Oceanic Time Warner Cable's Community Website'Do Not Worry, Sales will be good this Summer'
Really?
This is what was reported by the infamous Honolulu Star Advertiser this month with quotes from Prudential Locations L.L.C. supporting the Star Advertiser statement:
‘Do Not Worry, Sales will be good this Summer.’
Here is what we know about the Month of April 2011 the same month The Star Bulletin and Prudential Locations L.L.C. both said ‘Don’t worry about it.’
A.C.S. % is how many homes are in Escrow with Just Accepted offers as compared to total inventory For Sale. Let’s take a closer look at these two graphs:
Look at the cycle of unit sales for year 2010 where it was at a low A.C.S. of 28% for December 2009, then rose to 36% for April 2010, dived to a low of 28% again in July 2010, rose to the year’s high of 37% to bottom out in December of 2010 at 30%.
Yes, April 2011 is at 34% and is -2% down from 12 months ago and now it is nose diving until when? July? What will it be in July?
Let’s take a look at what is in Escrow:
When are these homes in Escrow right now going to record? Usually there is a 60 day Escrow process so I would venture to say that they are going to record in late June, early July.
I don’t know, but the last time I checked the Month of June is during the Summer. At this point I do not see how: ‘Do Not Worry, Sales will be good this Summer’ makes any sense.
April 2010 last year was the highest A.C.S. percentage and then it dropped to a low of 22% in July 2010 and ended in December of 2010 at 23%.
I also do not see how sales are going to be recorded in June and July with the current drop in units In Escrow for April. The only thing that is going to change this picture for both Single Family Homes and Condos is a good upswing in homes going into Escrow for the Month of May. We will have to wait and see.
As I write this report for publication on June 1st for the Oceanic Cable Website Aroundhawaii.com current May 16th, 2011 Oahu figures are as follows:
Total Single Family Homes For Sale: 1,314
Total Single Family Homes In Escrow: 435
= 33% A.C.S.
Total Condos For Sale: 1,785
Total Condos In Escrow: 514
= 29% A.C.S.
Although there is a modest gain for Condos A.C.S. percentage and almost no change for the Single Family Homes A.C.S. percentage, the amount of homes In Escrow as of May 16th 2011 for both categories are indicating no upswing in sales for the months of June and July.
This is subject to change as between now and July we might see a upswing of homes going into Escrow, as after all, this is the “Peak Selling Season” which is traditionally every year for the months of April through October.
In my estimation what we will see this Summer is an almost No Change from last year’s performance but I have a hunch that the ‘Second Bump’ that seasonally takes place in September through October will show a larger increase in sales than year 2010.
I expect the ‘Second Bump’ to be larger than last year as towards the end of this coming Summer I believe more buyers will be motivated to purchase due to the National and Local economic factors of rising Mortgage Rates, Inflation and the cost of living in Hawaii. I believe that buyers currently “sitting on the fence” will be motivated to purchase by year end.
There are many factors to consider in predicting future sales and some of the major factors to consider are Inventory, Asking Price of Inventory and consequently affordability.
In my opinion Oahu and the rest of Hawaii has two distinct Real Estate Markets, The International Market and the Local Market.
Above is what is For Sale as of April 30th for Oahu.
Note the difference in the $800,000-$899,999 Price Range.
Here is what was in Escrow as of April 30th:
Here is what is in Escrow as of May 16th:
Not much has changed except the AFFORDABLE $400,000-$499,999 range.
Condos might be the one case where sales will increase as we get into the Summer months when you compare these Pie Charts. There is a good increase in the price range $200,000 to $349,999 which in most cases should be considered the upper price range of most buyers.
The price range $300,000 to $599,999 is where most of the Single Family Homes are currently In Escrow (A.C.S.)
As I said earlier: “In my opinion Oahu and Hawaii has two distinct Real Estate Markets, The International Market and the Local Market.”
What you see above is primarily the “Local Market.” This is where mostly residents of Hawaii are purchasing. Of course there are International Investors in these numbers too but you also have to stop and consider what is the ownership percentage for Hawaii and Oahu?
According to the last census I could locate in the year 2009 it was reported:
Hawaii’s home ownership of 56.7 percent in 2009 was among the bottom four states and the District of Columbia. Washington D.C. had the lowest home ownership at 44.8 percent. New York State was second lowest at 55.0 percent; California was the third at 56.6 percent.
I believe that since 2009 Hawaii Home Ownership level has dropped into the Mid-50 percentile level which makes us either #1 or #2 in ranking of States with the lowest ownership level.
