Kona Kohala Blog

The Fed made history last night, reducing the Federal Funds rate and the Discount Rate by 3/4%, 75 basis points.  The stock market reacted by dropping, what's up with that?

Money is cheap and getting easier to borrow.  There's talk about all the new restrictions based on the subprime mortgage mess but for people with good credit, money is still readily available but the media doesn't have space for both good and bad news and bad news sells.

Yesterday's cut should be a breath of fresh air but it's not being seen that way.  The Fed is bending over backwards to stimulate the economy but instead of taking the money and running, our large financial institutions are just taking the money.  They say they need the cash in case there are more problems but bottom line is, there are more problems and will be for the foreseeable future.  How do we turn this around?

Let's start by looking at all we've got going for us.  We have international businesses that have no trouble finding soveriegn money, many billions.  This money is invested in various institutions like Merrill Lynch, MBIA and others who need the cash to bolster their accounts that are liable to be attacked by failing mortgage related industries and collaterals.

If we get back to normal, buying, borrowing and saving like we have in the past our financial vehicle may be back on all four wheels and moving again.  While keeping an eye on the potential for loss we also have to keep an eye on the potential for gain.

There's an old saying that says, "fake it until you make it."  It doesn't mean turn a blind eye to reality but it does mean choose to live with the good news and do what we do best, initiate new ideas.  We have thought and fought our way out of many seemingly terrible situations in our history and there's no reason not to believe we can do it again.  aloha

It looks like we might be down to the two contenders for the presidency; senators John McCain and Barak Obama will probably go head to head for the top position in the country and that's probably the way it should be.

The rest of the wanna' be's are falling by the wayside like so much road kill.  Having to choose between these two seems like the best choices we've had in a long long time.  Whomever gets the crown is getting more than their share of politicrap that comes with the territory meaning there's not much either one will be able to do except to keep the country afloat while the forces of nature and economics take their courses and put us back on track.  This could be the time for another Eisenhower, a man who helped us all keep our heads while those around us lost theirs.  We need a time of calm, of less name calling, of less partisanship and more of doing what's right for we the people.

Neither one is going to be able to straighten things out, that's going to require more of a miracle than any amount of political maneuvering.  While the stimulus package is equivalent to giving your kids a year's allowance all at once it may be the shot in the arm we need to avoid a total recession, at least for a week or two.  Making home ownership more attractive will go a step further since it's the slow down in the housing market that's causing most of the problems.  Letting the economy correct naturally i.e., having a recession, may be the best way to secure a long term cure.

Ask yourself, if we have a recession, what does it mean to me?  Most of us know it will be bad because that's what the media has told us but how bad and just how personal will it be?

Will a sizable correction in housing costs affect you in a negative way?  Will it slap down some of the people who got a little carried away with the chance to make a quick buck, probably.  Is that bad?  Probably not, unless you're one of them that got caught with your hand in the cookie jar.

As far as the price of a home in Kona or Holualoa or Waikoloa is concerned it will be a good thing for those looking for a new home.  For those trying to sell, it's not a good thing but still, if they've owned the property for a few years there's a bunch of equity available to them. 

Some people have already taken out their equity but fail to acknowledge that.  Still, they refinanced and put money in their pocket so they're ahead of the game.  If you want to sell and you're one of those who refinanced then count the money you already got, cut your asking price and get on with your life.  This remains a good time to sell unless you're one of those people who maxed out their real property ATM.  There's still money to be made by sellers, just not as much as there was in 2005.

While this may be an ugly market when viewing the wreckage of foreclosures, it's a beautiful market for those who were wise with their investment and didn't suck it dry every time interest rates dropped a half point or their value went up $10,000.  This is a great time to buy and Hawaii get more valuable every day.

The new year is starting the way the old year left off, slow in the Kona real estate market.  There are a lot more buyers looking at property right now but not many making any offers.  It seems that everyone is waiting to see just how far down the prices will go before they start up again.

I wouldn't wait too long.  Prices here haven't dropped the way they have on the mainland.  In 2007, median prices in North Kona did come done a bit, just over 4%.  For the four years preceeding 2007 we saw increases above 20% so 4% is a minor correction.

With Hawaii being one of the most desirable places on earth and 78,000,000 retirees hitting the streets in the next 10 years, this place is going to be in demand.

I talked to a client today who's looking 6 to 7 years down the road.  He's thinking buy now and hold for that long; will there be appreciation?  Almost guaranteed if history is correct.  That long should outlast any down market and return a nice amount of appreciation to the buyer.

Prices will go down but with current interest rates as low as they are, waiting may not be the smartest thing to do.  Timing the market seldom works.