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What's Really Happening in the Oahu Real Estate Market - April 2009

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First off, let’s check in with our State Legislature and look at some of the Bills in progress.

  • SB1346 Increases the G.E. Tax for the purpose of funding Public Education.  As drafted, this bill also contains provisions to set up an oversight commission to keep track of the revenues.
  • The Omnibus Bill SB1548 Increases the G.E. Tax Rates.
  • SB1277 is intended to increase the conveyance tax on real property transfers in Hawaii.
  • SB279 Increases the Transit Tax to pay for culturally-related programs.
  • SB1111 Increases the Transit Tax effective July 1, 2009.  As drafted, this bill funnels revenues into the General Fund.

Wait… there’s more!

SB1156 will prohibit rental contracts for residential property from specifying “No Pets Allowed.”   A related bill, SB1157, breaks new ground by identifying our pets as new-found members of the “Protected Class” – a legal term prudently used with human members of society.

So far, we have two measures to increase the G.E. Tax. Two measures to increase the Hotel Tax and one measure to make your Pet a Protected Class.

There is still yet another bill being proposed to increase our property tax rates by increasing the $ rate of assessment / $1,000 of current assessed value. So in effect the City & County's Mayor's Office cannot be sited for raising our "Assessed Home Values." They can just as easily garner more taxes from us by raising the rate of taxation upon the Assessed Home Value. How clever.

Where in the World do our elected officials think we are going to get this money from?  In addition, any consideration to levy more taxes upon our Tourist Industry which is already failing, is downright incomprehensible!

The last 4 years have been telling.  During this period, the Mayor’s proposed budget has risen from $1.5 Billion to $3.5 Billion. This is a +57% increase in 4 years. In addition, what you do not hear from the Mayor’s Office is the burden of the debt service for this budget. Taxpayers within the City & County of Honolulu are now paying approximately $3,900 per person for this budget with debt service. 

Like most 'businesses', it costs money to borrow money. Our City & County and the Mayor's Office is in fact borrowing a great deal of money to fund the tremendous amount of new employees and programs it has added in the last 4 years.

Unlike a 'business' the City & County and Mayor's Office are not cutting expenses in any meaningfull way.

Unlike a 'business' the City & County cannot go bankrupt. Or...can it?

I urge you to stay abreast of our State’s legislative matters.  Mark this website and visit it often to stay abreast of current bills before the Senate and the House:

Keep a keen eye on how our State and City Governments come to terms with the higher operational costs and dwindling revenues brought about by their legislation.  At no better time than this, can an informed and engaged electorate bring reason to bear before our elected officials. 

It is time to curtail the pressures from independant special interest groups who pressure our legislators from not doing the right thing for the general welfare of the citizens of this State. The demise of Superferry by the few to the detriment of the many is one case in point.

We can either urge them to change now for the common good or the damage will continue to rise.

The impact of proposed and past legislation should be considered by all who reside in Hawaii, regardless if you own your home or not. 

It is our very futures that are at stake.

You can keep track of the pending legislation at: 

Pending legislation will also have a profound affect upon our real estate market.
• Sales for this quarter have increased just slightly but any further increase in sales we may have might be coming more and more from Short Sale and Foreclosure activity.

• As of 3/16/09 we stand at 481 For Sale properties in the Short Sale and Foreclosure listings.

• Property values are going to further decrease in the coming months due to Short Sales and Foreclosures in your neighborhood as well as from the pressures of the marketplace, nationally and locally.
• As for Short Sales, the numbers are telling.  During the first two weeks of March 2009, the % of Single Family Homes Short Sales in escrow as compared to total inventory for sale is 25%. For Condos it is 12%. Each month these categories are growing.

A basic tenet of Real Estate is that every distressed property that is sold
brings down the values of the properties surrounding it.

Here is how the Short Sale market looks today:

Recently, I took a different historical look of Oahu real estate.



These graphs and others can be reviewed by logging onto

Visitors to my website are encouraged to e-mail with any questions or comments. 

A common question I receive involves the meaning of “ACS” and its % that I use in my reports. Please let me share a recent example of the following response to an email I received with you.

Aloha Joe & Holly:

Thank you for your email.

I do often get the question ‘what’s up with this ACS stuff.’ No problem.

Simply, ACS stands for “Active Continue to Show.” It is a real estate agent’s term and not very well known by the public. In fact this term is rarely used in real estate outside of the State of Hawaii.

Unlike Solds, which I assume we all know the meaning of, Sold data is 45+ days old. I chose some time ago early in my real estate career to decide on concentrating upon Active Continue to Show data vs. Sold data just for this reason. Sold data is too old. I do not necessarily want to see what has happened in the past as much as I want to see where “where are we going?” Even now, current market conditions do not allow me to use Sold as a way of determining your best suggested sales price. A suggested sales price is best determined by looking at the competition and pricing the home aggressively to reduce or eliminate those in the market with you with like properties. This is unfortunate, but necessary.

