Kona Kohala Blog

Here in Hawaii, a double dip puts a smile on government employees since it means they're getting a double retirement each month.  In economic speak it means we're headed for deep kim chee (also a Hawaiian term meaning, "not good").

We've been watching what appeared to be a recovery but unemployment has continued to grow, a fact played down by the administration.  The stock market continues to climb, more bad news for those seeking work; why would a company hire if they're doing so well with fewer employees?  And the dollar keeps losing value, maybe good in the short run but always bad in the long run.

November is shaping up as another month of change in the real estate market.  North Kohala is looking good for Single Family Residence (SFR) sales already ahead of last month.  South Kohala is starting strong in both SFR and condo sales and North Kona is good in SFR sales but almost dead on condo sales.

Our double dip could mean the bottom is going to fall out again and any gains we've seen will wither.  The median price in all west side districts is still declining at the roughly 20% rate we've seen all year compared to 2008.  The new tax credit may help out a little bit but Hawaii depends on investors and there's no help on the way for them.  What a great time to buy real estate.

The list of Foreclosure and Short Sale properties has been updated this morning for both North Kona and South Kohala.  The numbers in both districts are holding about the same for now.  The lenders are hesitant to dump too many Foreclosures on the market at one time in fear of driving prices even further down.

We are about to see the second wave of Foreclosed properties hit the streets and keeping the numbers of properties for sale down may not be that easy.  We have seen an upturn in the number of sales in both North Kona and South Kohala but the median price continues to decline at about a 20% rate compared to last years prices.

Most resort properties showed an increase in their bookings for October, their best month in quite a while.  November and December pre-bookings are down but there may be more last minute visitors if and when airlines cut their prices for last minute flyers.  Right now, the airlines are having such great success with all their amenity fees, bags, food, etc. that they are considering adding even more to the cost of a flight above and beyond the ticket price.

A combination of higher vacancies in the resort condos, high unemployment and more foreclosures coming on the market don't bode well for an extended real estate recovery here.  The sales we're seeing in both SFR and Condos are at the low end of the price spectrum.  Mid range and higher end homes and condos are not doing much at all. 

With the extension of the First Time Home Buyer Tax Credit we may see continued activity on the low end, at least until the extension expires.  Until we see a business recovery expect mid range homes and condos to sit where they are.

Rumor has it that hiring will begin sometime around the end of the first quarter of 2010.  Until people go back to work expect to see hotel and vacation rental condos stay empty, investors holding off on buying such properties and mid priced properties to go unclaimed.

With all the talk of a recovery in the works, the housing market seems to be overlooked.  Now that industry has trimmed any remaining fat they're showing a profit which makes people on Wall Street happy and that's showing up in stock prices.

Over all the stock market has gained back most of what was lost late last year and early this year but these times they are a changing.  You can't have a recovery without getting people back to work.  So, while the market and most financial institutions are gasping their way back to life, the real guts of the economy, the people that live in the U.S., aren't doing so well.  An independent report on consumers today caused a correction in the stock market when numbers showed declining jobs, increasing foreclosures and less spending.  It seems the 70% of our GDP isn't doing its part in supporting the recovery the administration is so proud of.

Here in Hawaii our median price continues its decline averaging about a 20% drop compared to last October and November.  Market activity is picking up as investors and some first time home buyers grab at the low end offerings but the mid and high end properties just keep racking up Days on Market.

It's time for some small and large business stimulants.  Instead of bailing out the big guys lets motivate the employers to expand their business and hire again.  Like it or not, the interest rate has got to go up.  A declining dollar is now having the effect of dragging down American business.

Stimulus packages in the form of tax cuts for business might just encourage hiring.  Cutting the cost of having employees will go a long way towards making that happen but that's going to call for some union cooperation and that's not something we see very often, in fact, never that I can recall.

In yesterday's West Hawaii Today there was an article citing the continued decline in West Hawaii property sales.  At this point, most people turn a deaf ear to such news having been bombarded with it for so long by a press corps dedicated to the spread of bad news and only bad news.

I can tell you there's no quicker way to get a Realtor's panties in a twist than to publish something so devastating to sellers and buyers but also so far from the truth.  I suspect having brought this oversight to the attention of the newspaper, apologies will be printed somewhere around the obits and the fact checker will be strapped to the rack.