Of course other interesting factors contribute to Hawaii Ownership such as:
The U.S. averaged 3.2 percent of occupied housing units with 1.01 or more occupants per room. Hawaii ranked No. 1 with 8.5 percent of housing units with more than one person per room.
Hawaii’s median rent of $1,293 in 2009 placed Hawaii at No. 1 in the nation. The U.S. median rent was $842 per month. Hawaii homeowner’s monthly housing cost of $2,282 in 2009 was the third highest in the nation. Our state also ranked high for proportion of income spent on housing. The percentage of mortgaged owners spending 30 percent or more of household income on selected monthly owner costs was second highest in the nation. Hawaii was ranked No. 3 in the percentage of renter-occupied units spending 30 percent or more of household income on rent and utilities.
Hawaii ranked No. 2 in the nation in percentage of workers working in the service occupations with 23.0 percent of workers in this category.
The “International Market” I believe invests in Single Family Homes priced between $600,000 and Up and from $300,000 and Up in the Condo market. I have no statistical basis in which to make this claim but based upon our Median Price ranges I tend to think my assumption is true because our Medians keep going upward for the most part when most of the sales are coming from lower price ranges. I believe International Investors are purchasing upscale properties which drives the Medians up.
Statistically on a National basis during the year 2010 it was Investors or Non-Occupant Owners who purchased the most housing and they were also the highest percentage of Owners who defaulted on their Mortgages.
It is for this reason current Bills passed in the National and Local Legislatures to mitigate foreclosures for “Resident Owners” might be somewhat misplaced when we consider that a higher degree of defaults are coming from Non-Resident Owners.
Another question we might also ask ourselves is “Are Non-Occupant Investors” backing away from Hawaii Real Estate?
According to the National Association of Realtors the housing boom rose to it’s peak in 2005, home buying by Non-Occupant Owners grew faster than Owner Occupants. Purchases by investors grew by almost 50% between 2003 and 2005. Over the same time period Investors share of the Sales increase of homes was approximately 61%. If you add in the estimated 20% of purchases from Vacation purchases and add it to the rest of the Non-Occupant ownership, 75% in the growth in unit sales across the Nation came from Non-Occupants.
The last available data from the Hawaii Department of Economic Development Business and Tourism was in year 2007 and they estimated that the Owner Occupancy was at 60%. My attempts to find out just how many homes are owned by Non Resident Owners have come up with a big fat zero. I believe we would have to run the entire Tax Map Records (T.M.K.) in order to find out how many Non-Resident Owners there are in Hawaii. Although this is enormous job, it is possible because the City & County now charges a higher rate of Property Tax for Second Homes, Vacation Homes and Non-Resident Owners. This means our Legislature has targeted INVESTORS. I am not so sure this is a good thing to be doing in this Economic Climate.
Ah heck…don’t worry about because if the Rail ever comes to fruition all owners of property in Hawaii, not just Oahu, will see their Property Tax go sky high similar to what the Legislature has recently enacted for our Motor Vehicle Renewals. Don’t believe me? Think about this: Who is paying for the Rail? Answer: We are but it’s the City & County who is doing it on our behalf. The real question: Where does the City & County get its only source of revenue? Answer: PROPERTY TAXES.
Is it really a Good Time to Buy?
It all depends on your individual circumstances. Period. If you want and need to get into a home and grow your Family or you just want more space and something that you own instead of paying rent to someone else so that they can pay their mortgage, then by all means buy. It’s a great time to buy now as interest rates are good but they will only stay good for so long.
Let’s face it, the reason why we have inflation, which is now gaining a strong foot hold in our Economy, is due the printing presses at the Department of Treasury spitting out Dollars 24 hours a day, 7 days a week which is driving the value of the U.S. Dollar to all time new lows.
Dollar Is Losing Value Over the Long-term:
The dollar's value can be measured by exchange rates, Treasury notes and the amount of dollars held by foreign countries. These three measurements usually are in sync with each other. No matter how you measure it, the dollar is losing value over the long-term. Here's why:
The Dollar Value Is Measured by Exchange Rates:
The U.S. dollar is most easily measured by its exchange rate, which compares its value to other currencies. Currency exchange rates allow you to determine how much of one currency you can exchange for another. Exchange rates change every day because currencies are traded on the foreign exchange market, known as forex. A currency's forex value depends on a lot of factors, including Central Bank interest rates, the country's debt levels, and the strength of its economy. Most countries allow their currencies to be determined by the forex market. This is known as a flexible exchange rate.
Dollar Value Compared to Euro:
2011 - The dollar's value fell 11% against the euro, which was worth $1.47 by April 8.
2010 - The EU debt crisis strengthened the dollar. By year end, the euro was only worth $1.32.