ACS data is only 4 days old. What happens when your home receives and offer and you accept it? The agent has to go into the MLS system and change the ‘Status’ of the listing from “Active” which means For Sale, to “Active Continue to Show” which means this home now has an accepted offer. The seller might be even looking for a Back Up Offer. The listing agent is fined several hundred $’s if they do not change the status from Active to ACS within four days of the Accepted Offer. This status change also provides a ‘road map’ so-to-speak for all agents looking at homes for their buyers. Agents may recommend to buyers that they should stay away from ACS’s as in all likelihood the current offer will result in a closed transaction. The only way to gauge whether a back-up-offer should be given is by the buyer’s agent calling the seller’s agent to find out more about the ‘strength’ of the primary offer the seller has accepted.

In terms of research I choose the ACS, as it is new data and provides a clear indication of what buyers are putting in offers for and what is being accepted by sellers that is the newest data available out there to tell us what buyers want.

For instance: I have a listing right now in that is priced at $859,000 in Mililani Mauka. The seller is becoming ‘anxious’ as the property, although well received by those attending Open Houses, etc., has not had a single offer and has been on the market for 60+ days. When asked “What’s going on?” by the seller, I turn to the ACS data and it shows us that although our home listing is a fabulous home and priced very competitively, the current buyers are choosing to purchase in this neighborhood right now in the low $600’s price range. This shows us ‘where we are going.’ These homes in ACS will eventually become “Solds.”

So, to make a long story short, ACS in terms of my reports shows a % of those homes in Escrow with an Accepted Offer, This shows us the ‘level’ of ‘demand’ and what price range it is in.

Right now Oahu ACS % in general is around 17%. Mililani Mauka is 27%. This shows us how well Mililani Mauka is outperforming general #’s on the Island as a whole. 17% vs. 27%.

Although demand, as measured by an ACS% is -29% less than last year’s figure for the month of February, we can also see that the price point most buyers are going into Escrow at is clearly no higher than between $600,000 and $699,999 for Mililani Mauka. This same scenario is true for all over the Island right now.

It is very important to understand that buyers are purchasing in the lower price points. This is not necessarily because this is all they can afford, but as the market continues to fall, the lower price points are more likely to be less affected by the decline, making this a sound strategy. After all, this declining market is going to be around for a while and if the new buyer decides to sell within a few short years, then they will most likely be able to sell much easier than higher priced listings which buyers are clearly showing they do not want at this time.


Do you see how Single Family Homes Median Sold Price for all homes ended up higher in December 2009 than it began in January 2007? 

By looking at the Condo Median Sold Price graph for the same period, you will see it shows the same trend.  

Why would the Median Sold prices rise in a down market?

I believe that Medians are not always a realistic way of looking at numbers. In many cases looking at Median Sold Prices for either Oahu or individual neighborhoods will reveal a vast difference in performance. Keep in mind that Median Sold numbers are heavily weighted or miscued because they reflect sold prices of much higher priced inventory.

Thus, the actual drop in Single Family Home and Condo prices is much more pronounced than you see here.

I foresee a marked deviation downwards from this trend during the 1st Quarter, 2009.  A full report will be ready for your review the first week of April.  You can see this at my website: under Oahu Reports.

Let’s look at another individual neighborhood by comparison:

In Mililani Mauka, we see that home values are not holding.  I envision an accelerated decline in this trend at the end of the 1st Quarter, 2009. The same is true for Waikiki Condos.

When we just look at the Oahu data alone it looks different because of the higher priced inventory that is included. As an example how differnt will a graph of SFH Median Sold Prices look in Ewa where the Median is $425,000 vs. Hawaii Kai or the combined data for Oahu?

Aloha, Mike Gallagher

OK, so now if you are a seller or a buyer you might be getting a little worried right now.


If you are buyer, there has never, (let me repeat that…  NEVER) been a better time to buy. Why?  Interest rates and incentives to purchase such as “Obama Bucks,” for the qualifying first time home buyer, present an opportunity we probably will never see again. 

Looking at the “Big Picture,” I can share that my generation has just passed on to the younger generation all of our wealth!

I have always had a limited savings, some 401k’s and some real estate investments including my primary residence that comprise my financial wealth...or what is left of it.  I planned on retirement using my vast home equity which I have, like most of you, built up over the years through sweat and toil.

Well, that home equity is gone.  If you are like me, so is half of our wealth in 401k’s. Where did it go?

As of this writing, I predict the next generation of buyers is poised to realize a gain from the older generation’s loss.  Rising from the remains of ill-conceived and executed home ownership schemes, the younger generation are now buying homes in greater numbers. There is a caveat.  IF they get into the real estate market now… before our massive Government borrowing all but eliminates any money to loan and interest rates start shooting up. 

My Sage Olde Advice to you young people out there:

  • Get and keep your personal finances in order.
  • Save your money for a down payment.
  • Get into the real estate market ASAP.

If you take my advice on these points by the time you reach my age, you are going to be wealthy beyond your dreams!  You are going to buy low in price, buy low with interest and make a killing in later years approaching retirement. Ah…  The American Dream!

