Not only the wealthy are actively buying West Hawaii real estate

What got me digging into these records were recent news reports that Mercedes Benz unit sales in the United States recently broke a record; an Italian handbag retailer experienced difficulty keeping its $1,000+ handbags on the shelves; and the top two luxury purchase types by wealthy consumers were either a $1,000+ case of wine or piece of jewelry.

In the Luxury Institute survey cited, the sample demographic was 50% male and 50 % female with a median age of 52, a $233,000 median income, and a $1.5M net worth.  The large majority was married and more than half were empty nesters.  Almost all possessed at least a Bachelor’s degree and were born in the US.  More than half were employed full time and over 20% were self-employed or the company owner.

What was the value of the most recent real property purchase by these wealthy consumers?  About 66% paid less than $500,000, while the mean price paid was $984,000.  To recap, one quarter of the top 9% of Americans are buying real estate, and a significant number of those properties are second homes.

Regardless of price band, how are West Hawaii single family and condo sales doing?  As you can see from the charts below, West Hawaii 2011 median sales prices are well below $500,000.  The category with the least amount of price slippage is South Kohala single family homes.  This area has Waikoloa Village and wet side Waimea, both affordable areas for local families.  Significantly more families bought in 2011 vs 2010.

The category with the second least amount of sales price slippage is South Kohala condos.  This is second home territory.  South Kohala 2011 condo unit sales are significantly up, even more so than single family homes.  Vacationers are not missing this opportunity to buy low.

January through September 2011 vs 2010

In 2010 the South Kohala real estate market sputtered back to life in fits and starts.  While unit sales for all real estate rose and fell each quarter, condominium unit sales have been steadily increasing the last three quarters.  Yes, Kohala Coast condo sales prices continue to slip, but just barely.  Sooner or later the upward trending unit sales will put a stop to that.  I predict, and I think Mr Yun would agree, prices will stop slipping before the end of the year.  Why?

* More jobs
* Rising stock market wealth
* Rising apartment rents
* A large selection of affordable homes
* Justifiable home values
* Investors looking to hedge against potential inflation
* Foreigners buying cheap property

The Big Island agrees with everything on Mr Yun’s list, except more jobs.  The stock market has returned to values higher than before the fall.  Rents are climbing because there just isn’t much of a selection anymore.  Real estate prices have been decreasing for quite some time, and the appraisers are easily justifying sales prices.  Investors in the form of second home buyers are definitely back, and Canadians are snapping deals up left and right.  As you might have guessed, the Chinese are coming, but they’ll hit Oahu, not the Big Island.

So what are you waiting for?  Interest rates to go up?  If you would like a vacation home on the Big Island, start looking now.  Ask about my automated new listing email service.  Properties you would like to learn about will hit your inbox the day they hit the market.  It’s a complimentary service.  Just ask!

1. $640,000; 2/2; Kumulani condo #B3; located on golf course with ocean view
2. $909,500; 3/2; Wai’ula’ula condo #M202; located on golf course with ocean and Maui views
3. $1,300,000; 3/3; Moani Heights residence #8; located on golf course with ocean and Maui view
4. $1,525,000; 3/3; Moani Height residence #9; located on golf course with ocean and Maui view
5. $2,600,000; 4/3.5; Kauna’oa condo #1A; ocean view
6. $2,400,000; Kauna’oa lot #6; located on golf course with ocean view
7. $1,500,000; Mauna Kea Fairways North lot #12; located on golf course with ocean view
8. $2,000,000; Mauna Kea Fairways South residence #3; structure is either a tear down or will be a demolition remodel with an outstanding ocean view
9. $1,350,000; 2/2.5; The Villas at Mauna Kea condo #37; original 1987 condition with ocean view

Long time resort visitors are recognizing the attractive current property values within the resort. If you do not need an ocean view, the deals can be even better at the Mauna Lani and Waikoloa Beach Resorts.

The Kumulani at Mauna Kea #E2 is still available as of this writing for $685,000.  Yes, it has a very nice ocean view!  Take a look:

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.

 Dr Yun commented on our frustration with the lack of loan products to finance second homes which will be used occasionally as short term vacation rentals.  Currently only portfolio loans are available for these properties, as the government is not backing second home purchases, regardless of the excellent qualifications of ready buyers or the subject property.

 He explained that banks shed jobs in 2009 in response to the lack of funds which froze the real estate market.  Of course the freeze was due to the banks’ own decision to turn off the availability of funds.  Though the taxpayers bailed out the banks, the banks are now so risk adverse they are not ready to start lending again.  Yes, the bailout loans have been repaid to the federal government, and bank profits have soared to pre-crisis levels, according to Yun.  But banks fear a double dip recession.  So instead of providing funds to the very taxpayers that bailed them out, the banks’ fear of lending is now fueling the foreclosure market. 

Taxpayers can neither buy nor sell when credit is unavailable.  If a homeowner is unable to sell his vacation home because his fully qualified, ready, willing and able buyers are denied  credit, he could end up in foreclosure.  This is a nasty cycle that can only be cured by the return of sensible lending guidelines for vacation homes.

“Interest in travel,” “time available to travel,” and “money available for travel,” variables from which the index is derived, have risen. Unfortunately, the increased cost to travel, and lingering concern about job loss may keep people at home.  However, financial factors that influence near-term leisure travel are mostly positive.  For example, the percentage of U.S. adults citing a “high level of personal credit card debt” fell from 56% in April 2009 to 46% in April 2010.  

