Kona Kohala Blog

They say every cloud has a silver lining.  Well, we have the clouds and according to the ever so evenly minded media they are dark and plentiful.  The silver lining?  Prices are at sale level; if ever there was a time to buy real estate it's now and probably for the next 6 months or so.

Since our world, our lives, our universe works in cycles it should be no surprise to people that our economy is in a deep negative swing right now.  If you consider how far the other way it was from the late 90's to 2006 you can pretty much determine how far it will swing the way it's going now.

In the late 90's there were those who kept dumping money into the stock market thinking it would go on forever.  In the early years of our new century there were those who continued to buy overpriced property thinking it would continue up and most recently there were those who thought oil would go up forever and continued dumping their money into energy stocks.

As long as we remember that everything works in these cycles of varying length we'll be okay.  As long as we go back to buying things when and only when we can afford them and stay out of debt, we'll be okay.  When we abide by the sage advice that says always save 10% of all you earn, we'll be okay.

No election is going to change the basics of economy.  Neither candidate will be able to correct what is going on but they could make it worse.  We've already seen that pouring money on the problem won't make it go away.

What's amazing is that our representatives are giving all this money, our money, away with no strings attached.  Can you believe that AIG has burned through nearly $80 BILLION of taxpayer money and can't account for it?

First we have these self centered, egotistical, self serving politicians who make sure they have regular pay raises regardless of the economy, great health coverage that lasts forever and amenities available to them that even kings and queens don't have access to and all at our expense.  Next, any remaining money they have left over from their tax and spend policies is now being given away in amounts that boggle the mind, billions and billions of dollars being given to individuals and companies that have already clearly shown that they can't handle money.

What the heck, if it doesn't work out we can always go back for more tax money.

In Hawaii, our teachers are also getting a pay raise.  Our students still test at the bottom of just about every category there is to test in but hey, give the teachers a raise.  Our teachers won't submit to random drug testing even though it's in the most recent contract they negotiated but hey, go ahead and give them the raise.

I can't imagine that a teacher, a person charged with interacting with our children approximately 16 times longer each day than a parent, a role model for our kids, that they would ever use illegal substances . . . could you?

Enough rant for one day.  Lord knows there's more than enough material out there to go on for a while.  Bottom line here is that there are some great deals out there in real estate and that the outcome of the election won't really change much at all.  You see, we live more and more in an international economy, a global financial world where no one single nation has total control anymore.  It used to be that the U.S. dictated financial policy but now, China and India are creeping up.  We still have the biggest economy going but others are catching up. 

Also, most large companies and corporations are now international.  How we will live for probably the rest of our lives is not dictated by our government but by the corporations that exist here, there, and everywhere.

Remember the cycles and be prepared for the next one.  What goes up always comes down and what goes down always comes up.  aloha

Now we see if a free market can actually work?  Will the private sector step in and buy these poorly managed but still potentially solid companies or will we have to rely on the government to once again misspend our money?

So far, Warren Buffet stepped in on Goldman Sachs, Mitsubishi bought out part of Merril Lynch and Citigroup took over much of Washington Mutual.  If this continues we won't have to worry about blowing tax payer money on what may be defaulted loans.

This could mean that the real estate market may begin its slow recovery.  If the private sector steps in that speaks volumes about putting your money wherre your mouth is rather than being saved by the feds.  Such a move will probably reinforce people's opinions of our market system and further increase consumer confidence as was evidenced in September.

The media is so busy reporting on Sarah Palin's lake front house they don't have time to spend on meaningless good news.  Here in Hawaii, there are numerous reasons zoning variances are given private property owners and nobody makes a big stink about it.

We even have lots, more than we'd like, of homes with illegal additions, bedrooms, carports, garages, etc.  In many cases these are cleared up at the time of a sale.  However, there are lots of them where the new owner just accepts it as it is knowing it is "non-conforming".

I suppose we should look into that or we could just go to the beach and not worry so much about other people's stuff.  aloha

Is it a good thing?  A bad thing?  Do we need to bailout our financial institutions like AIG, Lehman (too late there), Fannie Mae or Freddie Mac?

What do we do with those clowns that sunk those companies?  Are they let go with their millions in illgotten gains or do we prosecute them?  I like the Chinese approach, execute them but in our PC society that probably wouldn't sit well with certain groups.

What do you think?

What happens next is anyone's guess.  We're faced with a housing slowdown the magnitude of which we've not seen in a long, long time and energy prices that are putting the kaibash on travel.  This double whammy is hitting Hawaii below the belt; we rely on tourism and the desireablitly of Hawaii as a place to live for people of retirement age.

When travel becomes prohibitively expensive, people think twice about moving here since the opportunity to visit or be visited becomes less and less likely.  How far energy costs can climb and how low housing prices can go are yet to be revealed to us.  There is opportunity here, somewhere.

How far ahead can you see and plan?  Do you think this will ever change or are we headed down a long painful road to a drab and dreary future?  After too many cloudy days, one may believe cloudy days are here to stay however; I believe this too shall pass.

Nothing is forever except taxes and some STD's.  This too shall pass, IMHO.  Look for the opportunity hidden in the darkness.  For thousands of years wise men have said, this too shall pass.  There's no reason to believe that we are any different than those who came before.  There has always been opportunity in crisis and chaos.