In reality, our sales here have improved dramatically.  The chart below compares the percentage change in the number of sales between successive

years and shows that since the middle of the year, both North Kona and South Kohala have had sharp turn arounds in the number of sales compared to 2008.

Another interesting fact and one that seems to fly in the face of economic reason is that with this sudden increase in sales, there isn't a corresponding increase in median price.

With only a few exceptions in North Kohala and South Kona, our median price continues to drop compared to the year before.  The huge percentage changes in North Kohala are due to the very small number of sales there causing large statistical variations.

If the demand continues as it has we may see prices turn around just like the sales have.  As prices slide, more and more people either become interested in buying or now qualify for loans.  There's still some developer sales tied with foreclosures and short sales that are driving prices down, however, as inventory declines there's a good chance we'll also see an increase in prices.

Selling the sizzle may not always satisfy the appetite.  A good example are all the new condo complexes in the Waikoloa Beach Resort area.  Most of the developers have made their money on early sales but then were hit with the recession and consequent slow down in sales.

Today, those developers are doing just about anything to dump their remaining inventory and move on.  They are offering to cover closing costs or other monetary incentives and most have cut prices well below actual value which has upset many of those who bought in early thinking their value would remain up.  Undercutting the original owners has not helped the developer's popularity one bit.

When you drive through Waikoloa Beach Resort you notice the uniformity of the area.  While beautiful to look at it looks very much like any strip mall on the mainland in a tourist area complete with franchise restaurants and retail stores flanking both sides of the entrance then densely packed condo complexes tucked into every crevice and cranny surrounding the golf courses, nothing new here, nothing Hawaiian really.

A glaring difference can be seen by seeking out the older condos in the area.  You have to look a little to find them because they tend to be tucked away in more private areas away from the crowds.  One good example is The Shores at Waikoloa Beach Resort across from the Waikoloa Beach Course.

The Shores were built in 1986 when there was little to be found there except what was the Sheraton Waikoloa Resort.  The big draw to the area was and remains Anaeho'omalu Bay, a beautiful long stretch of white sand beach in a protected cove.

Back then the developer took full advantage of the space available.  The complex is laid out so to give each unit a bit of privacy from their neighbors and a bit of a relaxing view of the surrounding area.  The units are larger than the new cookie cutter models averaging around 1,200 square feet of living space.  When you're inside the units you feel secure with the soundness of the construction and the quality of the materials.  It feels good to be in these condos, to have room to move around and not feel trapped in a box that looks like every other box stacked next to each other like so much of the new construction.

Go to the search MLS page by clicking here and type in # 225674 and look at unit 133.  If you're looking for comfort, quiet and protected property value go no further.  We invite you to compare this unit to any of the newer, cheaper condos out there while remembering, you do get what you pay for.  The declining market has effected The Shores like all other complexes so today you can get a whole lot of quality for not a whole lot of money.

The number of Short Sales continues to climb while Foreclosures are holding steady due to regular sales.  Because short sales are still taking three to five months to close, the number of foreclosures will begin to rise in the very near future with predictions from Bank of America for a three fold increase in that number by the end of January.

Rumors out of Washington D.C. are still about a new Home Buyer's Tax Credit, this one applying to all home buyers who are purchasing a primary residence, not just first timers.

This is one way to get the market started again.  With the end of the Cash for Clunkers and the 1st time Home Buyer's Tax Credit the economy seems to have slipped back into the doldrums.  Corporate profits remain strong due to cost cutting measures and layoffs but even that can only go so far.

We're also running out of investors since we were drawing from a limited number to begin with.  When demand drops off as it will, prices will have to continue to fall in order to qualify more people to buy.

Fortunately or unfortunately, depending on which side of the table you're on, the increasing number of foreclosure will continue to bring more properties to market and each with lower price tags.  Look for foreclosures to continue to drive the price wars with short sales, which are tied to foreclosure sales, adding downward pressure to the market.

I believe the "recovery" we're seeing right now will be shallow and short lived.  Keep you eyes on the unemployment figures; only when that number ceases to grow will we see any real, sustainable recovery.  People need to go to work and feel secure in their jobs in order to spend money.  Until that happens, look for the government for more stimulus money and more debt.

It's time to reduce taxes on business and provide incentives for them to expand and update their equipment.  With a weak dollar there is no better time to focus on exports and maybe put people back to work.