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The Tip Off For Kakaako Luxury Condos

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It all started almost a year ago when my phone rang. An Investment Banker was on the other end of the line. After a short introduction I asked what I could do for him. He of course is representing a Consortium who wanted to examine ‘opportunities’ in the Waikiki and more specifically Kakaako Luxury Condo Markets. The information needed by this gentleman included any ‘distressed’ property sales, Days On Market (D.O.M.), Price / Square Foot, amenities, Sold data, location within Honolulu, etc.

More recently I have received three more phone calls and a couple of emails from other representatives of investors asking for the same information and this prompted me explore this market and to write this article.

After performing research on this particular market for the investors I was quit surprised at the results.

There are at any given time over 100 Condos for sale in the Kakaako area ranging in for sale as low as $400,000 to as high as almost $4,000,000. This may not seem like many condos to some especially when you stop to consider that the Waikiki Condo Market has approximately 600 condos for sale but the point is not in how many units that are for sale, the point is more about the sizeable investment in U.S. $’s these individual condos represent that are for sale.

When I researched this data I first wanted to see what was for sale and I came up with this Pie Chart Below:

Just the immense amount of for sale inventory in the $1,500,000+ range almost takes one’s breath away and this represents units, not dollars. There are approximately 25 condos for sale in this price range alone and there are another 16 condos priced $1,000,000 to $1,499,999.

Now that we know what the market looks like in terms of what is for sale and how each of  the different price range represent %’s of the entire market I wanted to see what buyers were purchasing by looking what is the newest data available. This data I term as A.C.S. and it means Active Continue to Show. This category means that these are the condos that have very recently received an offer and they have just gone into escrow under contract. An agent must change their listing from “Active” to “Active Continue to Show” (A.C.S.) within four days of an approved contract by both buyer and seller.

This data interests me more than Sold data as when we analyze Sold data we have stop and consider that these condos that sold went into escrow probably about 60 days ago. So instead of looking where we have been 60 days ago I like to look at where we are now by looking at the A.C.S. category.

It is clear that most of purchase decisions by buyers are at the $600,000 to $699,999 price range at 41%. One could say that 30 condos going into escrow in this Kakaako market is not very much but in terms of $’s it represents approximately $21,000,000 that is in escrow. You should also remember as well that this is representative for one month, September. So when we think again that 30 condos going into escrow is no big deal we need to back up and take a look at the amount of dollar volume this actually represents in transactions that may culminate into a sale.

Of course what goes into escrow may not end up culminating into a sale as some condos in escrow will drop out by cancellation due to many possible factors including appraisal or buyer financing. What we term “Short Appraisals” is when the appraisal amount is less than the contract price. This amounts to a Short Appraisal. When this occurs the buyer can cancel the contract or if indicated in the contract, the buyer and seller may have the opportunity renegotiate the contracted purchase price either to the appraisal amount or some where in between. If the purchase price is renegotiated higher than appraisal price the buyer will have to close with more cash as the finance company will only loan up to the appraisal price.

The logical next step to look at then is what has sold. In the example used below we are looking at what sold in the month of September ’09. At this point we can then compare what is on the market for sale, what is in escrow now and what has sold in the month of September. The condos that sold in most cases started out going into escrow about 60 days ago.

What has sold in the month of September is all across the board but some price ranges sold more than others. The majority sold in the $400,000 to $499,999 price range but there was activity in the higher price ranges as well. The point to take away from these graphs is that during the month of September buyers chose to purchase in the $600,000 to $699,999 price range predominantly and this is a higher price range than what we have seen in the sold pie chart.

After reviewing this information I decided to check and see which ‘Luxury Condo’ building were doing the best in Kakaako and what I find is that not only is the best selling price range is at $600,000 to $699,999 and the best selling size is a 2 bedroom, fee simple of course.

This brings the best selling Luxury Condo buildings down to two: Moana Pacific and 909 Kapiolani Blvd.

Both of these condos are pretty evenly split in unit sales totals over the past 6 months and both afford the investor a great views and amenities.

In both of these graphs we can see that prices have decreased over time and in the case of 909 Kapiolani Blvd. they have dipped below the $600,000 threshold. Remember this is only for one month.

If these beautiful condos are selling in the $600,000 range you can imagine what they will be selling for in years to come when the economy should be doing better.

If you need any other information on this market please feel free to contact me. You can reach me via email at mikeg@hawaii.rr.com or by cell at 808-384-9015.

For other reports from around the Island please see my website at www.hawaiirealestatestatistics.com

I wish you all much Aloha,

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


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stephen2 — Thursday, November 26, 2009
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"If these beautiful condos are selling in the $600,000 range you can imagine what they will be selling for in years to come when the economy should be doing better." That may or may not be the case, but there's no reason such prices will hold for the next year or so. Units in Keola Lai, Moana Pacific, and 909 etc. are available for well below $600k, and there will be more. The next barrier is $500k, which is more than many sold for in 2006/07 anyway! Key to the current elevated prices is that many were bought by speculators (investors) between 2005 and 2008, but as the market turned a year ago they couldn't be flipped. The owners, many of whom are realtors, are staring at negative equity unless they can sell to people who will believe that now, as always, is a great time to buy! When you have results of your property search in oahure.com, for example, check out the disclosures; 30% of 60 units in my search results are owned by realtors! And they're the ones not dropping the prices through months and even a full year on the market. These expire and may re-list later. These folks own a large shadow inventory, and they're helping to keep prices up. Check the expired listings, too. All the newer Kakaako buildings are loaded with realtor owned units (909, Moana Pacific, Keola Lai, Koolani, etc.). Foreign money and US investors can find much better deals elsewhere, and few, if any of them believe the Honolulu market has bottomed. These condos may or may not be beautiful, but that doesn't mean they're worth the asking prices! Case in point is Hawaiki Tower. C'mon, compare the 2br 1000 sq. ft. units to 909, Keola Lai, etc., and you'll see what I mean. Ten years old, lousy floor plans, aging fixtures and kitchens... no way are they worth well over $600k when much better appointed and newer units are $100k less in 909, Keola Lai, etc. You can 'imagine' them selling for more in years to come, if you must insist on overpaying now. Or you can wait for prices to come down while still imagining a market recovery :-)


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