price decline of 14%.  It was much better than higher end areas that took it on the chin like:

·         Kapalua down 49%

·         Kaanapali down 22%

·         Kula down 39%

·         Haiku down 30%

·         Lahaina down 41%

·         Maui Meadows down 47%

·         Napili/Kahana down 42% and

·         Wailea down 26%

There are some areas where we see both a lower number of sales and significantly lower prices.  Those areas, which include Haiku, Kapalua, Maui Meadows and Wailea can expect more price erosion. 

If you need to sell in this market, do not price your home at the top and hope for the right buyer.  The pricing trend is still headed down for homes. 

Get ahead of the curve.  If you don’t price your home right, you’ll have to reduce the price later to get it sold.  Pricing it right today means less time on the market, fewer payments and probably more money in your pocket.

First time home buyers seeking Maui’s lower priced homes should look at the central area, certain upcountry areas, Kihei and new home developments where developers are offering great incentives and below market financing.

This year we should see the best buys for mid-market home buyer in the central area, Kihei will continue to have good values and Kahana will offer value for the upper middle market.  And don’t neglect those new development incentives. 

For luxury home buyers, Kapalua will still offer some bargains as will Wailea and the Kaanapali Hillside.

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.

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Distressed property

Maui takes its place among the hardest hit foreclosure markets.

The stats tell us that Maui has one of the highest foreclosure rates per capita in the US.  But what we are witnessing doesn’t exactly bear that out. 

In talking to peers in the greater Phoenix area, I’m told that short sales and foreclosures account for over 50% of all real estate sales in that area. 

And while our numbers are not that bleak, they are still dramatic.  In the last quarter of ’09, short sales accounted for 9.9% of all sales.  Bank owned properties (REO) accounted for another 20.1% of sales. 

What is striking is the percentage of closings compared to listings.  Only about 3% of all homes listed are bank owned.  Yet 20% of the sales were REO’s.  There is such a focus by the buying public on these types of listings that it is creating a buying frenzy in many instances. 

We are seeing this with our own clients who are first time home buyers and mid-market investor clients and even some luxury buyers. 

Properties priced at or just below market are getting multiple offers at or above the asking price.  This is resulting in an auction like atmosphere where selling prices come in higher than asking prices, resulting in many disappointed buyers hoping to find the home or condo of their dreams.   

However, patience will be the key for buyers.  In watching the auctions at the court house steps we see that routinely 80 – 90% of the properties scheduled for foreclosure auction are postponed.  That means a backlog is building. 

That backlog will keep prices from recovering in the near term.  So if you have time and money, be patient, there are still some great values in the pipeline.  Find an agent that knows how to work REO and short sales and you’ll get your home or condo. 

The one exception is if you are trying to get the first time home buyer credit.  In that case you need to step up, get aggressive and be under contract by the end of April when the home buyer credit is set to expire.  A lot of folks are betting that the government will extend it again.  Maybe.  Maybe not.

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.

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.AlohaRealtyGroup.com.  If you can’t find what you’re looking for there, send us an email to 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 Aloha Realty Group. 

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.