More Speculation In Hawaii
Speculation in Hawaii is inflating prices by big leaps. "A slew of second-home and investment buyers drove condo prices higher than single-family homes on the Big Island last month."
"More than half the condominiums sold on the island netted more than $397,450, a 72 percent gain from a year earlier. The $370,000 median single-family home price was a 34.06 percent rise from April 2004."
"Frank Goodale, a broker in Kailua-Kona said, "'We've had a number of sales at high price points,' adding that second-home and investment buyers typically can afford more home than first-time buyers."
"'We used to have a glut of inventory in Puna and South Point but now even it's all dried out,' Goodale said. 'In the past, I rarely sold land, but in the last six months demand has pushed the price of lots up,' realtor Robyn Bagley said."
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Famed investor Warren Buffet unloads his $3.5 million Orange County home, cites real estate risks.
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http://www.ocregister.com/ocr/2005/05/10/sections/business/business_columns/article_513298.php
Indeed, Hawaii is an interesting place!
See page 11 here:
http://www.boh.com/econ/pdfs/econ0405.pdf
Lots of good graphs here – in particular, pages 6 and 14 of 20:
http://www.thekaufmanadvantage.com/stats.pdf
Once the CA year-over-year median prices are flat (May #'s? or perhaps June #'s?), I expect a repeat of 1990-1991 in Hawaii...
The numbers cited by the article represent activity of a month or two ago. Lately, things have slowed down according to a local realtor on the Big Island.
Here are the comments by our local realtor on the Big Island:
We are seeing a softening of our market now. I've mentioned this before and today read that the lead economist for the National Association of Realtors is in agreement. In the past, he's always said the market is strong, there is no bubble and the market will continue to improve. Now he's saying the market is slowing.
This is a good thing. From my perspective, for what it's worth, being a person who loves to play with the numbers coming out of MLS, our market has been slowing since the beginning of the year. We're seeing more listing every week, 20 to 24 compared to 3 to 5 last year at this time. Basic economics tells us that if the supply increases and the demand stays the same, which it has, the prices must come down.
This will not be a uniform, across the board drop in prices. Instead, we will see condos and subdivisions with many similar homes start to level off and even come down first. The reason is that there will be more of the same thing available giving buyers choices. Sellers will have to be competitive on price since there are few other differences in the properties.
IMHO, we will see prices level off in the overall market and drop in some areas. The economy wil continue to improve which will have the effect of increasing buyers ability to buy. I believe we will see somewhere around a 5% appreciation rate rather than the double digits we've been experiencing. Interest rates will be up about 1 point by the end of the year.
I also believe we will begin seeing the sad results of the irresponsible loan practices we've seen in the last couple of years; the interest only Adjustable Rate Mortgages. I expect a sudden increase in foreclosures as balloon payments come due and people are unable to refinance for what they owe since price appreciation has slowed.
A free market is a good thing when looked at objectively; however, there will be casualties as the market corrects itself. Remember, crisis' obverse side is opportunity. Get your financial house in order and if you're in the market for property expect a renewed market by years end. aloha
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