So how is the turnaround progressing on Kauai?  I mean the turnaround of the real estate market that peaked in 2006 and 2007? Well, not exactly, to quote a famous car rental TV commercial. The first quarter of 2012 reveals a market that is stablilizing in many areas of Kauai and yet there is not quite enough energy in the market to make prices move in the opposite direction.

A couple of very large sales skewed the island’s volume for 2011 and that being said, through the first quarter of 2012, the overall dollar volume of properties exchanged is down from last year. In the first quarter of 2011, $124,635,600 worth of property was sold compared with just over 100,000,000 for the first quarter of 2012. That does not necessarily reflect the market is down that 20%, it simply shows it is still hard to sustain the buying energy in the marketplace.

While many Realtors® are optimistic and conversations about the market “picking up” are frequently heard, there’s still not a lot of data to support that. Transaction wise, there were 197 transactions of real estate through the first quarter of 2011. With one trading day remaining in this first quarter of 2012, 180 transactions closed on Kauai. So our transaction number is down slightly.

There is some good news to be sure. Median prices are mostly stable especially when it comes to single family residences. The median price for homes sold in the first quarter of 2011 was $450,000 and that’s island wide. In 2012, the first quarter number is $449,250.

The condominium median sales price tells a slightly different story and a story that we’re going to see more of the next couple of years. The median sales price of condos are $290,000 this year while last year the median price was $187,450. Does that mean that condo prices have gone up dramatically? No, not at all. Remember the median price is NOT the average sales price. The median value is the middle price in a series of sales, where half of the sales are of lower value and half are of higher value. For example, if 15 sales are recorded in Puhi and arranged in order from lowest to highest value, the eighth sale price is the median price.

What this change in condo median price does indicate however is that we are starting to cycle through our distressed inventory, our short sales and foreclosure. The distressed market will likely be a big part of the real estate market for a couple more years at least. But for example, at the Kauai Beach Resort, where investors paid from $229,000 to $450,000 for hotel rooms ( what was everything thinking anyway?), the prices now range from around $28,000 to $95,000. Many of the condotel units have sold at very low prices, bringing down the island’s median condo price. Most of these distressed units have cycled through now, so there will be a smaller percentage of sales in this sub-$100,000 category and that is likely to raise our median price. Simple isn’t it.

Well, at the end of the day, the market is still in the buyer’s favor and nobody can predict how long that condition will last. If a homebuyer sees a property listed for $300,000 and thinks that perhaps with another foreclosure for sale on the same street, that same home can be bought for $10,000 less next month, the buyer might wait. But, if interest are up ½% by the time that buyer “locks his loan” at the lower price, the buyer will purchase the home at $290,000 but their mortgage payment will be higher per month. It’s almost impossible to time the market bottom both for price and interest rates so better not to risk losing a good value when you see one .

Wanna know if interest rates are going up or down.? Monitor the 10 year treasury bond market and if the yield of those bonds is going up, so are your interest rates. You can Google the rates or go to marketwatch.com to monitor them. We’ll just have to wait and see what the 2nd quarter of 2012 brings. It’s likely more of the same as noted above.

Great short sale value for a good quality country-like home on a half acre, park-like setting. In ground pool and lots of desirable amenities make this a bargain at $539,000. Sold at 1,039,000 at market peak. More than 50% reduction from market peaks.

Call me for showings or download my Foreclosure Facts and Opportunities toolkit – a great resource for both buyers and sellers alike.

The Garden Island published a piece of mine in last Sunday Kauai Business Report dated July 10th, 2011. Entitled “Are We There Yet?”, it’s an update on Kauai market stats and trends.

Are We There Yet?

That’s a common question younger children like to ask when embarking on a long journey. Well, it’s also a question home buyers, investors, and Kauai residents find themselves asking about our housing market.  The housing market is a journey too and its not always clear where the road is going.  While the statistics indicate we may have reached the price bottom of a market that peaked way back in the summer of 2005, there are still some uncertainties to the Kauai housing market.

Like much of the United States, the buyer demand in the market is not yet able to outpace the large number of distressed properties, that is, bank-owned REOs and short sales, which are pre-foreclosure properties.  In the 2^nd Quarter of 2011, 62 distressed properties sold on Kauai , but another 96 distressed properties were newly listed. The 62 sales represents one third of all the 186 transactions as reported by Hawaii Information Systems during the same time frame. On a national scale, through the end of April 2011, Loan Processing Systems reported that 6.38 million Americans were 30 days or more late on their mortgages. Nearly one quarter of all mortgage-paying Americans are underwater, meaning that they owe more on their homes than their homes are currently worth.

Through the first half of this year, the number of real estate transactions  on island are up 9.5% from 347 transactions in the first half of 2010 to 380 transactions through the first half of this year. The volume of transactions, how many $$ have been spent on real estate, is up 11.9% from 182 million to almost 204 million. You can see by looking at the graph that the velocity, the amount of buying energy that’s in the marketplace, is greatly improved from the doldrums of 2009. Notice the growth in condo sales this year. That is partially triggered by many short sale transactions at the Kauai Beach Resort. The condotel units at this wonderful resort are selling for prices as low as $22,000. These units originally sold at prices from $220,000 upwards to $400,000.

For prospective homeowners, now is definitely the time. Loan programs are available for first-time home buyers, including zero per cent down loans from the USDA, three per cent down loans through HomePath, a special program for Fannie Mae owned bank foreclosures, or three and a half percent down on FHA loans. The affordability factor for local residents continues to improve as prices are adjusting down, and that is a big silver lining in this housing journey.

But there are some recent developments that have created uncertainty in the housing marketplace. As of this writing there are 1440 active listings on the Kauai market. There are 300 plus properties in active foreclosure on Kauai, some of them not listed for sale. 90% of these properties are being foreclosed on through the non-judicial process. After announcements from Fannie Mae on June 12^th, and Freddie Mac on June 30^th that these government- sanctioned entities were cancelling their non-judicial foreclosures, many homeowners in foreclosure may have gotten a welcome reprieve from the foreclosure gavel. It’s not necessarily the type of assistance legislators had in mind when passing Act 48, Hawaii’s mortgage foreclosure reform law. Lenders are not only cancelling and postponing active foreclosures, they are apprehensive to put some recently foreclosed homes on the market for fear they may have not completed the foreclosure properly.

How will this delay affect our market? It’s possible that the reduction in REO (bank-owned) inventory will become depleted as there is a lull in new REO inventory.  Less supply and more demand can help the market. At the end of the day, every market in the nation must ultimately cycle through its “distressed” inventory to get back to the basics of a healthy real estate market with modest appreciation. Unfortunately, the market delays from Act 48 will most likely lengthen the time for that occurrence for properties on Kauai and throughout the state.

Consider this? RealtyTrac shows 3,217 properties in active foreclosure in the state of Hawaii. That number does not include delinquent borrowers who are approaching foreclosure but the bank has not yet filed. The Hawaii Judiciary processed 1,300 foreclosures last year through our court systems. If that number doubles, and it may become larger than that, the Judiciary may become overloaded with the judicial foreclosure proceedings and a process that now takes from nine to fourteen months could be delayed even further.

Are we there yet?  Not yet,  not quite yet.

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