Larry Barton, RA
Kauai Real Estate
2nd Quarter 2009 Kauai Real Estate Update
U.S. Economy Update We are now approaching 6 months in to the new Presidential administration. The 1st week of July Vice President Joe Biden stated that the Obama administration had misread" the weakness of the economy. The Obama camp is now hinting that an additional economic stimulus package will be necessary on top of the 2 year $787 billion stimulus package already approved! Granted a good portion of this money has not been spent yet, but it has had little positive impact and the national unemployment rate at the end of June stood at 9.5% and rising. The White House had expected the unemployment rate to peak at 8% when it pushed through the $787 billion plan. Even billionaire and legendary investor Warren Buffet has suggested that the unemployment rate could hit 11% and that an additional stimulus package might be needed.. He told ABC news that the 1st stimulus package was hampered by democrat lawmakers' excessive pet projects. Buffet stated that "Our first stimulus bill...was sort of like taking 1/2 a tablet of Viagra and also having a bunch of candy mixed in".
The bailout of big companies like AIG, General Motors, Chrysler and the like could come back to bite us in the long run instead of allowing the bankruptcy system to work as it always has. Another concern is if there will be proper accountability and oversight as to how the stimulus package is being spent. It is one thing to inject capital in to an ailing economy and quite another to make sure it is being spent efficiently. California has a $26.3M budget deficit and no clear plan how to resolve it yet. If California were a country, it would be the 7th largest economy in the world all by itself! June retail sales continued its downward slump in June. More bankruptcies are expected and Americans are showing a continued commitment to save and to spend less.
The national real estate market continues to look for a bottom. While a few select markets have held up well since the downturn started over 3 years ago, most areas are still searching for a bottoming out of prices. Distressed properties otherwise known as short sales, foreclosures and REO's are still dictating sales prices. As long as inventories are high and distressed properties are plentiful, prices wills stay down. A balance of supply and demand is most commonly reached when an area has an approximately 6 month supply of homes for sale. Some good news is in the past year, the Housing Affordability Index maintained by the National Association of Realtors has increased 29 percent overall and 19 percent for first-time homebuyers, and is higher now than at any time in the 28 year history of the index.
Kauai Real Estate Market Update We are still in a buyer's market. Inventory is high and prices have not hit bottom with the exception of perhaps $300,000-$500,00 homes in Lihue which has very little inventory. The largest demand for single family homes island wide continues to be in this range appealing largely to 1st time home buyers. This is reflected in the median price for homes that have sold island wide down from $657,000 in the 1st 6 months of 2008 to $479,000 for the same period in 2009. Condominiums are in even greater supply especially in the Poipu Beach area where several projects under construction have been put on hold for now.
Below are the statistics for the 1st 6 months of 2009 compared with the same period in 2008. The total # of unit sales are continuing to fall least of which is in the single family residence area. This is largely because the lower priced single family homes now represent a better value than similarly priced condominiums. The median prices again are reflective of what has sold during the 1st 6 months of the year and not what is currently listed for sale. This time I have included the statistics not only for island wide properties but for the north shore as well.
Nobody knows when we will reach that optimum balance of supply and demand on Kauai when prices will stabilize. While some areas of the mainland U.S. have seen a stabilization of pricing, Kauai remains a tremendous value for potential buyers. With 30 year fixed rate mortgages hovering at 5% and property values near 2004 levels, this is a great time to get your little "piece of paradise".
Distressed Property Terms Distressed Property - A Property on which the mortgage(s) total an amount higher than the current value and the owner must sell.
Short Sale - A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor (seller). Typically when the mortgagor is behind by 2 or more mortgage payments to the lender.
Foreclosure - Legal process by which a lender cancels (forecloses) a borrower's right of redemption of the mortgaged property through a court order (called foreclosure order). The court sets a date up to which the borrower can redeem the property by paying off the entire loan balance (including foreclosing expenses). Thereafter, the lender is free to sell the property and, upon the sale, applies the sale proceeds first to the due amount and pays the remainder (if any) to the borrower. The borrower remains liable for the due amount if the property remains unsold, and for the shortfall if the sale proceeds are insufficient to pay off the entire debt. The lender is generally under an obligation to sell the property at or near its fair market value.
REO - Also known as Real Estate Owned. Property which is in the possession of and owned by a lender as a result of foreclosure or forfeiture.
Loan Modification - A modification to an existing loan made by a lender in response to a borrower's long-term inability to repay the loan. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so is less than the cost of default.
August 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
P.O. Box 223700, Princeville, HI 96722
(808) 639-7532 Cell / (808) 240-2417 Direct line / (808) 826-9884 Fax / Email Larry