Part 4 of 4
Investors are entering deeply discounted real estate markets. According to Dr Yun, Las Vegas is experiencing an influx of investors. Since Las Vegas is the nadir of the US housing market drop, this is good news. Refreshingly deep pink firewood blosooms are first to return to a blackened northern forest after a devastating fire. While investors better resemble civil war carpet baggers more than fireweed, their effect is the same. They are the first to venture in, and they provide foundation for future growth.
Investors buy at a price which allows rents to cover the cost of the mortgage and more. Early investors into a devastated market may plan to hold the property for three years and then sell when recovery is underway. West Hawaii investors are doing the same here on the Big Island, buying entry level properties as they are the easiest to sell: many Kona families can afford them.
Big Island real estate professionals are now watching excess inventory in West Hawaii’s $200,000 to $500,000 price band being absorbed. That explains the preponderance of those nasty short sale properties. Discretionary properties (not distressted) and bank owned (REO) properties are successfully going into escrow, leaving short sales as the most commonly available property.
At a recent Kona Board of Realtors presentation, a local appraiser discussed statistics showing San Diego as a real estate market West Hawaii follows. Currently, San Diego prices are increasing annually 10-15%. They are the #1 recovering market in the country.
As the Canadian dollar, affectionately known as the loonie, is nearly on par with the US dollar, Canadians are buying warm weather locations in the US with 60% cash. The Chinese have a vested interest in maintaining the value of the US dollar because they hold so much of it. The stock market has returned to 2002 values, and will once again provide down payments for second homes. Dr Yun predicts the economy will grow 2.5% over the next five years, easy and steady. He argues inflation is not a concern, unless the global community loses faith is the US dollar. Dr Yun believes mortgage rates will remain between 5-7% through 2015. If this is all true, he sees no obvious reason for continued second home price declines. Bottom line: the worst is over. Get ready to buy as the market is low.
Tags: Big Island, Kona, Real Estate, west hawaii