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Oahu's Distressed Property Report - 1st Quarter 2011

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DO NOT BELIEVE EVERYTHING YOU READ IN THE HONOLULU STAR ADVERTISER

A whopping 74% for Single Family Homes and 86% of all Condos are in Escrow (A.C.S.) as of March 31st. 2011. The Distressed Property situation on Oahu is almost non-existent.

In most cases Distressed Properties have decreased in all major areas on Oahu. One must be cautious with this good news as we still do not know the effects of Lenders forestalling foreclosures as dictated recently by both local and National legislation to prevent erroneous foreclosures. There may be a mountain of Foreclosures which have been back-logged and about to hit the markets. I believe this is actually true but I also think Hawaii will not be significantly impacted when the wave hits.


Where we did see a rise in Distressed Properties since January of this year is in Hawaii Kai Single Family Homes and Condos, Kapolei Condos and Mililani Town Area Single Family Homes. If you are a patient buyer and are looking for a bargain you might want to begin searching in these areas for deals.

In every instance since January of this year the Months of Supply (M.O.S.) has decreased all around the Island with the exceptions of the North Shore and Kailua Condos where the number of Distressed Properties is insignificant. This is all shaping up as really good news for property values on Oahu since no matter how we may disagree how and when Appraisers use Distressed values to lower non-Distressed Appraisals, with much less Distressed Properties on hand the impact to lower property values will be less and less.

The beginnings of some of the graphs are somewhat misleading due to “Actives” or “For Sale” properties tracking are not correct in the beginning months of recording. When you go back to see how many Active, (For Sale) listings there were in January of 2010 in the month of June 2010 for example, those that show up in the M.L.S. as Active have moved on to become In Escrow or Sold.

The main point to take away from the graphs is not the huge percentage increase or decreases but the Up and Down motion of rising and falling inventory.

Sales of Distressed Properties has continued to steadily rise which has severely impacted the available inventory.

It is still too early to tell, but I would think we might start seeing fewer sales in the coming months as long as the Lenders do not add more inventory to the mix. For now, inventory is low and buyers seeking bargains in these types of properties are currently hard pressed to find their ideal home due to the low inventory.

Of course this is all conjecture going forward without knowing how many homes are currently in a back log to be foreclosed and how many Families will be “pushed over the edge” in this improving economy (yes, I am being sarcastic). Severely rising taxes from Hawaii’s legislature will compound the future Distressed properties by providing more energy to moving families into upside-down finances as well as inflation and Hawaii’s high cost of living.

I would like to take a break here and explain a theory I have about Hawaii Real Estate, especially Oahu Real Estate. I receive many comments from readers, friends and associates concerning the high cost of Oahu Homes. Many of these folks want to “Keep Kailua, Kailua”, have opposed any further building and stores like Target coming to Kailua or Home Depot to Hawaii Kai, etc. Their general opinions lead to one overriding question:

“How can Hawaii’s citizens continue to afford a home?”

My answer to them is: “It is already too late to think about this because the answer to this question is our Hawaii Citizens can no longer afford a home here.” It is just too late and you cannot stop progress if that is correct word to use.

My theory is that Hawaii has turned into the “Retirement, Vacation Land” for the well to do. We have always been a World Wide destination. We will continue to be in the decades to come. There is only so much land. There are only so many homes you can build, especially on Oahu. Prices for Oahu homes have risen steadily over the years.

The Average For Sale Price of an Oahu Home the month of March 2011 was at $1,023,331 and the Average Sold Price was $935,667. The Average For Sale Price of Oahu’s Condos was $473,254 and Average Sold was $455,099.

Assuming a 20% Down Payment for a Mortgage of 30 years at Today’s Interest Rate Average of 4.50%, only 1% Origination Fee and I am not going to factor in Monthly Taxes or Maintenance Fees, the following is an estimated Monthly Mortgage Payment for both of the Average For Sale Prices:

Single Family Home: $4,148.00      
Condo: $1,918.00

Oahu’s Resort Communities of Ko’Olina, Turtle Bay-Kuilima, Time Shares in Waikiki, Condotels are all growing in unit sales and the Average For Sale Price in Kakaako’s new High Rises for a 2 bedroom Condo is $910,000. It is no small wonder that Distressed Properties have virtually dried up. Of course this also means huge Property Tax Income to the State and City & County! 


  

New Distressed Property listings have risen in the past and it is anyone’s guess just how much higher the inventory will go. One thing is for certain right now and that is inventory has dropped significantly due to many savvy buyers snapping up these Distressed Property values.

“Hawaii is On Sale” hopefully is over but read my Oahu Reports at my website and you will see that I believe we are in whole New Market as the High End…$1,000,000+ in many of Oahu’s markets is slowing down in unit sales and the Hawaii Kai High End has almost stopped selling.

   

There has been some Distressed Property market shift over the past couple of months such as Ewa is growing and Waipahu shrank.

Let’s see what has sold in the past few months. Everything here is based upon what has transpired from February 1st through March 31st. and compared to January 1st to the 31st 2011 in many cases.

The Leeward Area shrank, the high end properties in Diamond Head practically disappeared and Ewa grew tremendously. Remember to compare these graphs with today’s existing inventories. 

    


Suddenly, in two months there was a huge increase in sales in Metro Honolulu Condos. Pearl City and Waipahu grew as well. Ewa Condos shrank but this in all likely-hood was due to lack of inventory.

Let us see how this plays out By Price Range:

Remember, what is happening in Escrow is now, what has sold is what into Escrow approximately two months ago.

  

There is taking place right now a huge buyer shift into the higher price range of $400,000 to $499,999.

For Condos, the opposite occurred and surge of new buyers chose the lower price range of $100,000 to $199,999.

Most buyers of Oahu Non-Distressed properties are purchasing in lower and lower price ranges. It is nice to see those purchasing Single Family Distressed Properties in higher price ranges and I would guess that most sales in the Condos lower price ranges are coming from Metro-Honolulu and great deal of them from Out of State buyers.



How did we look last year?

I hope that you have enjoyed this report. If you have any questions please let me know by email: mikeg@hawaii.rr.com or by phone 808-384-9015

Please do not miss more my reports on my website at www.hawaiirealestatestatistics.com

Also available on my website:

Ever wonder just how well some Brokerages actually sell at Full Price Or More? Well now you do not have to guess.

I wish you all much Aloha,

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


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