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Mike Gallagher's Real Estate "Crystal Ball" Predictions for Year 2011

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CAUTION: Do not believe everything you read in the
 Honolulu Star-Advertiser regarding real estate sales.

Real Estate Market on Oahu 

It has been a heck of a year! Many changes took place in the real estate market on Oahu and around the nation that have significantly impacted many home owner lives in terms of lower equities, negative equity values, foreclosures, short sales, standards of living, all within a suffocating atmosphere of greatly increased state and national taxes.

Due to publication deadlines I am writing this article just prior to the end of December 2010 for distribution on January 1st 2011, but I will provide you with an end of year forecast and 2011 forecast.

Oahu SFH Year End 2010 Projected Unit Sales

Oahu Condo Year End Projected Unit Sales

Condos have been leading the downturn this year after considerable gain over the sales number for year 2008. At the end of the year 2009, 3,467 sales recorded. I believe we will finish the year 2010 at 3,866, a +10% increase for the year over year 2009. Remember, the market turned and became a buyer’s market in December of 2006. That year recorded 6,380 sales.

Single Family Homes (S.F.H.) performed much better than the condo sector this year which I find surprising due the increase in the cost of a typical Oahu home.

At the end of year 2009, 2,585 sales were recorded. I believe we will finish year 2010 at 2,958 total sales, a +13% increase. In year 2006 recorded sales were 4,041.

Oahu SFH Unit Sales

Oahu Condo Unit Sales 

When looking at just unit sales we can expel a sigh of relief that things are looking up. Just looking at the unit sales however does not tell the whole story so we will continue to explore the year 2010 and project into what may come in 2011.

Is Now the Time?

Before I begin, I must say, I abhorred when real estate agents say, “Now appears to be a great time to buy a Hawaii home.” It brings to my mind another piece of advice, "Don't ask the barber whether you need a haircut." Do your own research, ask questions and get the whole picture.

Oahu SFH Median Sold Price

Oahu Condo Median Sold Price

Do not get too excited about this news, the rise is directly attributable to higher priced homes, which are flooding the market, selling.

Oahu SFH Nov 2010 Year to Date Units Sold by Price Range

Oahu SFH Dec 2009 Sold

Oahu Condo Nov 2010 to Date Unit Sales by Price Range

Oahu Condo Dec 2009 Sold

In Short:

 S.F.H.
  2010 2009
Sold:$2,000,000+ = 2%$2,000,000+ =3%
 $1,500,000-$1,999,999 = 2%$1,000,000-$1,499,999 = 8%
 $1,000,000-$1,499,999 = 7% $1,000,000-$1,499,999 = 8%
 $900,000-$999,999 = 5%$900,000-$999,999 = 4%

In Short:

Condo 
  2010 2009
Sold:$800,000+ = 3%$800,000+ = 1%
 $700,000-$799,999 = 2% $700,000-$799,999 = 3%
 $600,000-$699,999 = 4% $600,000-$699,999 = 3%
 $500,000-$599,999 = 6%  $500,000-$599,999 = 8%

Oahu SFH Nov 2010 Units for Sale Year to Date by Price Range

Oahu SFH Dec 2009 for Sale

Oahu Condo Nov 2010 Units for Sale Year to Date by Price Range

Oahu Condo Dec 2009 for Sale

In Short:

S.F.H.
  2010 2009
For Sale:$2,000,000+ = 15% $2,000,000+ =15%
 $1,500,000-$1,999,999 = 5% $1,500,000-$1,999,999 = 6%
 $1,000,000-$1,499,999 = 11%$1,000,000-$1,499,999 = 10%
 $900,000-$999,999 = 6% 

$900,000-$999,999 = 2%

In Short:

Condo 
  2010 2009
For Sale:$800,000+ = 14% $800,000+ = 2%
 $$700,000-$799,999 = 3% $700,000-$799,999 = 3%
 $600,000-$699,999 = 4%  $600,000-$699,999 = 6%
 $500,000-$599,999 = 5% 

$500,000-$599,999 = 6%

During the course of last year one most realize that only so many listings come onto the market in 12 months and only so many sell. What is surprising is the amount that sold is so low.

Oahu SFH Dec 2010 Year to Date Odds of Selling

Oahu Condo Dec 2010 Yesr to Date Odds of Selling

More along the lines of “Should I ask my Barber if I need a Haircut” is the Honolulu Board of Realtors President was quoted by the Honolulu Star-Advertiser that "prices were looking up and the market is getting much better due to the rise in percentage list to sell ratios." Really?

