Kona Kohala Blog

Did you know there are 37 Single Family Residences (SFR's) for sale in North Kona for under $400,000 and there are 220 condos under that price.  Even better, there are 63 condos under $250,000.

This is the time of the "Bottom Feeders", those investors who are looking for sellers in trouble.  I've been getting calls recently from agents who say they are working with buyer clients who want 10 to 20 homes or condos at deep discount prices, 60% to 70% of what they are asking for the property.

The other thing we're getting are investors who want Agreements of Sale or Purchase Money Mortgages aka, Owner Financing.  This is a good indication that the market is nearing the bottom.

The government is talking about creating trillions of dollars to be used for public transportation projects, education and various other types of welfare programs intending to put people to work.  Good intentions but does this makes good economic sense or are we just digging the hole deeper?

In any case, we have condos galore for sale and the price is right.  Under the $250K mark you can find condos at Kona Shores, Kona Mansions, Kalanikai, Kailua Bay, Casa de Emdeko, Bali Kai, even Alii Lani and Kona Coffee Villas.  The inventory is out there, interest rates remain low and the weather is great.

Stay up to date with our market by subscribing to our Aloha Friday newsletter.  There's no cost or obligation on your part, just the latest information on North Kona and South Kohala.  Email me at Service@FerrariPacificRealty.com and you'll be on the list receiving the latest and greatest from West Hawaii.  aloha

Believe it or not, there are 7 Single Family Residences (SFR's) in North Kona for sale under $300,000.  This is amazing considering that 3 years ago it was hard to find a SFR under $500,000; prices are correcting.

As an example let's take a house that go into escrow on at $290,000.  You put 20% down and finance the rest with a 30 year fixed rate loan as either your primary residence or a second home.  This is a property you could rent long term (over 90 days) and use yourself once in a while.  According to the First Internet Bank of Indiana your interest rate would be 5.25% with an APR of 5.364%, closing costs of $4,045.00 and a monthly payment of $1,281.11 for principal & interest.

This almost makes housing reasonable here in Hawaii, especially for a first time home buyer (a person who hasn't owned in 3 years qualifies as a first time buyer).  The feds are offering an $8,000 tax credit for you which will more than cover any closing costs and help with the remodel.

If you're looking at the other end of the market, there are some very good deals waiting for you.  We've seen some large price reductions in the million dollar plus homes meaning you can buy million dollar homes for under that magic mark.  We're seeing foreclosures in all price ranges so whatever you may be looking for, it's probably available.  Call us today for information in a specific price range or area.

Almost time for the next edition of Aloha Friday, our weekly newsletter.  If you'd like to be on the mailing list, no cost or obligatione, email here at Robert@FerrariPacificRealty.com and you'll go on the list.  aloha

Lots to choose from, no land pun intended.  In November of '07 there were 402 Single Family Residences (SFR's) and 364 condos for sale in North Kona.  In September of '08 it had dropped to 388 SFR's and 349 condos.  Four months later we have 468 SFR's and 403 condos for sale.

This gives us an inventory or supply of 24.5 months of SFR's and 26.3 months of condos meaning, if no new property came on the market it would take that long to sell existing properties.  An inventory of 6 months is considered a balanced market.

One year ago, in February of '08 we had an inventory of 31.67 months of SFR's and 20.25 months for condos.  One contributing factor is the number of properties that are falling out of escrow meaning that for one reason or another they are not closing even after beginning the process.  The biggest cause of that are our old friends, the banks.  Banks are waiting as they go through the underwriting process a month or so before coming back to the borrower and saying, "Sorry, you no longer qualify for that loan."

If the administration would work harder on getting the banks to loan all that tax payer money they've been given, given being the key word here, we might see the country start to move out of these doldrums we're in.

Instead of trying to save all these mortgages by forcing lenders to take less through modification programs they should be assisting the buyers.  Already we've seen those people who have been assisted in their mortgages by "cram downs", forced loan modifications, getting back into trouble within a few months of having been "saved".  This program is not going to work.

Obama should be looking at ways to help buyers buy these properties that are being lost by people who can not afford them.  It is not fair to be forcing banks and their share holders, to take less than the contract that was signed by everyone calls for.  Let's take this funny money the boys in D.C. are printing and use it to help qualified buyers get loans so they can buy the homes being lost.  At least this way we've got people who will pay off the mortgages not those who will default on them holding the note.