So which are you, the nay sayer or the dreamer?  Are you planning for the end or are you looking for opportunity?  What happens next is really up to each of us.  Failure or success is our choice, what'll it be?  aloha

Is there a light at the end of the tunnel or is that a headlight on the train that's about to run us over?  More and more people are predicting a market recovery by the fourth quarter.  Even the CEO of Merril Lynch is saying it.

What will that mean to you?  Here are some questions to answer, please post them here for inclusion in this week's Aloha Friday Newsletter (which if you haven't signed up for you can do now.  Just email me at Robert@FerrariPacificRealty.com and I'll put you on the list).

1.  Has our "recession" changed how you do things?

2.  Have you held back on vacation plans due to the "recession"?

3.  Do you believe that we will begin a turn around this year?  If not, when?

4.  Are you considering buying a new home or second home this year?

5.  What have you chosen to do without in light of tight money right now?

6.  The best investment today is, a) real estate  b) stocks  c) bonds  d. precious metals.

7.  Yes or no, I'm still going to retire as planned.

Answer these and let's see where people are going with this.

With the United States "on sale" right now, Canadians and other outside our borders are finding relatively good deals here in the U.S.  It wasn't that long ago that Canadians were buying property here with an exchange rate of about 75 cents Canadian to our dollar.  That's all changed now as the Loonie is on par with the green back.

A bad thing?  Probably not in this increasingly international world we live in.  It only makes sense that in a time when multinational companies are the norm, that multinational real property ownership would be right there with it.

As long as ownership remains a two way street there's nothing wrong with it.  When they can buy here but we can't buy there, I have a problem.  In this case though, Canada is usually thought of as the far northern states or Canadians see us as the southern provinces, we as a peopel aren't that much different.  I think sometimes we make things up to diasagree about just to maintain our differences.

In any case, we're seeing more and more Canadians coming to west Hawaii to look at property.  I recently sold land to a Canadian builder who's thinking of coming over to build homes.  I have clients in condos and some with homes that they hope to occupy more fully some day.  Even as we tighten our borders, pass port to go to Canada, yeah right, the imagined borders between most Americans and Canadians are dropping.  Funny how familiarity can breed comfort as much as contempt.

I say welcome to the Canadians.  Anything to keep our housing market stimulated and healthy is good for all of us.  aloha

Another good ol' boy bites the dust.  After years of successfully denying access to other airlines that would attempt to get a foot hold in the interisland market here, Aloha Airllines has decided they can no longer compete with Hawaiian and upstart airline, go!, the Mesa Air carrier in Hawaii.

Aloha complains that go! created an unfair playing field, operating at a loss just to put Aloha out of business.  Sorry Aloha, but you put yourself out of business.  Your management has been poor for many many years with no foresight or planning.  You've been crippled by the demands of abusive labor unions who were so intent on lining their own pockets and those of their members, they never looked ahead to the eventual outcome of their greed.  And last, some of the worst service in the industry.

For years, Aloha has flown where they wanted to regardless of what their passengers needed.  The employees had the same callous, arrogant attitude displayed by managment which has driven customers away.  After years of abuse by both Aloha and Hawaiian, residents of the state welcomed go! airlines with open arms because they weren't Aloha or Hawaiian.

Maybe a lesson will be learned.  If not, Hawaiian will be the next arrogant good ol' boy to go.  Nature abhors a void as does business.  Wouldn't it be great if Mr. Branson or Jet Blue saw the potential here, not just for interisland but for destinations to the west like Japan, Thailand, Australia, China and the rest of the western Pacific.

You won't be missed, Aloha, at least not by those of us who want good service and the aloha spirit.  I'm excitedly looking forward to what's next.

I was talking to a couple yesterday and the economy came into the conversation.  They were lamenting the coming recession so I asked them, "How will a recession effect you, personally?"  They both looked at me with a blank stare, their mouths slightly open as if ready to speak but no words came to mind.  Enjoying this moment I said, "Just what is a recession, any way?"

I knew it was time to move on at that point since neither of them had any more to say about the recession.  All afternoon then, I would steer conversations to the recession then ask, "So, what effect will a recession have on you?"

I was amazed by the lack of answers to that questio.  No one had an answer, they all just looked at me like I'd broken the news that the emperor had no clothes.  How can a headline like recession paralize so many people and yet none of them have any idea what impact it will have on them?

So, how will a recession effect you?

I was talking to a couple yesterday and the economy came into the conversation.  They were lamenting the coming recession so I asked them, "How will a recession effect you, personally?"  They both looked at me with a blank stare, their mouths slightly open as if ready to speak but no words came to mind.  Enjoying this moment I said, "Just what is a recession, any way?"

I knew it was time to move on at that point since neither of them had any more to say about the recession.  All afternoon then, I would steer conversations to the recession then ask, "So, what effect will a recession have on you?"

I was amazed by the lack of answers to that questio.  No one had an answer, they all just looked at me like I'd broken the news that the emperor had no clothes.  How can a headline like recession paralize so many people and yet none of them have any idea what impact it will have on them?

So, how will a recession effect you?

While the mainland continues its downward trend on both the number of sales of homes and the median prices, west Hawaii bucks that trend.  Here we see minor corrections in median price even though the number of sales is down guite a bit; only about a 4% decline in median price for homes in North Kona and less than 1% for homes in South Kohala.

The newspaper this morning reports the median price for a home on Hawaii's Big Island is under $400K for the first time in years.  What they don't say is that median price is for the entire island, an island where the median price can be less than $200K on the east side and over $600K on the west side.  They are grabbing headlines but they are not informing the public.