Kona Kohala Blog

It may be no surprise that the number of short sales and foreclosures continues to rise but where it's rising in the marketplace may be a surprise.  Historically we've been watching lower end homes being recalled by the banks as foreclosure properties if they didn't make it in a short sale.  Well, that lower end has slowed down, quite a bit.

What's changing today is that the middle class and the upper class or high end homes are now making their move towards foreclosure and short sale.  One of the reasons is that those with deeper pockets could hold out longer, which they have but this economy is hitting everyone.  Those pockets while deep do still have bottoms and after a year or two without a job or at a much lower paying job, the assets are running low.  Even the wealthiest are starting to feel the pain as their home values drop below what is owed.  Entire neighborhoods that were home to the "well to do" are experiencing this economy and it's not treating any one group any nicer than another.

In West Hawaii, we're starting to see short sales in homes over $1,000,000.  This means they've given up making payments or are about to and just want to get out with some of their credit rating left.  For those who have been sitting on the side lines waiting to buy some of these nicer properties, now is the time.  In looking through listings in Kohala Ranch today I came across a foreclosure, the first one in a while up there.

If you're one of those people who have been waiting patiently for this moment you are about to reap the rewards of that patience.  In a short sale, the price paid for the property is of no concern to anyone including the banks.  What is important is today's market value.  The banks are typically taking approximately 85% to 88% of market value on short sale properties but you do have to be patient a little longer.

Short sales are notorious for taking a long time.  That is getting better as banks are learning to use modern methods of dealing with short sales, something they haven't had to deal in over a decade.  More agents are becoming familiar with the process which is also helping to speed things up.  I've applied for my Short Sale and Foreclosure Designation after having taken all the required course work.  At first I was hesitant to be involved with short sales due to the bad publicity.  Now I realize they are the thing of the future and that future is now, this is our "normal" and what we're going to be faced with in the foreseeable future.

Check out our page on Short Sales.  They're not for everyone but they can be a great deal if you're one of the people who qualify.

Today was a monumental day in that a short sale closed after just 6 months in escrow.  I was talking to the Loss Mitigation rep at Bank of America about what a nightmare it had been and how just being able to communicate with him made such a difference.  For the first five months, I was unable to make contact with any of the reps but once I had one to talk to it went quickly.

Now I'm told that the whole process is being made more efficient.  The federal government working together with some of the larger lenders have come up with some standardized practices.  They've even come up with standardized forms we can use.  One potential problem is that while this headway has been made, the program is voluntary.  Not only is it voluntary but a bank may agree to the terms in one transaction but not in the next one.  Does this sound like something the government would be involved in?

Bank of America has the lion's share of short sale and foreclosure properties.  They've begun working with a company now called Equator nee, REOtrans.  This is allowing all documents to be posted on line accessible by all those involved in the process.  Hopefully this will make things happen faster, we'll see.

There are lots of reasons short sales have bad reputations but most importantly is getting the process fixed.  Equator has been working well with foreclosure properties.  If it works as well with short sales we may have a great alternative to other liquidation methods up and running in no time.

This would mean that people who qualify for a short sale could actually get on with their lives sooner than has been possible.  It will mean we can reduce the back log of "under water" properties by getting them sold and the owners out of a financial death grip.  This will be a good first step towards stabilizing our market place.  I'm opening escrow on another short sale on Monday so we'll see if it's real or just more smoke and mirrors.  Let's hope it's real.

If you think you may be qualified for a short sale, contact me by email at Robert@FerrariPacificRealty.com or call 808-896-0661.  If you're thinking of buying a short sale, contact me so I can prepare you for the process.  There's a lot both buyer and seller can do to prepare for the sale and being prepared is part of the trick of getting the job done.

If you're one of those people who wants to retire to sunny west Hawaii and trying to time the market, do it now!  Our market, both North Kona and South Kohala, is beginning its turn; our numbers of sales are on the rise.  The median price of both Single Family Residences (SFR's) and condos have stopped their nose dive into the last century and we're seeing activity in all price ranges.

We still have a pretty good inventory of properties to choose from and interest rates are still hovering around 5%.  Without my crystal ball I can't guarantee anything but my experience and what I'm seeing today tells me that this is the time to buy if you're planning on doing so in the next few years.  We are at the turning point, the proverbial bottom.  We may still slip a little lower but I don't recommend waiting too long or you're going to be in that crowd of people lamenting about missing their chance.

If you're ready to move on your purchase, contact me and let's get started narrowing the field.  You can email me at Robert@FerrariPacificRealty.com or call my cell at 808-896-0661.  You should give yourself at least 6 months to research the property and learn all you can about the area it's in.  Now is the time so let's get started.

Can we please forget about the health care bill for a while, at least until we solve the economy problem?  If the congress and the president and all his men would put as much energy into the jobless problem as they're putting into this health care bill that almost no one cares about, we might make head way towards getting people back to work.

This country is falling apart and no one is doing anything about it.  What a waste.  The average person on unemployment has been there for 8 months and the number of new people joining them continues to climb.  This increase seems to always be a surprise to those in the know; have we hired too many idiots to manage our country, it seems so.

We're all concerned about the housing industry, the consumer confidence, the Gross Domestic Product and on and on but who's worried about health care?  I know lots of people are but not to the degree they're worried about jobs.  Reducing our unemployment from near 10% to 6% or so would put a lot of people back on company health insurance plans.  Encouraging new business would do the same.

The problem was never a lack of health insurance, it was a problem of affordable health insurance.  If the government would tackle the cost of health insurance and work on tort reform so the health providers could afford their insurance we might see some positive change.  It's all about putting people back to work and not at some government agency.

