3rd Quarter Market Update For Kauai – Business as Usual (For This Market Anyway)

Aloha to all of you. As we enter the fourth quarter, typically not that strong a quarter in the island sales market, we take a look at the data from our 3rd quarter of sales on the island of Kauai. The information comes to us courtesy of Hawaii Information Services.

Monthly and quarterly, our MLS provides three key statistics:

1. Number of Sales—the total number of transactions in a given period.
2. Sales Volume—What is the dollar volume of business transacted? For instance, for the 3rd Quarter (July through September) there was $96,268,840 sold in the 3rd Qtr. of 2010, but only $75,734,504 sold in this same quarter in 2011—a decrease of 21.33%
3. Median Sales—This is defined as the number where there are an equal number of sales above and below this number. It is NOT the same as the average price. While the 3rd quarter sales volume was down on Kauai, year-to-date the total sales through September 30th on Kauai is $279,905,323. That $279K number is within one half of a percent of the total number through the 3rd quarter of 2010. For those of you who are not as familiar with our tax map key system, our island is divided into five zones, starting on our southwest side and working counterclockwise around the island. The map of our zones is below, so that you might better understanding the median value analysis to follow.

The five zones: Waimea • Koloa • Lihue • Kawaihau • Hanalei—notice the sections, the smaller numbers within each zone

Now, let’s take a look at the median prices through the 3rd quarter of the three different categories of property: single family homes, land, and condominiums. Through the end of September, there have been 268 sales of single family homes, 213 sales of condos, and only 70 parcels of land have changed hands. Land has typically been the softest component of the market and not every lender will loan money for land or the associated construction costs.

When you look at the median price of single family homes, you’ll notice there’s not a lot of change in the median prices in Waimea, Koloa, or even on the north shore in the Hanalei district. The median sales price of a single family home in the Hanalei district, from Kilauea all the way to Haena, is down a mere 1.03 percent, or basically flat.

On the other hand, the median prices in both Lihue and Kawaihau, the two largest population areas on island, are noticeably down from last year. This is mostly a function of the numbers of foreclosures and short sales, and those properties’ effect on value pricing in those towns.

In terms of raw land transactions, the biggest market adjustment is on our north shore; farm and mountain lots in Kilauea are selling for a lot less. Smaller lots in Princeville are selling for less too. In the area known to local residents as Queen Emma’s Bluff, lots which formerly sold for $600,000-$700,000 are selling for almost half of that. The last lot to close on that street sold for $345,000 and that was recorded on October 11, 2011. Sometimes though, as evidenced in the above graphic of the Waimea district, when there is only a transaction or two for a time period, one sale can have a dramatic affect on the pricing.

And in this final chart below, notice the dramatic adjustment in the median price of condos in both the Kawaihau district and the Lihue districts. The median price of a condo in the Kawaihau area, which includes all of Kapaa and Wailua, is down almost 24% from last year to a current median price of $127,500. And wow, how about the Lihue district where the median price is down a whopping 56 percent from last year at a median price of $65,000? Such a dramatic number, but do you know why? It’s relatively easy to explain those two dramatic adjustments.

For one, both the Kawaihau and Lihue districts have the highest foreclosure rates on our entire island, and the bulk of that shift in median price comes from the sale of Islander on the Beach units in Kapaa and Kauai Beach Resort units, which are technically in the Lihue district. Most of these condos were sold to investors and speculators at a time when investors and lenders asked way fewer questions.

At the Kauai Beach Resort, some of the mauka-facing units are selling for between $30,000 and $40,000 dollars. These are “condotel” units which sold back in 2006 for between $225,000—$325,000 dollars. The Islander units used to sell for $350,000 for oceanfront units. No longer. Prices at these complexes are down dramatically and are pretty much relegated to cash transactions. No lenders really want to loan on these condotels without kitchens, fondly referred to as “lodging units.”

It is surprising that with interest rates in the low 4 percent range or even into the high 3 percent range, there is not an increase in sales volume from last year. However, the great rates and programs are making it more and more possible for local families to purchase their first homes, and get an affordable mortgage to go with it. That trend is not likely to change any time soon. Remember, our island and market are small.

Currently, one home in Hanalei Bay is listed at $18 million dollars. When that home officially records, that one sale will of course dramatically affect that number in the Hanalei zone. Still, the numbers don’t lie. The market is pretty much status quo and the largest amount of transactions occur below $300,000. That was not always the case. The market favors the buyers. If you are thinking this may be a good time to enter the home market as a buyer, you are probably right!