Oahu SFH Dec 2010 Year to Date % Sold at Full Price or More

Oahu Condo Dec 2010 Year to Date % Sold at Full Price or More

There is so much misinformation out there concerning the real estate market it is no wonder no one knows what is going on. Realtors, agents all receive a sales report each month from the Honolulu Board of Realtors so in my opinion they are slightly in tune, but when you cannot rely upon the numbers the Board is putting out, what do you do? My advice is you do your own research and of course call me. I will tell what is going on. I will not tell you it is “Great Time to Buy,” or that “You Need a Haircut.”

I do this because I want your trust and your business. You also deserve to have the ‘straight story’ from someone who will give you the ‘whole picture.’

When it comes to sellers, it seems they do not really want to hear what their home is worth from a realtor and will list with the first realtor who promises ‘the moon’ on sales price. Then when the home does not sell, no problem, the realtor simply asks and typically receives permission to continually lower the asking price until the home is sold. If that does not work, the realtor will keep successively re-listing the property and dropping the price until the home sells, all the while the market is heading down and ultimately the seller looses a ton of money in the ultimate sales price.

Kalaheo Hillside in Kailua for example: 19 sales, total market time for all listings, combined: 135 months or 7.10 months / listing. Total combined listing price: $14,646,800. Final combined sold price: $13,662,900. Between the initial asking prices and the final sold price the difference is -$983,900 in price reductions and loss of equity for an average loss of -$51,784.21 per listing sold.

How many times were 19 homes sold in Kalaheo Hillside re-listed by the same agent? The answer is 32% of the time.

If you are going to sell your property this year, do it correctly. Just do not listen to what you want to hear.

December 2009

12-01-2009 - 12-31-2010

Note: Average prices are within the area’s boxes. Not medians.

November 2010

11-1-2010 - 11-30-2010

Inventory

Much has been said about inventory this year. It IS the single widely used ‘buzz word’ in the industry and rightfully so.

“Inventory is tight.” “There is not enough inventory.” “Better buy as soon as you see something with these interest rates.” “Inventory is so low, prices are going up.”

We have all heard this over the course of year 2010 and for the most part it is true, but it is not the “whole picture.”

Months of Supply

Months of Supply = Total Sales, Year to Date divided by the number of months and dividing the current For Sale inventory by the answer.

November 2010

11-012010 to 11-30-2010

Yes, the inventory situation is great for Oahu home sales and prices. Anything under 6 months of supply is considered by the industry as a “Seller’s Market.”

Yes, prices are stabilizing and in some areas on Oahu prices are rising. You still have to look at the whole picture to know what is going on.

Back in November and December 2010 For Sale inventory started to rise in certain areas on Oahu. In large part the areas that are affected are the more expensive areas of the island as in 2010 we witnessed a significant rise in high priced homes coming onto the market. I do not believe this will be much different in year 2011, in fact, I believe this trend will increase as more and more expensive homes come onto the market in larger numbers in 2011.

One scenario suggests that would be sellers are looking at the opportunity they have with low inventory and stable and sometimes rising prices.

The ‘other’ scenario, more in line for the high priced would be seller is that they are going to get out ‘while the getting out is good.’

For instance: 

 Oahu SFH Nov 2010 YTD Odds of Selling $2,000,000

 Oahu SFH Nov 2010 YTD Odds of Selling

Oahu SFH Nov 2010 YTD Odss of Selling $600,000-$699,999
Oahu Condo Nov 2010 YTD Odds of Selling $800,000+
Oahu Condo Nov 2010 YTD Odds of Selling $300,000-$349,999
Oahu SFH Dec 2010 Inventory
Oahu Condo December 2010 Inventory

Distressed Property

Distressed Property: Foreclosures, Bankruptcy, Short Sales, Probate, Lender Sale.

Another “buzz word” we heard a lot of in 2010: “Foreclosures.”

Distressed Property

Oahu Distressed Property Months of Supply

I have created the above map to show the current months of supply of homes for sale that are Distressed Properties. The GREEN arrows are condos and the RED arrows are single family homes (S.F.H.) The direction of the arrow, up or down, indicates whether or not the stats for any particular neighborhood is below or above the Oahu Averages.

According to the common explanation for Months of Supply, anything less than six Months of Supply is considered a seller’s market. The overall Oahu Months of Supply for distressed property is 6.27. This indicates it is still a buyer’s market.

