Aloha everyone. The first quarter of this year has been action packed with political, financial, and real estate news. Foreclosure numbers are at record levels, and expected to continue to grow for the next year; interest rates have been their lowest ever, and look to stay down; and some segments of the local market are showing signs of balance.
North Kona
There were 41 residential units sold in the first quarter. This was a decline of 40% from Q1 2008. Condos fell from 47 in 2008 to 32 in 2009 for a 32% drop. However, there may be some good news in the next paragraph. The median price of residential units in North Kona for the first quarter was $455,000 a 19.6% decrease from Q1 2008, and a 26.6% decrease from the record high in Q3 2007. The median price for condos was $294,750, a 20.1% decrease from Q1 2008.
So what is the good news? Well, the number of residential sales increased over the last 2 months from 7 in January, to 15 in February, to 19 in March. Also, the median price of residential units increased from $381,000 in January, to $419,000 in February, to $497,000 in March. This was certainly a surprise, but be sure to look at these numbers with a little skepticism. With so few sales each month, it only takes a couple high sales to skew the numbers. Truth be told, there are still 109 active residential listings in North Kona today, which are under $497,000.
South Kohala
For the first quarter, South Kohala residential units sold saw a 22% decrease to 38 sales. The median price was $403,000 a 21% decrease from last year.
Condos were very hard hit, with 12 sales in the first quarter (including just 1 in January when there were well over 300 active listings) a 73% decrease over Q1 2008. I see plenty of value in smaller residential condos in this area (Waikoloa Village) but not as much at the resort properties. The maintaince fees with these resort condos are very high when compared to similar Kona condos. Also, with the remarkably low demand and high number of listings (many of these properties were bought as income or vacation properties) prices still have a way to fall.
Interest Rates
Everyone knows that interest rates are very low right now, but do you realize that the rates on a 30 year conforming loan have been between 4.5% and 5.125% for the whole year? Just to show you what a difference that makes for affordability, a 6% on $100,000 will cost $600 for principal and interest in your mortgage payment. Over the last 7 or so years, 6% has sort of been the benchmark. A 5% loan on $100,000 will cost you $536. That’s a savings of $64 per month for every $100,000 of the loan amount. On a $500,000 loan, that’s $320 per month!!! That’s $3,840 per year, and OVER $115,000 OVER THE 30 YEAR LIFE OF THE LOAN!!! Wouldn't an extra $115,000 be nice? Take advantage of these rates while you can.
Why are rates so low? Well, as bad off as some banks are, and as bad as the foreclosure situation is right now, there are still some very large sums of money sitting out there and the investors want to make some money, the interest. "Hey Mike, why do they want to lend money for a house when there are so many foreclosures?" Well, the banks hate foreclosures, but at least they have something to foreclose on. With stocks, all they have is paper, and the stock market is not doing any better than the real estate market. The bottom line is that at least a home loan is secured with something (the house).
The only caveat is that it takes good credit and payment history to get these low interest rates. But if you have a history of paying people back in a timely manner, the interest rates are there for the taking.
As always, call or email me if you have any questions.
Mahalo,
Mike Drutar R(S)