2008 was one of the most challenging years on record for the real estate industry. As you might imagine, the Hawaii market has suffered along with the rest of the nation. While we look forward to 2009 with hopeful optimism, now is a good time to reflect on the last year (or two), and see exactly where we are.
For the entire Big Island, sales of residential units finished with a volume of 1,138 units. 2007 totaled 1,684 and 2006 saw 2,084 units sold. From 2006 to 2008 we saw a decline of 46% in units sold.
North Kona residential sales have seen a 20% decrease in median price from January 2006 until December 2008. That actually shows strength when compared to the entire island which saw a 28% decrease over the same period.
Condos have been especially hard hit over the last 2 years. The median price in January 2006 was $426,290. In December 2008 that number was $275,000, a 35% decrease. I expect we will continue to see downward pressure on all prices, and especially condos in the next 2 quarters. Condos tend to be second homes, vacation rentals, and investment properties at a higher rate than residential units. As a result, owners with shrinking portfolios tend to sell these off first, resulting in an over saturated market.
There is some good news. Qualified buyers are seeing amazing interest rates right now. The key here is qualified buyers. It is getting more difficult to get a loan with average credit, or a debt to income ration which is not ideal. But if you have good credit (over 720) and a favorable debt to income ratio, you are golden to investors. Because of the mortgage crisis, investors are tightening up who they lend money to...they want to be sure they will be paid. However, they still have money to lend! The stock market is not a great place for their money right now, and the dollar has gained back some of the losses over the last few years. What does this mean? They want their money to make money of course, and the best option is individuals with good credit and the ability to fulfill their obligations. The result is interest rates below 5%. For anyone out there with an existing home loan over 5.75% and good credit, this might be your last best chance to refinance. The biggest obstacle to a refinance right now is the lowered equity you may have if you purchased with a small down payment in the last 5 years. If not, you would do yourself a favor to at least speak to a refinance specialist and see if the numbers work for your situation.
On a side note, if you saw a sharp rise in your property taxes over the last few years due to the real estate market going up, you may want to check and see what your property value is according to your local government tax office. They may be charging you based on a value from the peak of the market. As prices have dropped, so should your taxes.
Now is a great time to buy investment properties. Some people are doing better than others, and the lower prices and interest rates represent a buying opportunity. Banks are selling off their foreclosure properties well below market value. Some government rules and programs (Rule 137) have actually backfired and done the exact opposite of their intentions, resulting in more foreclosure properties that banks need to unload fast. Gone are the days of the auction at the court house steps. Banks are listing with agents and putting properties on the open market in order to fetch the best possible price, but with an emphasis on selling fast. I am seeing banks accepting offers that make me wish I had more money!!! The best part is that this market used to be open to only people with a lot of cash, willing to give the bank a cashiers check immediately. Now, people with less cash can get these properties financed. Some people will get rich off this market in 5-15 years.
If you have any questions, feel free to contact me at any time. Here's to a better year!