Comments anyone?  I'm pretty sure the answers are going to have to come from we the people.  Those nit wits we have in elected office haven't got a clue how hard we've worked to earn the money they so freely give to people who have already proven they can't run a business or budget properly so they can maintain the payments on their homes.  The people I talk to, people who work for a living and honor their debts have great ideas.  They're the same ideas they employ in running their own homes and businesses and keep them in their homes and in business.   aloha

We are flirting with record numbers of homes and condos for sale.  Today, there are 466 Single Family Residences (SFR's) for sale in North Kona and 397 condos.  In Sout Kohala there are 230 SFR's and 351 condos on the market.

The escrow numbers are lagging behind with only 56 SFR's and 26 condos in escrow in North Kona and 32 SFR's and 20 condos in escrow in South Kohala.  To date, just 16 SFR's have sold in N. Kona and 15 in S. Kohala.  Fifteen condos have sold in N. Kona and only 5 in S. Kohala.

The median price for a SFR in N. Kona is $402K, the lowest it's been since about July of 2004.  Condo prices are down to $250K, about the same time frame as SFR's.  In South Kohala, SFR median price is at $379K and condo median, hold on to your hat, $1,375,000.  The reason is that there have only been 5 sales there, all of them in the Waikoloa Beach Resort and Mauna Lani Resort areas.  The least expensive sale was $750K with the rest of them over one million, one at $1,500,000.  Those kinds of numbers will skew any scale.

Now, the good news.  There are 177 condos listed for sale in North Kona under $300K and 7 SFR's.  In South Kohala there are 12 SFR's and 61 condos under $300K.  For first timers and people looking for investment properties, that offers a nice selection to choose from.

Ferrari Pacific Realty just listed a 1 bedroom, 1 bath condo in Kona Mansions V.  This is a complex almost in Kailua town complete with nice pool area and BBQ and plenty of parking.  These are small but very comfortable units and this one has it's own washer and dryer.  For more information on this unit listed at just $120,000, click here.

Prices continue their downward trend in West Hawaii.  Today, I listed a 1 bedroom, 1 bath condo very near Kona town, for just $120,000.  This is a perfect unit for a single or couple just starting out or as an investment property.  Always check with your tax professional before making such a decision but with a low buy-in price there may be a return on your investment, something not often seen in Kona or anyplace else in Hawaii, for that matter.

With a 5% loan and 20% down ($24,000) you'd have an APR of 5.095%, closing costs of about $2,590.66 and a monthly payment of $515.35, this according to the Pentagon Federal Credit Union website quote.  This is assuming a good credit score of 720 or better, a solid work history and substantiated income.

The sun continues to shine, whales are still here and last night there were so many stars out that the sky looked like one big blur of light punctuated with bright spots, it was amazing.  Kona is a wonderful place to live inspite of the crazy growth we've seen in the last few years.

It takes people a while to slow down once they get here.  They tend to stay on mainland speed until it finally hits them, this is Hawaii, I moved here to slow down, now it's time.  If you want to slow down, contact us and we'll find the perfect place to watch the whales, the stars and slow down.  aloha

The following article was in todays Realtor Magazine On-line and summarizes the Foreclosure Prevention Plan presented yesterday.

Well, here goes another $275 Billion so let's hope this works.  Perhaps one of the most controversial parts of this package is what is known as "Cram downs", allowing foreclosure judges to modify loan amounts without lender approval.  This is one part of the package that does require an act of congress in order to change foreclosure law.

$75B is expected to help about 3 million homeowners hold on through loan modifications.  The fed will use some of this money to pay loan servicers $1,000 upfront for each loan mod that meets federal guidelines and then another $1,000 per year for the next three years if the borrower stays current with the loan repayment.

Borrowers may also qualify for $1,000 per year for up to 5 years if they stay current.  Whether that will be a tax credit or a check or some other form of payment has yet to be decided.  More on that later.

