Kona Kohala Blog

What happens next is anyone's guess.  We're faced with a housing slowdown the magnitude of which we've not seen in a long, long time and energy prices that are putting the kaibash on travel.  This double whammy is hitting Hawaii below the belt; we rely on tourism and the desireablitly of Hawaii as a place to live for people of retirement age.

When travel becomes prohibitively expensive, people think twice about moving here since the opportunity to visit or be visited becomes less and less likely.  How far energy costs can climb and how low housing prices can go are yet to be revealed to us.  There is opportunity here, somewhere.

How far ahead can you see and plan?  Do you think this will ever change or are we headed down a long painful road to a drab and dreary future?  After too many cloudy days, one may believe cloudy days are here to stay however; I believe this too shall pass.

Nothing is forever except taxes and some STD's.  This too shall pass, IMHO.  Look for the opportunity hidden in the darkness.  For thousands of years wise men have said, this too shall pass.  There's no reason to believe that we are any different than those who came before.  There has always been opportunity in crisis and chaos.

So which are you, the nay sayer or the dreamer?  Are you planning for the end or are you looking for opportunity?  What happens next is really up to each of us.  Failure or success is our choice, what'll it be?  aloha

Is there a light at the end of the tunnel or is that a headlight on the train that's about to run us over?  More and more people are predicting a market recovery by the fourth quarter.  Even the CEO of Merril Lynch is saying it.

What will that mean to you?  Here are some questions to answer, please post them here for inclusion in this week's Aloha Friday Newsletter (which if you haven't signed up for you can do now.  Just email me at Robert@FerrariPacificRealty.com and I'll put you on the list).

1.  Has our "recession" changed how you do things?

2.  Have you held back on vacation plans due to the "recession"?

3.  Do you believe that we will begin a turn around this year?  If not, when?

4.  Are you considering buying a new home or second home this year?

5.  What have you chosen to do without in light of tight money right now?

6.  The best investment today is, a) real estate  b) stocks  c) bonds  d. precious metals.

7.  Yes or no, I'm still going to retire as planned.

Answer these and let's see where people are going with this.

With the United States "on sale" right now, Canadians and other outside our borders are finding relatively good deals here in the U.S.  It wasn't that long ago that Canadians were buying property here with an exchange rate of about 75 cents Canadian to our dollar.  That's all changed now as the Loonie is on par with the green back.

A bad thing?  Probably not in this increasingly international world we live in.  It only makes sense that in a time when multinational companies are the norm, that multinational real property ownership would be right there with it.

As long as ownership remains a two way street there's nothing wrong with it.  When they can buy here but we can't buy there, I have a problem.  In this case though, Canada is usually thought of as the far northern states or Canadians see us as the southern provinces, we as a peopel aren't that much different.  I think sometimes we make things up to diasagree about just to maintain our differences.

In any case, we're seeing more and more Canadians coming to west Hawaii to look at property.  I recently sold land to a Canadian builder who's thinking of coming over to build homes.  I have clients in condos and some with homes that they hope to occupy more fully some day.  Even as we tighten our borders, pass port to go to Canada, yeah right, the imagined borders between most Americans and Canadians are dropping.  Funny how familiarity can breed comfort as much as contempt.

I say welcome to the Canadians.  Anything to keep our housing market stimulated and healthy is good for all of us.  aloha

Another good ol' boy bites the dust.  After years of successfully denying access to other airlines that would attempt to get a foot hold in the interisland market here, Aloha Airllines has decided they can no longer compete with Hawaiian and upstart airline, go!, the Mesa Air carrier in Hawaii.

Aloha complains that go! created an unfair playing field, operating at a loss just to put Aloha out of business.  Sorry Aloha, but you put yourself out of business.  Your management has been poor for many many years with no foresight or planning.  You've been crippled by the demands of abusive labor unions who were so intent on lining their own pockets and those of their members, they never looked ahead to the eventual outcome of their greed.  And last, some of the worst service in the industry.

For years, Aloha has flown where they wanted to regardless of what their passengers needed.  The employees had the same callous, arrogant attitude displayed by managment which has driven customers away.  After years of abuse by both Aloha and Hawaiian, residents of the state welcomed go! airlines with open arms because they weren't Aloha or Hawaiian.

Maybe a lesson will be learned.  If not, Hawaiian will be the next arrogant good ol' boy to go.  Nature abhors a void as does business.  Wouldn't it be great if Mr. Branson or Jet Blue saw the potential here, not just for interisland but for destinations to the west like Japan, Thailand, Australia, China and the rest of the western Pacific.

You won't be missed, Aloha, at least not by those of us who want good service and the aloha spirit.  I'm excitedly looking forward to what's next.

I was talking to a couple yesterday and the economy came into the conversation.  They were lamenting the coming recession so I asked them, "How will a recession effect you, personally?"  They both looked at me with a blank stare, their mouths slightly open as if ready to speak but no words came to mind.  Enjoying this moment I said, "Just what is a recession, any way?"

I knew it was time to move on at that point since neither of them had any more to say about the recession.  All afternoon then, I would steer conversations to the recession then ask, "So, what effect will a recession have on you?"

I was amazed by the lack of answers to that questio.  No one had an answer, they all just looked at me like I'd broken the news that the emperor had no clothes.  How can a headline like recession paralize so many people and yet none of them have any idea what impact it will have on them?

So, how will a recession effect you?

