Larry Barton, RA
Kauai Real Estate
2009 Year End Kauai Real Estate Market Update
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2009 Kauai & Princeville sales charts
What to expect in 2010
U.S. Real Estate undervalued
For many of us, we are glad to see 2009 come and go. For property owners needing to sell, it was a frustrating experience often times resulting in selling for less than what they paid, especially if they purchased the property from 2004-2008. For opportunistic buyers the deals were plentiful, given pricing levels dictated by foreclosures and short sales. Whether the property was a distressed sale or not, it had to be priced like one in order to sell.
Property values fell approximately 15% from January to December and lower priced homes were in greater demand due in large part to the government’s 1st time home buyer tax credits (still in effect through April 30th). It was the dominance of lower priced homes that sold which reflect in the median price drop from 2008 seen in the charts below. This is not the same as the reduction in overall property values. Since higher priced homes were in the vast minority sold, the median price would naturally be lower than actual overall property values.
2009 showed a distinct improvement in the overall unit sales differential from the previous year. The year over year unit sales difference between 2008 and 2009 is less than 10% for condos and single family homes while the 2007-2008 differential was a sizeable 30.64-42.71% decline. This is real progress and expect an increase in unit sales in 2010 over 2009! Median price on the other hand took another good hit. Expect to see prices stabilize sometime this year, sooner for lower priced properties than higher end ones.
Additional good news is that we are seeing a noticeable increase in escrows and closings over the past couple of months with a marked improvement in overall buyer interest. November 2009 island wide single family home sales totaled 23 vs. 15 in 2008 and December 2009 recorded 38 single family home sales vs. 19 for the same month in 2008. Currently there are 67 single family homes in escrow, 8 in Princeville alone and 38 condos with 11 in Princeville alone. This time last year these escrow #’s were approximately 50% less! Expect this increase in activity to continue as we are nearing a bottom in property values and consumer confidence is improving.
We are currently at 2003-2004 pricing on homes and land. Property values below $400,000 have hit bottom in a few places, and we have actually seen multiple offers at full price in some cases. The more expensive properties are expected to soften a little more but should stabilize some time this year. I have included below the year end numbers island wide as well as those for Princeville (which many of you have expressed interest in).
* Does not include 2 sales on Hanalei Plantation RD. of $650,000 & $1,575,000
** Does not include 2 sales on Hanalei Plantation Rd. of $2,100,000 and $900,000
*** Excludes all Ka’iulani sales – 2 in 2009 totaling $2,410,000 and 24 in 2008 totaling $33,041,239
These properties are not considered indicative of The Princeville SFR and condo market but are worth noting
What to expect in 2010
- Mortgage interest rates will rise - With inflation looming and the government loaning to banks at less than .50%, expect rates to climb before summer.
- Pricing - Prices will continue to be under pressure particularly in the mid to upper price brackets but there is much evidence that at the entry level prices and inventories relative to sales are firming. Higher end real estate needs further price reductions before stabilization occurs.
- Employment vs. real estate - Most predictions are that jobs will recover slowly over the next two to three years so don’t expect that employment will add measurably to the housing recovery.
- Foreclosures will continue – There will be little slowdown in the rate of foreclosures if any – 3,957,643 homes nationally were foreclosed on in 2009 and Lawrence Yun, chief economist at the National Association of Realtors and many other sources expects 2010 to be at or near this level.
- Inventory levels will remain high – "Pent up" need to sell, continued flow of foreclosures, an end to the 1st time home buyer’s tax credit and inflated prices on higher end homes are big contributors but inventory is expected to come down from 2009 levels.
- Adjustable rate mortgages (ARM’s) to reset will fuel more foreclosures - Some 88 percent of Option ARMs originated between 2004 and 2007 are going to adjust higher between now and 2012. Those option ARM borrowers could see their mortgage payments go up as much as 63 percent, according to Fitch ratings. Resets are scheduled to peak in 2011 rising from about $4 billion resetting in March 2010 to a peak of $14 billion in September 2011.
- Increased Kauai sales - Unit sales will increase over 2009 perhaps by as much as 20% here on Kauai. A sense of urgency will increase as the year goes on due to higher interest rates, more visitor arrivals and an improving economy amongst other things.
- Value on Kauai – While prices will begin to stabilize and interest rates will slowly begin to creep up, the value in a market that is currently around 2003 pricing levels will offer unprecedented opportunities especially in the 1st half of the year. Interest rates are still at historical lows and Kauai will resume leading the state in increased visitor traffic once the economy stabilizes.
U.S. Real Estate Undervalued Below is a real estate chart showing 19 countries worldwide. It shows their property values as a percentage year-over-year and whether it’s over or under-valued. The United States of America is listed as being 3.1% undervalued. In simple terms you can draw a comparison that a $500K home is $15,500 under value based on a global market. What this means is that U.S. real estate represents a good value in today’s world especially for foreign nationals.
January 2010
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