Under this new plan, lenders will be required to modify interest rates on loans so that monthly payments are no more than 38% of the borrowers income.  After that, the feds will match dollar for dollar to further reduce the margin to 31% of income.  This will be available to all loan mod qualifiers but those with more than 55% debt to income will have to agree to federal housing counciling to help them with their financial affairs.

One problem is that none of this assistance is going to be available to those with Jumbo loans, over $625,000, or those with private equity loans, non FHA qualified mortgages.

There is much more to the bill than just this and we'll look deeper into it later on.  For now, if I put my conservative leanings aside, this plan may be of some assistance.  It's going to take cooperation among people who don't normally get along all that well.  In the past year, the Bush administration attempted to do very much the same thing but made it voluntary on the part of the lenders.  That didn't work out so well so now that it's becoming mandatory, we may see more positive effects.

This may save some homes but if people don't go back to work, even the lowest monthly payment may prove to be too much for some families.  The feds need to immediately institute the job creation programs if this is going to work.  aloha

Please be patient, we're still waiting for the unveiling of Obama's Housing Recovery Plan due out today.  As soon as we get the details the blog will be updated.

aloha

This should be an interesting week for the world of real estate.  Today, the president signed the new recovery bill into law meaning we are now another $700+Billion in debt with no end in sight but some nifty possibilities for real estate.

The biggest bonus for first time home buyers which includes those who haven't owned a home for 3 years, is an $8,000 tax credit.  This will go a long way to helping out home buyers but you do have to make the purchase by December 1, 2009.  The biggest difference between this and the $7,500 credit is that this one does not have to be paid back.

On Wednesday, Obama has said he will unveil his housing recovery program.  I'm looking forward to seeing the contents of this package since it could have the farthest reaching effects for the economy.  Offering a tax credit is a great idea but short ranged in its coverage.  We need longer range fixes like more access to well structured fixed rate loans.  In order to get that we need people who qualify for such loans.  In order to get them, we need a good job recovery program to put people back to work.

The government wants to set up public works programs to put people back to work.  Hopefully, these will be bid contracts with independent companies of all different levels not just the big guys that can afford to undercut the bids of the medium to small sized construction companies.

There needs to be other job building since the governments history of doing anything is dismal.  Do you realize that after the Mustang Ranch, a well known house of ill repute went under the government took it over and ran it into the ground.  Our government couldn't make a profit out of a bar and a whore house, how do we expect them to make a profit at anything they try?

As much as tax cuts for business runs counter to common sense (of which there doesn't seem to be enough to go around) it is the only way to stimulate that sector of our economy.  Make it worthwhile for businesses to grow, to build new plants or offices.  Give them a break on some of the taxes they have to pay.  Relax the overly strict regulations that stop businesses from being started let alone expanded.

Once we have people developing jobs and allow them to make a decent profit they will beging to create new and expanded businesses.  More people will go to work.  New businesses will be started by the entreprenuers, creative minds everywhere will gear up when the opportunity presents itself.

Small business makes up a huge proportion of the employed population of this country so lets cut them a break now and then.  Let's revert back to the old days of growth when men and women were rewarded for starting new businesses.  Then, with a vibrant fertile bed for new business to grow, we will see people being hired again.  We'll see businesses expand and we'll begin to see our tax coffers begin to fill again as they did under Reagan.

He made creating jobs pay and people created jobs.  Money flowed into the government at the federal and state levels.  People saved and spent money and our economy was healthy.  This allowed people to buy homes and when that happens all the ancillary industries thrived.  Let's not rely on the government to give us jobs.  Let's bite the bullet and let our economy start over again, start with we the people doing what we do best, create.  We can create jobs that then create wealth.  When people are no longer worried about feeding themselves and their families they feel better.  Well fed people make better citizens and better citizens take better care of each other and their environment.

While there is no silver bullet, no single fix, focusing our efforts on stimulating the individual business man or woman will do more to fix this country than all the funny money the U.S. Mint can print and all the public service jobs our government can create.  aloha

Big weekend at Waimanalo polo fields with the 22nd annual Kaimana Klassic Ultimate Tournament which wraps up today.  Thirty-five teams attended the event with over 600 players from Australia, the mainland, Japan and ranging in age from teen agers to 50 somethings going for the gold.

