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.

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

Act 48 reformed and redefined the foreclosure process in Hawaii. This law sets up a MFDR (Mortgage Foreclosure Dispute Resolution) mediation process that is now a part of the non-judicial foreclosure process. Here’s the problem: If the banks do not use the nonjudicial foreclosure process, there is no mediation required. So, if the bank does not pursue non-judicial foreclosure parts I or II (there are two styles of non-judicial foreclosure in Hawai‘i) what do the banks do? They file a judicial foreclosure. This is in the Kaua‘i civil court system. The local lenders have always pursued their foreclosure in the court system, so this is nothing new. However, last week alone 20 new cases were filed in Kaua‘i. What does this mean? The majority of these new judicial foreclosures are the result of the mainland foreclosing banks, cancelling their former non-judicial proceedings, only to start them over in our Kaua‘i courts.

The mainland lenders are now, post Act 48, simply choosing the safer (for them) judicial process. This is not necessarily good for the homeowners. Deficiency judgements are a key issue. No homeowner wants to lose his home and then have his assets pursued by the lender. Under Act 48, in a nonjudicial foreclosure, the bank can no longer pursue a deficiency judgement. However, in a judicial foreclosure the bank can and will most likely pursue the deficiency judgement. That means if the borrower owes $300,000 and their foreclosed home sells for $200,000, the bank will then file a deficiency judgement against the homeowner for $100,000. This judgement is good for ten years and can be renewed for another ten years.

When this bill was being discussed, Hawai‘i attorneys who participated on the state’s Mortgage Foreclosure Task Force warned legislators that this switch to all judicial foreclosures could be a repercussion of Act 48. Apparently, the legislators did not heed the warnings. Since May 5th, there has not been a single non-judicial foreclosure completed on Kaua‘i. All foreclosures are being restarted in the court system. This was not the intent of the law.

Are the banks bypassing Hawai‘i’s Act 48? Or did the legislators, in their rush to defend homeowners, pass a law that left the banks no choice but to protect their assets in a judicial proceeding? If there were a way for the chief justice and the state’s judges to integrate the mediation process into the new judicial proceedings (a process the state has now spent hundreds of thousands of dollars on) perhaps homeowners would have a face-to-face opportunity to work out a solution with their lenders.

Then, homeowners would have the respect that the state legislators intended them to have when dealing with their delinquent loans, underwater properties, and mainland banks.

This article was printed in a special Foreclosure and Short Sale Buyer’s Guide in The Garden Island on October 30, 2011

Call or e-mail me today for a free consultation reviewing the full range of options that may be available to you. Download my
Foreclosure Facts and Opportunities Toolkit at hawaiiforeclosurefacts.com to learn more about the foreclosure and short sale processes.

If you have an interest in purchasing a distressed property on Kauai, visit my Kauai Foreclosure Gallery, for the latest list of available properties all in one convenient location

Hawaii’a Act 48 – Mortgage Foreclosure reform legislation that became effective as of May 5th, 2011
This legislation reforms Hawaii’s foreclosure process and sets the new rules for non-judicial foreclosure Part I and Part II

Making Home Affordable – Programs from the Treasury Department including:

• HAMP (Home Affordable Modification Program)
• HARP (Home Affordable Refinance Program)
• HAFA (Home Affordable Foreclosure Alternative

Eligibility for Government sanctioned programs – Fill in  these short surveys to determine if you may be pre-qualified for one of several government programs and alternatives to avoid foreclosure

CDPE Financial Worksheet - Whether you are pursuing a Loan Modification or a Short Sale, your lender will require a current financial information form. This CDPE form will be helpful in both situations.Download the form and fill it in digitally or manually for use in a Loan Modification or Short Sale.

