Kona Kohala Blog

There's been much talk about the lower priced properties resulting from foreclosures and short sales but what about the other end of the price spectrum?  Today is the broker's weekly caravan to preview new properties on the market and today's is our annual Christmas caravan.  We get to see beautifully decorated homes in prime condition since all of them are over, some well over, the one million dollar mark.

Today I was looking at oceanfront properties that are listed at about half what they would have sold for just 4 years ago.  Moving up to some of the estate properties, in excess of one acre, there too, are homes that are drastically below their 2006 prices.

For those looking for a home in the million dollar range now is the time.  There is a great deal of competition at this level as newer subdivision come on line at Kukio and Hualalai and surrounding properties.  For those not wanting to be in a community like that there are magnificent homes available all around North Kona at just about every elevation meaning you can name your ambient temperature.

I had a short, very short, discussion with a liberal minded person this morning concerning the various forms of the health bill trying to make it through congress.  The point was made that it's just not fair that HMO's and others won't take you with a pre-existing condition, like buying auto insurance after the accident.

I suggested that pre-existing conditions might be the place where the government could step in and help out.  Since a pre-existing condition doesn't require insurance, rather it requires financial assistance in dealing with it.

Insurance is all about actuary and risks.  If they already know something's wrong, why offer to cover those expenses, how can you stay in business doing that?  Could it be a place for government intervention, coverage for pre-existing conditions where we know roughly what long term care for such a condition could cost?

Maybe there could be a tax credit of sorts available to HMO's, PPO's and all the rest of them that step up and tend to those needing such care.  The rest of your coverage could still be complete with the exception of that particular pre-existing condition.

It seems that there is really little discussion going on, more just yelling and accusing each other of this and that.  In talking to those of us working for a living and without the massive brain power found on capital hill, I find lots of good ideas, ideas that could be moulded into viable options to provide for those unable to provide for themselves.  Maybe if people like Chuck Schummer would spend more time talking with flight attendents rather than swearing at them some good ideas might surface.

It's almost the end of the year, at least in real estate, not much gets done between now and the first week of January.  Most people are more concerned with family and friends during the holidays which is as it should be.

Year to date for sales in North Kona we up 13% going from 245 Single Family Residences (SFR's) in '08 to 278 in '09.  Condo sales dropped <13%> from 183 in '08 to 159 this year.  Median price is still declining with SFR's in North Kona going from $542K in '08 to $425K in '09.  Median price for condos has dropped from $335K to $250K.

In South Kohala, median price for SFR's is down from $476K to $370K.  Condo prices have gone down from $610K in '08 to $445K in '09.  We're still averaging drops of over 20% annually for SFR's and roughly 25% for condos.

Rumor has it there will be a short recovery period after the holidays when businesses restock putting businesses back to work until a smaller than normal inventory is reestablished.  The First Time Home Buyer's Tax Credit is still in effect until the end of April but winter is traditionally a very slow time for real estate sales.  Other than continued aid to banks and other financial institutions, government stimulus funds are out of sight and has taken the reported recovery with it.

If the health plan is passed as is anticipated, look for a few new taxes and surcharges showing up next year.  The rush to pass health care reform seems to be such a waste of time since nothing takes effect until at least 2014 except the taxes associated with the bill.  Maybe having one more republican that's against the bill now in the house can help slow the madness.

If our elected representatives would put the same energy they've put into health care into getting the economy back up and running there might actually be a recovery on the horizon.  Unfortunately, all that's out there right now is more government spending.  All a senator has to do is be a hold out to realize a few hundred million dollars for his or her pet projects back home.  When will people begin to realize that all this pork and stimulus is our tax money being redistributed by the congress in many cases, in the most wasteful of ways.

We're at the half way point of the month as we approach the end of the year.  As one of our great presidents once asked, "Are you better off today than you were a year ago?"  I guess the answer will depend on whether you're employed or not.

Unemployment is still hanging at 10%, 7.2 million people out of work.  At least that's the number still in the system.  Total unemployed is rumored to be closer to 16% counting those who no longer apply for unemployment and have given up finding work.  It doesn't mean they aren't working but chances are they're working part time with no benefits and getting paid under the table.

Here, in Hawaii, the cash labor market has always been huge but I suspect that it's grown in these tough times.  As taxes on just about everything go up more people find ways of showing less income to the tax collectors.  I had a $14 increase in my cell bill last month so I called AT&T to find out why.  It seems there are some new "surcharges" being added by just about every level of government that can get its hands on our cell phone bills.

The National Home Builders Association reported that there was a record number of housing starts last month.  Much of it was in anticipation of the $8,000 First Time Homebuyers Tax Credit.  The problem may be that we've pretty much run out of first time home buyers.  The first round of tax credits earlier this year drew plenty of takers but with unemployment where it is, there may not be that many more out there that can qualify under the governments new stricter rules.