For those of you who may not be familiar with Utlimate Frisbee, let me tell you a little bit about it.  I was on the University of Oregon Utlimate team in '84 and '85, the year we ended up placing second in the Annual Mud Bowl in Eugene, OR to the champion Humboldt Buds from Humboldt State.  The Mud Bowl was a three day event where we played hard against each other all day then partied together all night making ultimate frisbee one of the most loved games by participating sportspeople, men and women alike.

It's a game where you call you own fouls and a game where there aren't that many.  A player holdning the frisbee must stand in place but can pivot and turn always keeping one foot planted.  This person attempts to pass the disk to a team mate fighting for position against an opponent and it's always one on one, never more.

It very fast paced and there are no pauses until a frisbee hits the ground or a goal is scored.  A score takes place when the frisbee is caught in the end zone.  If you have a chance to watch the game being played, take it.  It's a great game packed with competitive spirits and sportsmanship.

On to real estate.  I've been researching homes and condos purchased up to 2003, those properties that should have plenty of equity unless large refinances were made.  I found page after page of properties that were but no longer are on the market.  While we have an abundance of property for sale today, I believe there is an even greater number out there that could come on the market at very competitive prices. 

It's only when pricing becomes more competitive and loans become more available that we'll see sales begin to pick up.  On the west coast right now, sales numbers are on the rise, up as much as 43% in some hard hit areas.  Ther reason is that prices took such a big hit, in the 40% to 50% range while Hawaii prices have only come down 20% or so at the most.  Our market still needs correcting after the bloating run up of the early 2000's.

Watch for all this to happen in the next 6 to 12 months as banks get a second infusion of cash and prices near the bottom.  aloha

After the crazy times, '03, '04 & '05, it's hard to accept that there are some very nice almost new homes out there for under $400K.  This may seem extravagant to some on the mainland but for Hawaii it's very good.

Here's a new listing for you.  If you're interested in picking up a piece of land near town in a gated community of nicer up scale homes, now is the time.  I've just listed, not in MLS yet, a 1.09 acre lot in Kahakai Estates.  This community is about 5 minutes south of Kailua village at about 200' to 300' elevation.  All the homes below this lot are built out so the view will not change.

How's this for a view into Kailua Bay. This lot is listed at just $370,000.

Last night, I had the opportunity to speak at the Town Hall meeting sponsored by the Community Enterprises organization.  My topic was real estate, where was it, where is it and where is it going?

From 1991 to 1998, the median price of a Single Family Residence (SFR) in North Kona went from $235,000 to $225,000 while SFR's in South Kohala dropped from $229,000 to $194,000 according to the Hawaii Information Service on-line records.  Then, the crazy times came and changed the real estate landscape dramatically.

In the next 7 years, SFR prices in North Kona went from $225,000 to $620,000 without slowing a beat.  In South Kohala prices jumped from $194,00 to $530,000 in the same time.  Since 2008 we've seen slight declines but nothing like those experienced on the mainland in areas where similar explosive rises took place.

I suggested to this group that we had another 6 to 12 months before we find the bottom and another 12 to 24 months before our market returns to normal.  Normal is defined as having a balanced inventory of property for sale, roughly a 6 month supply.  Today we have a 23.6 month supply of homes in North Kona and a 16.8 month supply in South Kohala.

With the next infusion of money from the feds, I expect to see the banks begin loosening their lending requirements, not to the point of getting in trouble again but at least allowing more qualified buyers into the market.  This will not come without a price, higher interest rates.

When banks dropped interest rates below 5% for a week they were overwhelmed with refinance applications which taxed their operational capabilities.  In my opinion, banks do not believe they can make enough money on loans unless they are charging at least 5% but preferrably, 6% to 7%.

I was then asked the question, "Isn't there a law that limits the percentage spread between what the banks pay for money and what they can charge to loan it?"  I didn't have an answer for that and will research it further this morning; however, I did read that the interest rate charged by the banks did jump after lowering rates below 5% by more than 10% while the fed was lowering their interest rates to near zero to stimulate bank lending with no mention of a point spread limit.

To date, the feds have spent $92B buying mortgage securities in attempting to lower interest rates to consumers.  They plan on spending $500B total to get interest rates down by removing the toxic securities from the bank's books but based on recent history, it may do no good and only result in higher interest rates and wealthier banks.