When a buyer acquires their first home, it can be a great opportunity to investigate combining all or some of their debt into one loan. Since interest on the acquisition debt is deductible and interest on personal loans like credit card debt are not, consolidating your debt in your home acquisition will provide additional tax savings for the buyers. As you shop for a loan, if you are like most home buyers, most folks do not understand all of the individual terms and costs on the loan. One of the disheartening things I see in working with many homeowners who secured homes through interest only loans and pay option ARM loans in 2004-2006 is that most buyers did not understand the type of loan they were getting and how much money the homeowner would ultimately be paying for the home. One of the terms a home buyer will hear when shopping for a loan are “points”. “Points” are a term used to describe the cost of borrowing money and the charges paid in connection with originating a loan. Think of a “point” as a per cent. If you are paying 1.5 points on securing your loan, you would be paying 1.5% percent of the loan amount. These points are considered prepaid interest and are fully deductible in the year paid. If you are fortunate enough to have the seller pay discount points on behalf of the buyer ( this makes the home even more affordable for the buyer), this is also a deductible cost.

Let’s say you were purchasing your first home for 210,000 and securing an FHA loan, one of the best loans available today with a minimum down-payment. While the down payment is low, there would be PMI (primary mortgage insurance). Did you know that currently PMI is deductible as interest for the cost of financing your home? However if your adjusted gross income is over $100,000, the deduction is reduced or eveneliminated.

It’s a wise idea when purchasing your home to maintain a record of your costs of ownership. The average American family sells their home every six to seven years. When you purchase the home you establish your cost basis for the purchase. Over time, you may make capital improvements that will add to your cost basis. When you do get around to selling the home, you will need to calculate the gain on the sale and by keeping a record from the beginning, you can have that information at your fingertips. Ask your Realtor to provide such a form if they do not offer it to you first. When you calculate the gain after selling expenses and then subtract the basic (costs) and any exclusions, you will have your taxable gain (recognized gain). Fortunately, there is a homeowner exclusion for selling this principal residence as long as you have owned the home for five years and have lived in the home for two out of the last five years. The two years don’t need to be consecutive. There is no limit to how many times a taxpayer can take this exclusion, hooray! Single filers can exclude up to $250,000 of gain. Couples filing jointly can exclude up to $500,000 of gain. This is one of the most significant tax-saving opportunities for home owners. You can find out more information by navigating to www.irs.gov and downloading the Publication 523 – Selling your Home.

Statistically, 60 % of American’s wealth is found in their home equity. By understanding the tax advantages and keeping good records, you’ll know where you stand with regards to this important asset in your fiscal world. If you would like an analysis of renting vs. buying a home here on Kauai, I’m happy to assist you in developing that financial understanding.

View Kauai Deals in my Kauai Foreclosure Gallery →

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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.

http://advault.kauaiworld.com/SS/Page.aspx?sstarg=&facing=false&secid=104845&pagenum=9

Property Details

Property Details

SHORT SALE TREMENDOUS 2-STORY MAIN HOUSE PLUS 2 Cottages and a 2 Gar-Garage with Apartment! (A total of 7 bedrooms and 8 bathrooms)* Main House – boasts a total of approx 4453 sq ft & encompasses 3 Suites & the owners personal residence! Up the staircase you’ll come upon 2 very roomy, suites, both with their own bathrooms and kitchenettes. The 1st suite has 1 bed, separate sitting area & an enticing jacuzzi tub! The 2nd suite has 2 beds & separate sitting area. Downstairs, the 3rd suite has a spacious 1000 sq ft of intimacy. A 6 x 6 foot jacuzzi is brightened by skylights & windows, giving a very spacious feel but is surrounded by tropical plants so you have privacy too! Also downstairs is the Inns dining room & the rest of the main house – used as the owners private residence. The residence consists of a marvelous tiled great room with fireplace; its own bathroom & bedroom area. The spacious kitchen has a gas stove, tiled counter tops & dining area/office. An laundry room is placed adjacent to the kitchen.* The 2 Free-Standing Cottages are well spaced out amongst this abundant 2-acre parcel of land. Each cottage has its own bathroom and kitchenette. A covered serene sitting area is placed towards the back of the property and a stream runs through the property too! Centrally located in a quiet rural setting in the Wailua Homesteads makes this property a dream come true!* Versatility – Use it as a B&B or make it a huge family compound instead! Perfect for the multi-generational or extended family that wants to stay close but desires privacy as well ! You could even choose to occupy just the main house and rent the 3 separate detached spaces – as a long term to help to pay the mortgage. Endless possibilities for the creative buyer.

Property Details