Oahu June 2010
Distressed Property Real Estate Report

In the upper right hand corner of the map is a legend which shows the current A.C.S. % for the Distressed Properties on Oahu. Simply, the percentage is of what is in Escrow with Just Accepted Offers. This percentage gives us measure of the activity level, inventory level and general performance of the market. The A.C.S. % is affected by variances in inventory levels as well as how many homes are in Escrow Just Accepted Offers. The lower the inventory and the higher the amount of homes in Escrow will give us a higher A.C.S. %.

Also in this legend are the Average For Sale and Sold figures for Oahu Distressed Properties. It is important to note that the percentages within the boxes on the map are the increases or decreases of Distressed Property inventory since March 31st. 2010. The Up or Down Arrows indicate and increase or decrease.

These reports are time consuming to produce and therefore my decision to update this type of market activity every Quarter.

As we can see from the Map, Oahu increased in all regions and neighborhoods except two: Kailua and Hawaii Kai.

The biggest single increases in inventory of Distressed Properties were the
Metro-Honolulu Condos and Kapolei Single Family Homes at +88%. (Metro includes Waikiki)

It is important to note that the Single Family Homes and Condos are not performing with the same characteristics.

As I noted many times before, it is the Condo market that leads the downturn in this market. After the end of the First Time Buyer’s Home Tax Credit which expired April 30th. 2010 unit sales have slid in both Single Family Homes and Condos while we are in the “Peak Selling Season” of April through September of each year. I believe it will become evident to you that Condos are no longer the attractive alternative to Single Family Homes and are generally performing worse than their counterpart. This is both true in Non Distressed as well as Distressed Properties.

Since late 2008 Distressed Properties have captured the interest of a multitude of buyers as evidenced by the tremendous rise in the A.C.S. percentages.

We can also see from the two above graphs how the Single Family Home A.C.S., although has declined is still more or less flat line while the Condo A.C.S. percentage is taking a nose dive. Remember, A.C.S. percentage can be affected by rising inventory. We shall see later if this is the case.

I am having some difficulty discerning what the meaning is when I see these Average Sold Prices either rise or fall. The assumption I will make here is that the Single Family Homes have gained in Median Sold Price which I believe would mean that higher priced Distressed homes are selling. Subsequently it might be safe to assume that the more, affluent owners are now having more difficulty maintaining their mortgage payments.

As for the Condos, in light of the decrease in the Median Sold Price, this drop can only have occurred with more, lower priced Condos having been sold. The same might be true of the owners of these properties showing us that these owners are now having more difficulty in paying their mortgages. 

Unit sales of both Single Family Homes and Condos continue to rise but I must caution the reader with recent news that Bank of America, Sun Trust and G.M.A.C., Fannie Mae secured loans are now are being “forced” into foreclosure, even if they have been “Short Sale Approved.” This action started in June 2010 we are probably just seeing the tip of its influence in these numbers.

D.O.M. or Days On Market needs some explanation here. D.O.M., as used by many Real Estate Boards is the measure of time it takes a home to receive an Accepted Offer and go into Escrow. Therefore this figure should indicate the speed in which the market is moving.

There are other ways to measure to D.O.M. which include Active or For Sale D.O.M. and Sold D.O.M.
As an example, here are the three D.O.M. for Oahu Single Family Homes for June 2010:

For Sale D.O.M.: 98
In Escrow (A.C.S.) D.O.M.: 59
Sold D.O.M.: 64

It is the middle D.O.M. the Real Estate Boards use which is a measure of how fast homes are going into Escrow.

The graphs above are misleading as when I began to collect the data the “clock was still ticking” sort to speak and the high D.O.M. figures slowly decreased through time until my data collection started to enter a time period that was more consistent with current time. As this occurred we see a flattening out of D.O.M. as it becomes an accurate portrayal.

I professionally like the Active or For Sale D.O.M. as it ages the entire inventory and tells me how long on average the inventory has been on the market without an offer.

The Sold D.O.M. is just an average of how long it took for homes to sell. As you can see it is running just over two months.

If we can assume that it is a good sign that Single Family Homes New Listings are declining over the past year then can we assume that it is not a good sign that Condos have suddenly jumped? I think this is a safe assumption. Condos are deeper trouble than Single Family Homes.

New Listings of ALL (Non & Distressed):

Taking into consideration, all listings, the Single Family Homes are declining in New Listings, while the Condo New Listings are rising. The decrease in New Listings for both Single Family Homes over the past 12 months is not the same as the Condo decrease.

Single Family Home owners I believe are “holding on” to their properties as long as they can keep paying mortgages and are confident that when the market is better they then may sell.

I do not think this is the case for Condo owners, as more of them who purchased between 2000 and 2005 at the height of the market are now in trouble.

Earlier in the year the New Listings coming onto the market for Single Family Homes were predominantly in the $400,000 to $499,000 but recently they are split between the $300,000 to $399,999 and the $500,000 to $599,999 price ranges.

The Condo New Listings for most part have been in the $150,000 to $299,999 price range all year.

As I mentioned before, it does not bode well for Condos as the Average For Sale Price has increased +3% since June 2009, especially in light of the Single Family Homes coming in at -4% in Average For Sale Price of New Listings. I can only assume that the Distressed Properties in Condos is starting to reach into higher price ranges. Remember this is New Listings For Sale, not Sold figures.

Regardless whether or not you approve of Obama’s job performance on the Nation’s Economy, I have simply entered a milestone into these graphs to show what has happened since his election.

It does not take a “Rocket Scientist” to figure out that the Distressed Property market has gotten much worse since his election.
 
It is generally known by most that his stimulus plan has failed and plunged our Nation into unconscionable debt, the Stock Market has plunged, unemployment is actually coming in at 17%+ (Real Figure) and increasing. This has lead to massive “Going to the Mattress” mindset of the average Consumer. Consumers are not spending.

What you may not be aware of is the following:

1. Obama’s Mortgage Mediation Policies have failed. Ask any Realtor.
2. Cumo’s H.V.V.C guidelines for lenders are a disaster. Ask any Realtor.
3. Banks are not lending. Ask any Realtor.

I do care greatly who is in office, but I do not care who fixes this, but it has to be fixed.

Additionally on the Horizon: The Tax Payer (You) and Fannie Mae & Freddie Mac

Here is a part from a recent article dated June 2010 from Bloomberg News:

The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.

The above graphs present further evidence of the Condo Distressed Property market dire straits.

I hope that you have enjoyed this report on the current status of the Distressed Property market. I encourage any questions you may have so please feel free to contact me.

I am also looking for a few buyers and sellers to work with so if you are need please consider my expertise and services. Thank you.

Mike Gallagher, Broker in Charge, Abe Lee Realty
Ethics Complaints Review Committee Member, Honolulu Board of Realtors

mikeg@hawaii.rr.com, 808-384-9015 cell.
Websites: www.hawaiirealestatestatistics.com and www.aroundhawaii.com at Oceanic Cable web, under “Real Estate.”