There are two new buttons on the control panel for you to use.  One is Community Enterprises and the second is Community Enterprises II.  Tonight I'll be giving a short presentation at the Community Enterprises sponsored Town Meeting addressing our real estate market. 

We'll look at our market from 1991 to present then what's happening today followed by the ever exciting, what the future holds.  The two new buttons have some of the information I'll be going over tonight in graph form since there will be no hand outs.

There is a good graphic representation comparing the number of Single Family Residence's (SFR's) that are actively listed for sale versus those in escrow.  If you have any questions regarding our market, please ask here or email me at Robert@FerrariPacificRealty.com.  aloha

Our condo market in Sout Kohala has almost come to a stop.  We've been talking about a slow market but this is an almost unmoving market with just one sale to date in 2009.

It's not because prices are too high and it's not because there isn't plenty to choose from and it's not because interest rates are too high so what is going on?  Any thoughts?

There are 357 condos for sale in all of South Kohala and another 379 in North Kona.  Prices are still on the way down albeit slowly.  I expect prices to continue downward for another 6 to 12 months depending on the results of the various stimulus packages and recovery plans going into effect in the next few months.  After that, we should see our prices stabilize and hold at that bottom for may be another year before the economy rebounds enough to eat away at this suplus of property on the market today.

Now is a good time to shop even if you're not ready to make that move.  There are some very good deals out there, some of which we are high lighting in our weekly newsletter, Aloha Friday.  If you'd like to be on the mailing list, email me at Robert@FerrariPacificRealty.com and you'll get the next issue hot off your screen.  aloha

May be just a spike or coincidence but we're had 6 new escrows opened in the last 24 hours.  With the exception of one condo all were under $400K and three of them were under $300K.

Lower end properties remain of interest to first time home buyers.  Investors are still waiting while occasionally sticking their feet in the water with low offers.  For most investors, the rental market is too soft right now with a plethora of properties waiting for tenants.

Once the overall economy begins to pick up and people go back to work we'll see more demand for rentals.  A lot of the transient laborers will show up again to work in the various trades mainly associated with building.  These people and their families won't want to buy but will want to rent.

There will be a small window of opportunity from the time the recovery begins until the investors start buying again to get a nice proeprty for a reasonable price.  Expect prices to continue downward for a while here; we still have to catch up (or catch down) with the mainland before our prices are seen as good deals.  The other thing to watch is interest rates.  I've been wrong before, a lot, but I expect to see interest rates begin climbing around the end of the year with a substantial jump next spring.

Timing is everything so if you're one of the people standing on the side lines waiting for just the right time then you should contact us.  By getting signed up on our Prospects List, you will be notified whenever a property meeting your criteria comes on the market.  We can also put you on the list for our weekly newsletter, Aloha Friday.  Other than updates and a newsletter, we won't be bothering you and we do not share email addresses with anyone.

If you're interested, email me at Robert@FerrariPacificRealtyl.com.

Here's something out of the blue, no one I've been in contact with had heard anything about it.  The congress has passed a housing stimulation bill that includes language giving first time home buyers up to $15,000 in tax credits.  This still has to go to the senate and some kind of compromise will be worked out that could modify that number of eliminate it all together.

If it passes, it means that home buyers, not just first timers, would get up to 10% of the purchase price credited to them in the form of a tax deduction; whether a credit or deduction is yet to be determined.  In either case, as written, it wouldn't have to be paid back like the current $7,500 credit and would apply to all home buyers.

This could be a great kick in the pants for home buyers.  It's too bad that the money will be like the rest of the magic bean money that's being created by slight of hand by our ever so financially enlightened representatives but in the short term will go a long way towards encouraging buyers to get off the fence.

Now all we need is some cooperation by the Scrooge like banks.  If they will loosen their criteria, we may actually see some action and a reprieve for the housing industry.  Do keep in mind, however, that Fannie Mae is still giving loans with just 3.5% down so the money's there, you just have to find it.

If you received this weeks Aloha Friday today, there are some tips for getting a loan today.  If you're not on the mailing list, email me at ferrari.realestate@gmail.com and I'll add you to the list. 

Hope all is well in your world.  aloha