Hawaii Luxury Real Estate Owners Trading Up

During the recent Hawaii real estate boom years I worked as a developer sales agent for the oceanfront Kolea and Hali’i Kai communities on the Kohala Coast. That’s why “The Coulda Shoulda Club of 2009,” a blog post title on my ActiveRain network, made me laugh out loud. How many times did someone come in “just to look” and shake their head at prices, declaring how they had been coming to the Big Island for 30 years, and coulda-shoulda bought a $3 million lot at Puako on the beachfront side for under $100,000 (yes, if you click through to look at the lot, their story is true).

My prediction for who will be in the Coulda Shoulda Club of 2009 include:

• The people who are convinced that because they can buy a high-rise condo for 30 cents on the dollar in Miami or Las Vegas, every oceanfront condo in Hawaii will be selling for that kind of discount if they just wait.
• The people who pass on an excellent REO or motivated seller opportunity, convinced that the one meeting every single one of their wish list requirements will also show up at similar pricing if they just wait.

On the other hand, I’m working with two categories of smart “Could and Did Club of 2009” buyers:

• The people who are buying for future retirement, even if that date is 10 years out, because they can buy their dream property at today’s prices and the future direction of prices is unknown.
• The people who realize the luxury property they bought at the peak is down $500,000 in value, but the dream property they’d like to trade up to is down $1,000,000 or more!

Last week I was scouting best buys for a couple who fit in both categories. They own a great 1,700+ sq. ft. condo with the pocket doors and wine fridge walking distance from the beach, but would like to build a house in one of the resorts for future retirement. They’d seen a notice in the newspaper for a lot being auctioned at the Hualalai Resort, and wanted to know how it compared with the developer reductions I’d suggested at Ke Kailani in the Mauna Lani Resort and Kauna’oa at the Mauna Kea Resort.

Luckily when they called I had on my desk a Fact Sheet sent to me by the attorney serving as commissioner for the foreclosure auction.

The 1.367 acre lot is in Kaimupulehu Estates, one of the Hualalai Resort subdivisions nearer the highway than the beach. The county property tax assessors place a value on the lot of $2,565,500 and the foreclosure is on a mortgage of over $2 million. The auction has no upset price, but in order to close the lucky buyer will have to pay back taxes of $23K and all closing costs including conveyance tax, which at the new 2009 rates would be 30cents/$100 if the price is $1-$2 million. I also reminded my buyers that the amenity program works differently at Hualalai than at the other resorts they were considering.

To compare apples to apples (papaya to papaya?), they would need to factor in the $225,000 membership deposit and $28K annual dues on top of their subdivision maintenance fees. But if the Hualalai Resort amenities were one of the features that attracted them in the first place, my recommendation was that they consider developer inventory rather than the lot in foreclosure. Why? The developer is offering a 1.5 acre lot in the same subdivision for $1.6 million.

My buddy who is on the sales staff at Hualalai tells me they had a strong sales pace in August and September, which corresponds with what the Hawaii Life team is experiencing throughout West Hawaii. (Remember that some developers in Hawaii do not list all their inventory on the MLS nor report all their sales, so this is one area where the Internet-empowered consumer is at a disadvantage in doing their own research).

Bottom line: developers who are realistic about pricing for the current market offer an attractive alternative to foreclosures and short sales for the resort buyer—whether a Hawaii real estate first-timer, or one who is trading up.

A hui hou,

Beth Thoma Robinson, R(S)
Direct: 808.443.4588
Email: beth@hawaiilife.com