1st Quarter 2009 Kauai Real Estate Update

3 months in 2009 has come and gone, and the deals just keep getting better here. Your chance to own a piece of paradise is looking better than ever. 30 year fixed rate loan programs below 5% on homes and prices at 2004 levels is a reality. Once prices stabilize, Kauai represents one of the best long term real estate investments you will find anywhere! Call me and I will show you why!


Beat Inflation - Buy now! Inflation is our biggest enemy right now. Why? Let's say that inflation is at 5%. If an item today is $100 and and the expected rate of inflation is 5%, then that item would increase to $105. If someone loans you money for a mortgage at 4.5% (where it is as of today, April 7th), that means the end investor is making a rate of return of 4.5% on that investment. (A homeowner's mortgage is a liability but an investment to the owner of the mortgage). If inflation is at 5% but the investor is earning 4.5%, that means they are losing money because the money they are earning is lower than the increasing prices for goods and services. The good news is that you the borrower win! This is also a reason why in the late 70's and early 80's mortgage rates were double digit when we had double digit inflation.

Rest assured that the trillions of $ our government is printing and will be spending at twice the amount it is taking in, high inflation is in our near future. Higher inflation means higher interest rates...a reason for buyers on the fence to jump off and purchase now. What are you waiting for?

Kauai Real Estate Market We are seeing a clear trend in the sales for the 1st 3 months of 2009. Buyers are mostly buying the lower end single family homes in the $300,000-$600,000 range with a median sales price island wide of $430,000. This compares to a median price twice this high a year ago. Median prices for land and condos are down even more. Condo sales YTD are largely in the $150,000-$350,000 range with median pricing at $254,000. Total unit sales are down 35-73% spread across the 3 property types. We are also seeing fewer total unit sales as buyers are being more cautious or may not have the ability to spend vs. this time last year. This is not good news for sellers but suggests that due to the higher inventory and a smaller pool of qualified buyers that now more than ever before buyers are in the driver's seat.

The areas with the best activity and the most stable pricing are in Kapaa and Lihue. Some properties are receiving multiple offers at or just under the listed price due to the lower end homes available and smaller inventory levels. Nobody knows when general pricing will stabilize but it is certain that we haven't seen the bottom yet. We can expect to see more of the same in to summer and likely beyond. The Obama stimulus plans, TARP, consumer confidence and returning to a sense of urgency in buying real estate are amongst the many factors that will influence this.

Credit - Know Your Score A good credit history has never been more important when applying for a loan. It is safe to say that a strong credit score keeps down the cost of financing and it can not only be the deciding factor on whether or not you get approved but what your interest rate is and how many points you will pay.

In today's high tech world, your credit history will more than likely be reviewed by artificial intelligence rather than human intelligence. This has made the loan process more efficient but computers take all the subjectivity out of credit evaluation. This means you need to take ownership of your own credit standing to make sure you're not blindsided by any blemish on your record. It is critical that you know your credit score when applying for any type of financing, especially a loan for a home or investment property. Everyone is entitled to one free credit report a year. See www.annualcreditreport.com or other various companies can provide this for you. You may have to pay a small fee for the credit score itself. When an erroneous claim appears on your report, it can take a few months to correct which might mean the difference between being able to purchase your real property or not.

Credit scores usually range between 400-600. On rare occasions this range can be exceeded. Sometimes a score cannot be obtained for factors like lack of credit history or too few lines of credit. If you know your score, then you can see what the creditors see and have the ability to get a jump start on maximizing your rating.

Here is a quick look at what a score means to a creditor:

740 and above:	This should qualify you for the best rate and terms available
720-739:	You are near the top and will get favorable rate and terms
700-719:	Excellent score. You are regarded as a very desirable borrower
680-699:	Good credit but expect to settle for something other than the best rate
660-679:	O.K. credit. Don't look for other exceptions
640-659:	Borderline. Could be O.K. if everything else is strong
620-639:	Weak. The rest of your file must be perfect to qualify
600-619:	Doesn't look good. Needs a special program
Below 600:	Sorry, no loan this time!

Here are 5 suggestions that are sure to help maximize your credit score:

1. Pay your bills on time
2. Pay down your debts and consider charging less
3. Don't close old paid off accounts
4. Don't be afraid to get some credit counseling if you feel you could benefit from it
5. Stay out of bankruptcy

I am always available to answer your questions and would be happy to provide you with up to date market information at any time. If you or anyone you know is considering owning a piece of paradise, please contact me.

Aloha,
Larry


April 2009

Larry Barton, RA, CENTURY 21 All Islands Kauai
P.O. Box 223700, Princeville, HI 96722
(808) 639-7532 Cell   /   (808) 240-2417 Direct line   /   (808) 826-9884 Fax   /   Email Larry