2009 - The dollar fell 20% thanks to debt fears. By December, the euro was worth $1.43.
2008 - The dollar strengthened 22% as businesses hoarded dollars during the credit crisis. By year end, the euro was worth $1.39.
2002-2007 - The dollar fell 40% as the U.S. debt grew 60%. In 2002, a euro was worth $.87 vs $1.44 by December 2007. (Source: Federal Reserve Bank, Exchange Rates)
Check out the National Mortgage Bankers Association prediction for Interest Rates:
April’s Inflation Rate was 3.16% and has risen 1.53+ since January 2011.
Is it a Good Time to Sell?
YES, I believe it is a good time to sell if you are not going to hold onto your property for the next 5 to 7 years. Although I have almost lost the ability to predict when this market is going to even out and begin to correct itself from it’s current declining values, I just do not see a corrected market for another 5-7 years from now.
What will happen then is anyone’s guess. There is just too much on the table for anyone to reasonably, accurately predict what the Real Estate Market will do beyond the next few years. Inflation, Higher Income Taxes, Higher Cost Living, Obama Care, Unemployment, etc. are just too variable to make a prediction.
My guess is that most home owners either want to wait for the return of the market or just do not have enough positive equity to even consider selling in this market and these reasons may be why we are seeing such a drastic decline in New Listings and Inventory in today’s Real Estate Market on Oahu.
The Honolulu Board or Realtors NO Longer Reports The Median For Sale Figures.
This is just plain WRONG.
The Honolulu Board of Realtors stopped tracking The Median For Sale Price in March of 2010. Up until then they did track these numbers and it looks like this:
Since March 2010 The Average Sold Figures look like this:
Both of these graphs is the result of Higher Price Ranges Selling.
When you have this much Dollar Volume Sold what do you think is going to happen to the Average AND Median Price? YES! They go up!
Condos are no different.
Just How Well is The High End Doing?
I recently wanted to answer this question for myself and did a study to see how well the High End was doing that was priced from $1,500,000+ and I found things pretty interesting.
The first thing I found was “Flipping” in Multi-Million Dollar properties, predominantly in the Kahala Area. I found this amazing. All but one walked away with several Hundred Thousand Dollars in quick profits when the owners bought and sold almost back to back.
The Neighborhoods above sold the most in unit sales of all the High End Neighborhoods on the Island of Oahu from January 2010 to April 2011.
There were a total of 128 sales totaling $391,989,188 Listing Values which resulted in a total Sold Value of $338,568,005. The difference between Listing Value and Sold Value was -$55,556,187 or an Average of -16%. That gives you a List to Sell Ratio of 84%. The Honolulu Board of Realtors says the List to Sell Ratio for April 2011 is 94.9% for both Single Family Homes and Condos. DO NOT BELIEVE IT. Check my website for what is really selling by checking my charts under “Sold At Full Price Or More” at www.hawaiirealestatestatistics.com
What Has Been Happening With The High End Since Year 2008?
I then wanted to see what was happening with the High End Market today, relative to what has happened since year 2008 and I found a few surprising things.
Up until the end of year 2010 unit sales have been on the rise since year 2008
Total Dollar Volume in 4 Out of 7 Neighborhoods increased to their highest level in year 2010
Unit Sales from January to April 30th 2011:
Dowsett has had 5 sales which puts it on track for 15 sales for the year.
Diamond Head has had 7 sales which puts it on track for 21 sales for the year.
Kahala Area has had 12 sales which puts it on track for 36 sales for the year.
Hawaii Loa has had 9 sales which puts it on track for 27 sales for the year.
Portlock has had 0 sales so far for the year.
Beachside has had 1 sale which puts it on track for 3 sales for the year.
Lanikai has had 3 sales which puts it on track for 9 sales for the year.
All of these Neighborhoods in RED are on track to do less sales than in 2010. Those in GREEN are on track to do more sales than 2010.
Overall, I think the High End Market is stuck and losing traction. It is the predominantly the low end that is selling in this market and Short Sales and Foreclosures are blowing out the door but they are still a very small percentage of total sales.
The Honolulu Board of Realtors M.L.S. system says that 1,794 Single Family Homes and Condos have sold this year that are not Distressed Properties.
Distressed Property sales for the year represent only 22% of the total. This is a far different situation from the Mainland.
I hope that you have enjoyed this report and that if you have questions or need a good Realtor to help you find the right home for the right price or help you sell your home quickly for the highest Dollar, send me an email or call me.
I wish you all much Aloha and I thank you for your readership and comments you have sent to me. I appreciate your comments.
Mike Gallagher, Broker in Charge, Abe Lee Realty