The Consumer Price Index is up 1.8% but that includes food and energy.  If you take those two out the change was nil, nada.  Retailers are unable to raise their prices because of the overall economy.  Once again, we've run out of people to buy things, even little things.

Year to Date for our housing market shows declines across the board with one exception when we consider both the number of sales this year and the median price.  Only North Kona sales are on the positive side with a 10.61% increase in the number of sales this year to date.  The median price for Single Family Residences (SFR's) is down <21.59%> and condos are down <22.39%>.  Condo sales are down <15.3%> in North Kona.

In South Kohala, year to date, the number of sales for SFR's are down just <1.23%> while condos have dropped <24.64%>.  The median price for the year has declined <18.84%> for SFR's and <24.64%|> for condos in South Kohala.

I don't expect to see any changes in these numbers or trends until we see a positive change in employment.  Those who were going to spend have spent with a few more trickling in as prices drop to new lows.  At some point almost everyone finds some deal too good to pass up.

This morning I saw a bumper sticker that told me that no matter how bad the economy gets, so how there's always humor to be found.  I was behind a beater Honda with parts falling off and a body consumed by rust with a sticker that said, "I survived the Cash for Clunkers."  Ah, the American spirit.

In what appears to be a reversal of the sales numbers, Single Family Residences (SFR's) are now showing a seasonal increase where condos have historically prevailed.  To compound the reversal, looking back to the summer when SFR's would have shown the greatest increase in sales, condos led the way.

This could signal fewer investors looking for condos in the fall and winter and more of those considering retiring to Hawaii in the future buying retirement homes.  That doesn't explain the summer condo surge but as always with statistics, there may be no explanation.

One incentive for investors and almost all property buyers here, will be the upcoming "Cash for Caulkers" program.  I know I'm thinking about replacing some of my old jalousie windows with casement types if the government is going to pay me to do it.  I think it's a total waste of taxpayer money but since they're taking it anyway I might as well get some of mine back.

The presidents thinking would be sound if the U.S. government wasn't so far in the hole.  This program will generate sales of home improvement products and materials which may cause some rehiring at companies providing these goods.  Or not; it may be that these stripped down, lean and mean companies will continue to work with their smaller crews giving more overtime and not rehire anyone.

Sorry to keep singing the same old song but until the unemployment numbers turn around and we see some substantial rehiring there is not going to be a recovery.  Any positive signs we're seeing are transitory, here today, gone tomorrow.  All the smooth talk in the world isn't going to help until there are some serious tax cuts for individuals and for business.

This W is the recovery that's being touted based on one faulty statistic but more on that later.  First, let's look at what awaits the fortunate few, those being the wise ones who live frugally, save money and either restrict or eliminate their debt.  These are the people who stand to benefit greatly in this time of recession.

Prices on real estate continue to decline as more foreclosure dot the landscape with more waiting just over the horizon.  The banks own lots of property these days, much more than they want to own or should own, banks are not investors in real estate.  Banks make their money in hedge funds and other varieties of manipulated structured and unstructured investment vehicles dreamed up by wild eyed crazy economists hiding in dark closets high above Wall Street.  Having money tied up in something so mundane as mortgages is costing them huge bonuses and stock options.

So, when a bank has to sell these non-performing holdings they cut the price and cut the price and cut the price.  What they lose on a piece of property is nothing compared to what they're losing by not working in the higher return end of their business.  If that means that any one particular housing market or all housing markets are undermined, so be it, money needs to be made elsewhere.

If you believe this thinking to be wrong, try to get a loan modification or a refinance unless you have stellar credit, high income and plenty of assets.  Very few of the people who need help holding on to their homes are getting it but the banks are getting richer by the minute, with taxpayer money.  I know, some of the larger banks have paid back what the fed loaned them but not before turning that money into a nice tidy profit.

Now there's nothing wrong with a nice tidy profit.  Our businesses are all entitle to profits, it's what makes this country what it is and allows each and every one of us the opportunity to do well.  The problem I have is that in order for you and me to do well, we must provide a service.  By providing that service we receive some for of remuneration making it a two way street.  Unfortunately, this is not the case with banks and many of the largest financial institutions today.  They are working one way streets and that's not what our country is about.

The W that's back in the white house is the one that thinks one week of lower unemployment figures is a true signal of recovery.  They seem to forget that it was a three day work week, Thanksgiving and all, which meant closed government offices allowing fewer people to file claims.  When the revised numbers come out it may paint a very different picture but by then we'll have some other one time stat that shows a bright and cheery future for all of us.

The fact the the economy is still in the toilet means that prices will continue downward for housing.  For those of you who practice wise financial tactics there are good deals out there.  Real estate has always been a wise investment and something that should make up at least a small part of your investment portfolio.

Employers are saying there will be no new hiring through at least 1Q 2010, possibly 2Q 2010.  Business is doing very well with their diminished staffs and thinned payrolls, why should they hire.  Since the recession is world wide, even a weak dollar is not improving our export picture.  Until the employment numbers improve we will not see a recovery, at least not one that's going to last more that one brief segment on the evening news.