The airlines serving Hawaii have recently indicated more seats will be added.  More travelers to Hawaii is good news for real estate sellers.  The West Hawaii Island’s entry level market (to $500,000) had already recovered.  Excess inventory has been mopped up, and prices are creeping up.  If you have been thinking about buying West Hawaii at the market’s low point, now is the time to visit with your checkbook. 

Take a look at Hawaiian Airlines’ reduced fares beginining August 9^th.   Tickets must be purchased by June 11, so now is definitely the time.  While you are here I can put together a short tour of homes for you.

First-Time Homebuyers in Kona, Kohala, Mauna Kea Resort: If you’re in the market for the first time, buying a home as an investment is a wonderful opportunity. Not only are there federal funding options available for first-time buyers, but the low average cost of homes right now means that you can get more Hawaii home for your dollar. This is especially true if you’re looking for a home to live in for a few years. By buying a house now, you can have a place to call home and the potential to sell it for profit five, ten, or even twenty years from now.

Kona Home Flipping: “Flipping” a home, or buying a house and fixing it up to increase the resale value, has been made popular by television shows and success stories that boast of tens of thousands of dollars virtually overnight. However, the process of fixing up a house is a much larger task than it at first appears. If you plan to flip a house as a way to earn a living, make sure you know exactly what the construction projects will entail and how you will finance your way through the process for the entire time it might take to resell your investment home.

When Buying HI Real Estate, Timing is Everything: As a financial decision, buying real estate is often best taken advantage of as a long-term investment. After all, it can be difficult even for professionals to predict the Kona real estate market. That’s why one of the best ways to turn a profit on a Hawaii home is to plan on living in the home or renting it out for upwards of 10 years at a time. It’s one of the best ways to guarantee an increase in your investment, and to enjoy yourself – and your family – while doing it.

The most important thing to remember before delving into HI real estate as a way to make money is that there is no quick and easy road to riches. The recent housing bubble burst is perfect evidence of this, and many people learned the hard way that buying a home as an investment, like any financial decision, takes time, planning, and a little homework.

In real estate lingo, this is known as curb appeal.

Most potential homebuyers make a decision about a house within the first 30 seconds. For example, simply driving by a well-kept single family home for sale in the Kona, Kohala, Mauna Kea Resort Hawaii areas is often enough to cause people to pull over and make an immediate call to their realtor. That’s because an inviting exterior promises an inviting interior.

To get the kind of curb appeal that really gets noticed, you have to be able to detach yourself from your home. You may have lived there for months or years, and have probably learned to overlook the overgrown shrubbery next to the sidewalk or the mailbox in need of repair. However, these are the first things potential homebuyers will see. You have to view your home as objectively as possible in order to begin making the necessary repairs to get noticed.

Look out for:

• Visible mold or mildew on the house, roof, or sidewalks
• Outdated exteriors
• Yard clutter
• Dirty gutters, siding, or windows
• Chipped paint
• How your home appears at dusk or even at night
• Overgrowth in the yard or on the sidewalks
• Dead plants or leaf piles
• Overly personalized doormats

Of course, if you’re really motivated to sell your home in the Kona, Kohala, Mauna Kea Resort Hawaii areas, you may also want to consider upgrading your landscaping. Like staging your home or making repairs, restorative landscaping can give your house just enough polish to entice a higher level of buyers. In fact, in a recent study, it was determined that good landscaping can actually add 6 to 11 percent to your home’s sale price.

We all know that selling a home can be hard work. Increase your chances of success by making sure your potential buyers are impressed before they even get out of the car.

Buyers are more serious during the holidays. Anyone shopping for a home during the holidays probably has to buy before a certain deadline. Therefore some buyers may be looking to relocate before the new year. Investors may also want to close before the end of the year for tax reasons. If you live near a university, students and staff may be looking for homes between academic sessions, and if you live near a military base, servicemen and women may be moving to the area. Work with me, Diana Woods, your agent to target these motivated buyers. Buyers have more time to house-hunt. Buyers who are looking at this time during the holidays are serious about making a purchase. Some buyers purposely wait until their families are together for holiday vacations to start looking for a home. Homes show better in the winter. Decked out in lights and garland, homes often look their best during the holiday months. Take advantage of the Holidays and spruce up your homes to make them more festive. Deck the halls, but don’t go overboard, just enough to make your prospects feel at home and your home still looking spacious.

Home sellers can’t always take a holiday from keeping their house on the market. Instead, they should consider ways to turn the holidays to their advantage. By holding a holiday-themed open house – maybe instead of the traditional Sunday afternoon open house; your home could be open in the evening to take advantage of a festive holiday light display. Keep in mind to not block or cover up important selling features such as fireplace mantels, stairs, stained-glass windows. Tone down the size of tree. In place of a 10-foot tree, try decorating a table-top, four-foot version. Set a plate of cookies on the counter, next to festive paper napkins for guests. Giving house hunters a place to escape from the cold is another excellent way to get them inside your home.

The holidays are stressful enough without having to think about staging and open houses, so if you’re not truly motivated to sell, it’s probably best to wait a few months. But if you absolutely have to sell, don’t be discouraged. A good agent like myself can take the burden off of your shoulders, giving you more time to enjoy the season.

With these tips in mind, it is possible to enjoy the holidays and still successfully feature a home for sale on the real estate market. Now is still a good time as ever in the Kona, Kohala, Mauna Kea Resort Hawaii areas.