Not all areas of Oahu are buyer’s markets. Ewa S.F.H.’s and condos, Kapolei S.F.H.’s, Hawaii Kai S.F.H.’s and condos and many more areas are seller’s markets.

The largest areas on the island with the most amount Distressed Property Months of Supply are Waikiki and North Shore area condos, both exceeding 14 Months of Supply.

Oahu SFH Dec 2010 YTD Distresses Property Odds of Selling ALL PRICE RANGES
Oahu Condo Dec 2010 YTD Distressed Property Odss of Selling ALL PRICE RANGES
Oahu % of Inventory Distressed Properties to Total Available Inventory
Ewa % of For Sale Distressed Properties to Total Inventory Ewa
Leeward SFH % of For Sale Inventory Distressed Property to Total Available Inventory
Waipahu Area % of Inventory Distressed Property to Totoal Available Waipahu Area Inventory
Oahu SFH Dec 2010 YTD Distressed Proprty Units For Sale

Oahu SFH Dec 2010 YTD Distressed Property Units Sold

 

Oahu Condo Dec 2010 YTD Distressed Property Units For Sale

 

Oahu Condo Dec 2010 YTD Distressed Property Units Sold

Even More Important than For Sale and Sold is, “Where we are headed?”

 

Oahu SFH Dec 2010 Distressed Property Units in Escrow (A.C.S.)

 

Oahu Condo December 2010 Distressed Property Units in Escrow (A.C.S.)

Oahu had had its fair share of foreclosures and like distressed properties this year. Overall, we are ‘not like the mainland’, thank goodness. Our current inventory in distressed properties is manageable and much lower than the mainland. The question is: “Is what is happening on the mainland going to affect us here?”

From the Wall Street Journal:

"Number of the Week: 103 Months to Clear Housing Inventory"

103: The number of months it would take to sell off all the foreclosed homes in banks’ possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales.

How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern.

 

Real and Shadow Inventory

Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.

From Corelogic:

December 13, 2010, Santa Ana, CA
CoreLogic (NYSE: CLGX), a leading provider of information, analytics and business services, today released negative equity data indicating a third consecutive quarterly decline in negative equity for residential properties. CoreLogic reports that 10.8 million, or 22.5 percent, of all residential properties with mortgages were in negative equity at the end of the third quarter of 2010, down from 11.0 million and 23 percent in the second quarter. This is due primarily to foreclosures of severely negative equity properties rather than an increase in home values.

During this year the number of borrowers in negative equity has declined by over 500,000 borrowers. An additional 2.4 million borrowers were near negative equity with less than five percent equity in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5 percent of all residential properties with a mortgage nationwide.

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

"Negative equity is a primary factor holding back the housing market and broader economy. The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement in negative equity," said Mark Fleming, chief economist with CoreLogic.

 Foreclosure sign

Oahu Median Sold Price

  

Forecast 

Mike Gallagher’s Predictions for 2011

Based upon what we have learned from year 2010, we can honestly say “We are not the mainland.”

I also conclude that if we are not the mainland, we will still be affected by transpires on the mainland in 2011.

“What will transpire on the Mainland?”

  • Increased delinquencies, foreclosures, short sales and equity loss resulting in reduced sales prices.
  • Continued high unemployment, higher personal taxes and ineffective Congress.

“What will transpire on Oahu?”

  • Increased delinquencies, foreclosures, short sales and equity loss resulting in reduced sales prices.
  • Continued high unemployment, higher personal taxes and a Hawaii government that will continue to add to the State and City & County employee rolls and social program funding.
  • We will see a higher State G.E. Tax, a State Income Tax increase and a Property Tax increase. This will be done in an effort to create jobs through increased taxation and public works projects, which is exactly what we are seeing now on the horizon in the rail, sewers, water infrastructure work.

Oahu Median Sold Price Predictions 

It is my hope that you have enjoyed reading this report and that you have gained some market knowledge that will prove valuable to you during the coming year.

I encourage you to ask questions, do your own research and give me a call to help you buy or sell your next home. 

Happy New Year!

Mike Gallagher
Broker in Charge, Abe Lee Realty
Ethics Complaints Review Committee Member, Honolulu Board of Realtors
http://www.hawaiirealestatestatistics.com/
http://www.aroundhawaii.com/

 


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Comments

User Graphic
premier — Wednesday, February 9, 2011
reportreply
Outstanding Information Mike!!



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