What a great time to buy Hawaii.  Those who have been wise enough to stay free of debt, save money and work towards a solid retirement whether it's in a year or 10 years, have an incredible opportunity to purchase Hawaii on sale.  Someday, the economy will recover.  Someday people will again go back to work.  Someday people will regain the mobility we once had and travel.  That will be a good time to own rental property in paradise, a good time to move into your retirement home in paradise or just a good time to own real estate in general.

Continue to save, continue to live within your means and soon you will be so far above the struggling crowd just because you used your head.  The crazy days of spend, spend, spend, put it on the card and take care of it with the year end bonus are over, over for good and there's nothing wrong with that.

It's time we all woke up and realized that the real world is not a picture painted by an ad agency in New York.  The real world is family and friends, communications face to face not just texting and email.  The real world is about people sharing struggles and successes and not just about how much you have.  All it's going to take is one power outage lasting for a day or so to realize just how advanced we aren't.  Knowing your neighbors, heck, knowing your kids, is a wonderful thing.  Humans are social animals, we are meant to interact in reality not just on the internet.

This is a great time of opportunity.  Opportunity for creative thinking.  Opportunity for entrepreneurs.  Opportunity to get to know each other.  Opportunity to use our God given skills and abilities to think, to create, to solve problems and to invest in real estate.  I had to throw that in after all, it's what I do.  Best wishes in the holiday season, and Merry Christmas . . . yes, I do believe in God.

20 days to go until Christmas day and the rush to shop is on.  According to those who track such things, Black Friday was acceptable but fewer companies got into the black that day than was expected.  On line shopping, however, was up more than expected with many shoppers choosing to stay at home and spend money on line.  Good news for the credit card companies any way you look at it.

Real estate market activity continues to improve.  It's all the low end properties that are selling but we're seeing people in a hurry to buy, even showing that "I don't want to be left out" thought.  Over all the inventory of homes and condos in North Kona and South Kohala is increasing but good less expensive homes are moving off the shelves quickly.

The cost of homes and condos continues to decline at about the same 20% per year rate we've been seeing for a while.  The moving force remains foreclosures and short sales which are keeping prices down.  We expect a new batch of properties to come on the market in the next few weeks with the trend continuing into the first quarter next year.  These are the people who live and work here who are in trouble and unable to make payments.

West Hawaii remains a desirable locale to own property.  Investors are here as they pretty much always are but we're seeing more soon to be retirees showing up to stake their claim on a home for their future.  Since the First Time Home Buyer Refundable Tax Credit has been extended that group is still in the hunt along with those who have owned for 5 years but want to take advantage of the new $6,500 credit offered by the feds.

My guess is that these two credits will be the end of it.  There's increasing clamor to get the budget back in control.  So far, in less than a year, Obama has increased the national debt by well over ONE TRILLION DOLLARS with little to show for it.  Business is going great guns with little help from the government; the bad news is that they're doing all this without hiring.  Unemployment could stay over 10% for much longer than is now being predicted unless the feds enable small business expansion with some tax cuts, something more liberals don't understand works in times like these.

There's always hope and it is the Christmas season.  The government wiseing up could be the greatest miracle of all, let us pray.

The end of another month and the beginning of December with just 24 shopping days until Christmas.  Where has the time gone?  Even in a recession, time flies.

The improvement in the number of sales continues as bargain prices entice buyers into the market place.  We're seeing not only first timers and investors jumping in but also those who will be retiring soon.  More people who wish to live in Hawaii in their golden years or rust years for some of us, are seeing very appealing prices on homes for their future.  Most of these people I'm working with have either the cash or the credit to buy now and hold onto their current homes until they retire.

The median price continues to decline in both North Kona and South Kohala.  This November compared to last November shows a <46.27%> decline in median price for Single Family Residences (SFR's) in South Kohala and a <12.63%> decline in North Kona.  Year to date for those two districts are <22.11%> and <22.5%> respectively.

Condos are still coming down, South Kohala condo prices are down a whopping <84.49%> compared to last November and <26.82%> year to date.  In North Kona, condos are down <23.08%> from last year and <25.11%> year to date.

Sales numbers look so much better, a little light shining through the dismal fog of recession with a 142.86% increase in the number of SFR sold in November compared to last November in South Kohala.  North Kona isn't too far behind with a 94.12% increase over last year.  Year to date South Kohala is up 4% and North Kona is up 11.26%. 

Sales of condos in South Kohala are up 50% for this November compared to last but down <25.19%> year to date.  North Kona is unchanged comparing November to November and down <15.79%> year to date.

As long as prices keep coming down we can expect to see sales numbers go up.  With all the inventory of foreclosed properties now being held by the banks we can expect prices to continue to fall for a while, at least until the number of foreclosures diminishes somewhat.  With the new pressure on the banks to modify loans we may see short sales and foreclosures slow down but if past performance by the feds is any indication of future performance, don't look for any change soon.