How is the Real Estate Market faring on Kauai – 1st half of 2009

Our Kauai Board of Realtors as a service to the community publishes articles in our local paper, the Garden Island. This weekend’s article in the business section has been adapted to give you a good sense of how our Kauai real estate market is doing through the first half of the year. Normally, the Kauai real estate market is a seasonal one. That is, our market tends to spike in the winter time when the “snowbirds” come to the tropics, and spike during the summer months when tourists vacation with their families while their children are off of school. Not sure if those same tendencies still apply to our current state of affairs, but the numbers don’t lie, that’s for sure.

As the first half of 2009 has just passed, we thought it would be timely to review real estate activity on Kauai. As to be expected in light of the global economic downturn, the results are down in every category versus the same time frame for 2008. Please keep in mind that the Kauai real estate market is an insulated one with a relatively small sampling section, therefore a high or low dollar sale, a new condominium project or subdivision, or a foreclosure in a condotel project (we recently had a large one) can dramatically affect the statistics.

Kauai Year-to-Date Transaction 2008 vs. 2009

Kauai Year-to-Date Sales Volume in Dollars 2008 vs. 2009

Kauai Year-to-Date Median Sales Price*

*Median Sales Price on Kauai represents the midpoint between the most expensive house and the least expensive house sold in an area during a specific
time. The Median Sales Price is often regarded as an indicator of the strength and the direction of a real estate market.

To emphasize where Median Sales Price values are in relation to previous years, enclosed are Median Sale Prices from 2004 – 2007 in the same time period.

Kauai Year-to-Date Median Sales Price 2004 – 2007

These charts above are based on Information which is provided by Hawaii Information Services, the company which runs the multiple listing service for Kauai and Hawaii, the Big Island.

Using the Median Sales Price as a barometer, the property values on Kauai are now comparable to 2004 values; Condominiums are closer to 2003 Values ($271,469). Regarding broader generalities, the State of Hawaii appears to be tracking closer to what is currently happening on the mainland as opposed to previous trends where there was a 6-9 month lag from what occurred on the mainland until it affected Hawaii. Of course similar to our climates, there are many micro-markets that ebb and flow according to the supply and demand of units on market. Another observation is that Hawaii’s market is also a bit healthier than some of the mainland markets, such as Southern California.

The increase in Hawaii in Median Sales Prices did not rise as high or as sharply and consequently the decrease in Median Sales Prices has not been as steep or dramatic—we have experienced lower highs and higher lows. Hawaii’s two-leading Banks, Bank of Hawaii and First Hawaiian Bank are strong and stable. According to Bank Director’s Magazine—The 2008 Bank Performance Scorecard: America’s Top 150 Banks, Bank of Hawaii was the 4^th highest rated bank in the U.S.

In terms of foreclosures, the State of Hawaii has generally been in the bottom 10 of the 50 States, ranked 36^th in April and that number spiked in May which caused Hawaii to be ranked 15^th among the 50 states. There were 816 foreclosures in state of Hawaii in May according to a recent RealtyTrac report. With one in every 374 housing units receiving a foreclosure filing during the month, Kauai County posted the highest county foreclosure rate in the state amongst the five major counties. RealtyTrac statistics includes commercial properties, which include condo-tels and timeshares in the foreclosure data, and sometimes includes properties multiple times in the three-phase foreclosure process. As I alluded to earlier in the post, there were 145 residential units and 16 commercial units at the Hilton Kauai Beach Resort that were auctioned at a public foreclosure auction on May 6^th that dramatically skew the Kauai foreclosure numbers. iStar Financial, the primary lender at the Hilton Kauai Beach Resort, bid $15 million, outbidding several other bidders. The up tick in Kauai’s foreclosure numbers can also be attributed to mainland buyers and investors defaulting on resort properties/2nd homes purchased over the past few years.

In terms of mortgage delinquencies (percent more than 30-days past due) Hawaii was 45^th among the 50 states according to the Mortgage Bankers Association (Q4 2008). If you factor the condo-tels in, Hawaii may be climbing the ranks in that stat.

In addition to the decline in the Kauai Median Sales Prices, the other dramatic impact to the real estate market on Kauai is in the number of transaction. The numbers of transactions were down 50% between 2005 and 2007 and decreased another 36% in 2008. There were 1,768 total sales on Kauai in 2005 and we are currently at a run rate to  have 508 total transactions in 2009 or 28% of the number of transaction that occurred in 2005. That’s a slowdown to be sure.

Currently there are 1 in 14 residences for sale that are in escrow followed by 1 in 16 condominiums and 1 in 16 land parcels.

Total Kauai Properties for Sale as of 7/1/2009

Total Kauai Properties in Escrow as of 7/1/2009

In as much as the Kauai real estate market has adversely affected Sellers of properties, the construction industry, escrow companies, Realtors, and lenders, it has created a boon for Buyers. You would have to go back to 2002 or 2003 in many instances to find the types of values that exist in today’s market. Motivated Sellers, relatively low interest rates, first-time homebuyer programs, and Seller financing in some cases all equate to a great opportunity for property buyers. That’s the overview of the market for the first half of 2008. Again, thanks to the Kauai Board of Realtors for collating this information.

What’s next? We are in uncharted territory where some of the most accomplished economic experts are having a difficult time forecasting future trends. It does appear though that there are economic indicators and signs that perhaps the worst is behind us and the market is flattening out a bit.

If you would be interested in seeing how your neighborhood is faring contact me at ron@hawaiilife.com and I’ll be happy to generate a comparable market report for your specific property type and location. And of course, the most current list of Kauai foreclosures and short sales is available on an island-wide basis, or by general geographic region, i.e. North Shore, South Shore, Eastside, etc.

Looking forward to the second half of the year as great values abound and there’s so much opportunity for qualified buyers to own their piece of paradise.