I was talking to a couple yesterday and the economy came into the conversation.  They were lamenting the coming recession so I asked them, "How will a recession effect you, personally?"  They both looked at me with a blank stare, their mouths slightly open as if ready to speak but no words came to mind.  Enjoying this moment I said, "Just what is a recession, any way?"

I knew it was time to move on at that point since neither of them had any more to say about the recession.  All afternoon then, I would steer conversations to the recession then ask, "So, what effect will a recession have on you?"

I was amazed by the lack of answers to that questio.  No one had an answer, they all just looked at me like I'd broken the news that the emperor had no clothes.  How can a headline like recession paralize so many people and yet none of them have any idea what impact it will have on them?

So, how will a recession effect you?

While the mainland continues its downward trend on both the number of sales of homes and the median prices, west Hawaii bucks that trend.  Here we see minor corrections in median price even though the number of sales is down guite a bit; only about a 4% decline in median price for homes in North Kona and less than 1% for homes in South Kohala.

The newspaper this morning reports the median price for a home on Hawaii's Big Island is under $400K for the first time in years.  What they don't say is that median price is for the entire island, an island where the median price can be less than $200K on the east side and over $600K on the west side.  They are grabbing headlines but they are not informing the public.

While the rest of the country languishes in a declining market, Hawaii continues to be a good place to own property.  On the mainland, 9% price drops are being reported while in Norht Kona, our median price is down just over 1% for Single Family Residences (SFR's) and condos are down less than 1%.  We're actually seeing median price increases in South Kohala.

The number of sales continues to decline just like the mainland but the value is holding it's own.  Today, there are condos in the Waikoloa Beach Resort area that can be purchased in the mid $500's and with a good deposit, will give you a positive cash flow at the end of each month.

Interest rates have gone up for the last three weeks in a row so don't wait too long.  Bond yields have to go up to lure investors back into the bond market which means interest rates will go up, too.  Most investors are holding onto their cash, like the banks, or putting it into real estate.  Now's a good time to beat the crowds and buy before interest rates get out of control.  aloha

In the last week I've seen two headlines, one for a lack of funds available for expanding the hospital presence in North Kona and South Kohala and the other about a funds shortage for an outreach program for senior citizens.

I realized that I'd never seen a headline addressing a shortage of funds for raises for our legislators or tight funds regarding elected officials health programs.

Why is it the financial shortages always seem to be with funding for "we the people" and never for those who serve us?  Will we ever see meaningful health care reform as long as senators and congressmen have 100% coverage for life?  Do you think they will ever feel the need to act on these issues until they are without?

Perhaps when some of those people "on the hill" lose a home or health care or teachers in their school districts the rest of us will see them move to do what is right.  When their retirement plan is in danger of disappearing because of faulty investing they may see the need for more oversight.  When those who represent us face the trials we face maybe then will we get the representation we deserve.

I'll never forget John Kerry telling the nation that when he's elected president there will be the same health care coverage for all people that members of the house and senate enjoy.  He wasn't elected so we'll never know but doesn't it seem like he may have still taken some steps towards that kind of help even if only as a senior member of the United States senate?

It looks like we might be down to the two contenders for the presidency; senators John McCain and Barak Obama will probably go head to head for the top position in the country and that's probably the way it should be.

The rest of the wanna' be's are falling by the wayside like so much road kill.  Having to choose between these two seems like the best choices we've had in a long long time.  Whomever gets the crown is getting more than their share of politicrap that comes with the territory meaning there's not much either one will be able to do except to keep the country afloat while the forces of nature and economics take their courses and put us back on track.  This could be the time for another Eisenhower, a man who helped us all keep our heads while those around us lost theirs.  We need a time of calm, of less name calling, of less partisanship and more of doing what's right for we the people.

Neither one is going to be able to straighten things out, that's going to require more of a miracle than any amount of political maneuvering.  While the stimulus package is equivalent to giving your kids a year's allowance all at once it may be the shot in the arm we need to avoid a total recession, at least for a week or two.  Making home ownership more attractive will go a step further since it's the slow down in the housing market that's causing most of the problems.  Letting the economy correct naturally i.e., having a recession, may be the best way to secure a long term cure.

Ask yourself, if we have a recession, what does it mean to me?  Most of us know it will be bad because that's what the media has told us but how bad and just how personal will it be?

Will a sizable correction in housing costs affect you in a negative way?  Will it slap down some of the people who got a little carried away with the chance to make a quick buck, probably.  Is that bad?  Probably not, unless you're one of them that got caught with your hand in the cookie jar.

As far as the price of a home in Kona or Holualoa or Waikoloa is concerned it will be a good thing for those looking for a new home.  For those trying to sell, it's not a good thing but still, if they've owned the property for a few years there's a bunch of equity available to them. 

Some people have already taken out their equity but fail to acknowledge that.  Still, they refinanced and put money in their pocket so they're ahead of the game.  If you want to sell and you're one of those who refinanced then count the money you already got, cut your asking price and get on with your life.  This remains a good time to sell unless you're one of those people who maxed out their real property ATM.  There's still money to be made by sellers, just not as much as there was in 2005.

While this may be an ugly market when viewing the wreckage of foreclosures, it's a beautiful market for those who were wise with their investment and didn't suck it dry every time interest rates dropped a half point or their value went up $10,000.  This is a great time to buy and Hawaii get more valuable every day.