Now for us older folks who have lost their equity and are looking to cash out.  Ready?  If you are not going to hang onto your property for the next 7 to 10 years, my best advice to you is to sell now and I mean, now.

Here is an excerpt from a recent article concerning the bust of the housing market and its effect upon older citizens.

The venue was a recent session of the Senate in Washington, DC.  Testimony was offered by Mr. Dean Baker, founder and co-director of the Center for Economic and Policy Research:

  • Falling home prices have “… decimated the wealth that baby boomers have accumulated in their working years…”
  • The median net worth in households with a person aged 45 to 54 has fallen by more than 45% during the past five years, dropping to $94,200 this year from $172,400 in 2004.
  • For people aged 55 to 64, the decline was worse: a nearly 50% drop in median wealth to $159,000 in 2009 from $315,400 in 2004.  This loss equates to an estimated $7 Trillion in home equity as nothing more than an enormous inter-generational transfer of wealth.

If this doesn’t make you upset enough to keep track of how our Government Officials are spending our money and proposals to raise all of our taxes, then I don’t know what will!

If you are a seller and need a good agent, I respectfully ask you to consider my Team.

I work with another Broker and between the two of us, we have over 60 successfully sold listings for happy clients.  We’re also proud to have over 50 additional sales as buyer’s agents.  All real estate transactions are welcome, but being present as a first-time home owner turns the key in their own front door and walks through to a new chapter in their lives is a unique and special experience, Every Time! 

"Why do I mention the qualifications of myself and my partner?"

An ad in last week’s Honolulu Advertiser by Lisa Scontras attempts to offer limited guidance in selecting your next real estate professional. 

In this article, Lisa Scontras quotes a senior V.P. with another major Oahu brokerage. (Notable is the large block of advertising space this brokerage frequently purchases from the Honolulu Advertiser, including the space for this article)

The reader is presented with an incomplete and worse yet, unfocused set of questions:

  • “Is residential real estate sales your full-time job?”
  • “How many homes did you and your company sell last year?”  (Underline mine)
  • “How many days did it take you to sell the average home?”
  • “How did that compare to the overall market?”

The answers to these questions may point you in a direction, but like an archer who needs glasses, without a clear target to acquire, our archer will miss the point!

The most important question of all was almost asked and it should have been:  “May I see your Transaction Report?”

This simple question tells you how many homes the realtor has sold in their lifetime, how many days it took to sell, what neighborhood or building it sold in and what  percentage to List Price it sold for.

It will also tell you how many Withdrawn and Expired listings the agent has had.

Withdrawn & Expireds indicate two things. The Withdrawn listings usually indicate the agent could not sell the property at the current price. Either the agent or the seller priced the home unrealistically and by executing a Withdrawn and then relisting the home again at a lower price, could be an indication that the agent ‘bought’ the listing or didn’t know how to properly price the home.

Some agents will allow the seller to unrealistically price a home (‘buying the listing’) as 1) the agent can always sell an Open House attendee for the mispriced home, a different, properly priced home or 2) the agent knows they will get a price reduction from the seller sometime in the near future.

Expired listings usually indicate that the home just flat out is not going to sell and it is taken off of the market.

To put this into perspective, a successful sales practice does not include wasting time, energy and money on something that will not sell.

Each and every transaction that agent has ever done is on the Transaction Report. It is for all intensive purposes… A report card.

Here is a sample of our Transaction Report so you know what it looks like:


A related article on Short Sales, what it means to the Hawaii real estate market and prudent strategies to cope with this reality was presented in last weeks Honolulu Advertiser, Home Section.

In the article, Andrew Gomes, feature writer for the Home Section, described what was happening with Short Sales. He also names and writes about a local prominent brokerage that has a Short Sale Team in place. (In fact it is the same brokerage who buys large blocks of advertising in Lisa's article above.)

Again..'Our Archer has missed the target.'

Not one agent in this ‘short sale team’ for this sited brokerage was identified as a short sale “expert.” The term to learn is “Certified Distressed Property Expert.”

My Business Partner holds this Professional Designation as she has studied many hours, past the proper exams as set forth by the instructors and now has received the same training and certification as our Fannie Mae & Freddie Mac trained Distressed Property Experts.

This is a designation earned to apply professional disciplines to an area of real estate that now requires our immediate and undivided attention to avoid any possible complaints or letigation brought forth by consumers.   

Another concerning aspect for the Short Sale seller is what brokerage should they choose to sell their property.

Not all brokerages will negotiate with the lenders in the same manner. The question you should be asking your prospective brokerage is

“Will you negotiate your commissions with the lenders if this becomes a requirement of them for approving the sale?”

There are many agents and brokerages here that will not negotiate their commissions. I urge you to please ask this question if you are a short sale seller candidate.

I am a Professional Realtor and ‘I tell it like it is…

Please send your questions on real estate to:

I hope you have enjoyed the article and don’t forget to see my upcoming report during the first week of April at  

I wish you all much Aloha,

Mike Gallagher
Broker in Charge, RE/MAX Honolulu
Ethics Complaints Review Committee Member, Honolulu Board or Realtors

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