Larry Barton, RA
Kauai Real Estate
2009 3rd Quarter Real Estate and Economy Update
This update will be filled with facts and statistics, as I feel this tells the story best in today’s markets. With job losses at their worst rate in 28 years, increases in foreclosures and short sales and an increasing federal deficit amongst other things we are certainly in challenging times in our country and globally. Consumer bankruptcies totaled 1,046,449 filings through the first nine months of 2009 (Jan. 1-Sept. 30), the first time since the 2005 bankruptcy overhaul that filings have surged past the 1 million mark during the first three calendar quarters of a year, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC).
We are all challenged in these times but cannot forget how blessed we are to be Americans, have our good health and to be amongst family and friends.
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General real estate market
Kauai real estate market
The Economy and General Real Estate Market The national unemployment rate is 9.8% as of October 1st but in the state of Hawaii it is a respectable 6% down from 6.1% in August. Many believe the rate will top 10% nationally before the end of the year. The good news is that unemployment claims have been dropping over the last few months and should continue. The graph below shows the diffusion indexes for private nonfarm payroll employment and are based on estimates for 278 industries, while the manufacturing indexes are based on estimates for 84 industries. Each component series is assigned a value of 0, 50, or 100 percent, depending on whether its employment showed a decrease, no change, or an increase over a given period. The average (mean) value is then calculated, and this percent is the diffusion index number.
Housing starts have been on the rise along with unit sales throughout the mainland and in some places prices are beginning to stabilize. However many parts of the country are searching for a bottom including Hawaii and still have excess inventory, and a wave of foreclosures on the way. There are reports in select areas that multiple offers at above asking prices are becoming more common. This is in part because of lower inventories but also aggressive foreclosure pricing especially in the lower end part of the market. A June survey by Mortgage Finance of 1,500 real estate agents revealed that 64% of all existing home sales were “distressed” properties. On Kauai we still have higher inventories for single family homes above $500,000-$600,000 due in part to a lack of an abundance of foreclosures and short sales in this area. These are however on the rise nationally and here on Kauai as the graphs below indicate. The number of U.S. lenders that can’t collect on at least 20 percent of their loans hit an 18-year high, signaling that more bank failures and losses could slow an economic recovery.
Here is a graph that shows the delinquent loans by type since the 1st quarter of 2008. What this doesn’t show is the Option Adjustable Rate loans alone that are projected to have $40 billion worth reset in 2011.
Kauai Real Estate Market In 2009 YTD we are continuing to see a significant decline in units sold and median pricing in all 3 major categories compared with the same period of 2008. Due to the host of challenging factors we are facing in our economy, unit sale are predictably down. The median price figures are a bit deceiving in that they reflect only what has sold and not the market as a whole but nevertheless is a good indicator. Lower end properties have had the most activity, particularly in the $300,000-$500,000 range for single family homes and $150,000-$400,000 for condominiums. This is due in part to the $8,000 tax credit that the federal government has made available to 1st time home buyers. This program is scheduled to expire November 30th of this year. There is considerable pressure on the government right now to extend this program past November 30th and even open it up to ALL homebuyers. For more information on this program, go to http://www.federalhousingtaxcredit.com/2009/faq.php.
Mortgage rates for 30 year fixed rate financing for primary residences and second home properties continue to remain at historic lows (4.85% at the time of this writing). The government has said that they will keep rates low for the foreseeable future which probably means until the end of the year. What this means is unprecedented opportunities to make incredible buys on real estate while prices are currently in the 2003-2004 levels here on Kauai.
Sellers – if you need to sell, your properties must be priced ahead of the market to maximize your chances of selling. Buyers are buying almost exclusively based on price in this market. Buyers - get prequalified with a lender and make your best deal in the near future at 5%+/- mortgage rates while they last.
Here are the Kauai sales figures through September compared to the same period last year. We are beginning to see more activity here on Kauai as of late. We are largely driven by mainland buyers, especially on the north and south shores. Many of these people are reliant on selling other properties before having the ability to purchase here. This is happening especially in the western states and many of those people are recognizing the current deals available here on Kauai.
Employment Influence on Housing Sales For consecutive months beginning in February, national year over year job losses have increased in all 372 U.S. metropolitan areas. September however showed an improvement vs. September 2008. History tells us that the influence on housing in 2010 of high unemployment is not good. How do job losses relate to the recovery and, more importantly, to the coming year? As a trailing indicator, employment follows the economy, so likely joblessness won’t improve until the economy is improving. Due to the high # of bank foreclosures nationally, unemployed property owners are staying in their homes many times more than a year after they made their last payment. Expect considerable foreclosures to continue for many months to come and housing sales here on Kauai to be sluggish for the foreseeable future. Below is a graph that shows the changes in the U.S. employment figures since January 2007.
October 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