I'm watching our housing market turn around here in Hawaii, especially in North Kona and South Kohala.  I know it's a limited turn around.  It's being fueled by those wise individuals who have always saved a part of their income.  Those who have lived below their means.  Those who have strived to live without debt.  These are the people buying homes now.  They're the ones who saved for their retirement and didn't rely on the government.

They now see great deals on homes in paradise and they're going for them.  Unfortunately, we only have a small number of such people.  We live in a society that relies on someone else to take care of them.  If things don't go right, they blame someone else.  These people are like our politicians who are so quick to claim credit buy reluctant to claim responsibility.

Forget the health care people in Washington and work on some effective taxation that will put this country back to work.

The stories of our demise are greatly exaggerated.  It's now 8:35am and all talk on both TV and the radio stations is of the impending tsunami.  Personally, I'm sitting on my lanai (194' above sea level) enjoying a cup of freshly brewed Kona coffee and an Opus X given to me by my wife for Valentine's Day.  Any wave that may arrive is scheduled for Hilo at 11:05am.

The first waves have already hit French Polynesia and amounted to a 6' rise in sea level.  Although that doesn't sound like much, for those living at the waters edge it can be devastating.  More on that at some time after 11:00am.  Right now, it's a beautiful calm sunny Kona morning.

The real estate market for west Hawaii, South Kohala and North Kona, seems to be picking up nicely.  Our year to date figures compared to 2009 are still down except for North Kona Single Family Residences (SFR's) which are showing an increase in both the number of sales and the median price.

In other areas, condos and land, the number of sales are picking up and keeping with a trend we've seen since mid 2009.  Median prices, which have continued to plummet at about 20% per year have begun to slow their descent and appear to be leveling off as demand continues to increase.

I doubt that the recession is over.  I suspect that prices have just gotten to the point that many people don't believe they will drop much further if at all.  There are some very good buying opportunities available right now.

I've been working in the Villages at Mauna Lani for the last week.  There are units there, one anyway, listed at $699K and more in the high $700's to high $800K's.  When these units were released for sale between 2001 and 2005, many were priced over the one million dollar mark.  The Villages are a Maryl project so you know the quality is there.  These units have such upgrades as Wolf appliances, Fisher-Paykel dishwashers, washers and dryers and Sub Zero refrigerators.  The finish work leaves nothing to be desired with mahogany trim and doors, beautiful tongue and groove mahogany ceilings plus tile and granite throughout.  You do not feel like you're in a condo here.  The three floor plans I've been looking at have 2,100 square feet, 2,558 square feet and 2,756 square feet of living space.  You will not feel cramped living here, even full time.  Call me at 808-896-0661 or email Robert@FerrariPacificRealty.com for more information.

I'm amazed at how many people are coming out of the woodwork now, people with the same personal habits or traits.  These are hard working people, those who have saved their money, didn't get greedy when their property values sky rocketed and begin refinancing their homes and other holdings, continued a savings plan and relentlessly worked towards their retirement.  These are the smart, wise and even courageous ones who hung in there when everyone else was on a joy ride.

I'm seeing those people as clients today.  They're coming to Hawaii in search of their retirement home knowing that prices are back to where they were before the fireworks began.  They are people who saved money and spent wisely so they would have what they needed to get to the retirement spot of their dreams, west Hawaii.

One of the really good deals right now is the Villages at Mauna Lani.  Just a couple years ago you would be hard pressed to find one under a million dollars.  Today that's not the case.

This is a luxury complex built on the grounds of the famous Mauna Lani Resort in sunny South Kohala.  Most are exquisite town homes, some with two master suites.  Many are fully furnished and come with 2 car garages.  There is extensive use of fine finish materials including mahogany and granite as well as marble tile in some areas.  The kitchens boast Sub Zero refrigerators, Fisher & Paykel split dish washers and Dacor appliances.

Today you can purchase one of these beautiful units for as little as $795,000.  This is for a 2,174 square foot, 3 bedroom, 3.5 bath home.  These units were built between 2001 and 2005.  One of the benefits of ownership is being a member of the Mauna Lani Advantage Club which offers discounts on golf, dining and shopping in the resort.

If you find yourself in the enviable position of being able to afford this price range then you owe it to yourself to see one of these condos at your earliest possible convenience.  Email or call me at 808-896-0661 for more information.  Having spent time with clients in the complex recently I can tell you there is activity with two going into escrow just recently.  That part of our market has been static but the "good deal" seekers are coming out so now may be the time to wrap up your retirement site.

Not a surprise really but the number of distressed properties is following mainland trends here in Hawaii, at least in west Hawaii.  Today there are a total of 396 Single Family Residences (SFR's) for sale in North Kona.  Of that number, 95 are either short sales or foreclosures.  This means that 24%, almost one in 4, of the homes for sale are distressed.

Condos in North Kona fare a little better with just 21% in the distressed category.  There's a total of 299 for sale in west Hawaii and 63 of those are distressed properties.

If rumors from bankers are to be believed that number will be increasing in the coming few months, maybe as long as the coming year.  Bank of America has said we can expect their number of foreclosures to triple by the end of the first quarter.

Where's the stimulus for the little guy?  Our financial leaders are back to getting hundred million dollar plus year end bonuses but what about the people who are two or three months behind on their mortgage?

This is really all about jobs.  Obama and the rest of the Chicago thugs, ooops, did I print that . . . oh well, are so worried about health care they're really not putting the time and energy into developing a solid jobs program that includes small and medium size business, the people that hire.  It's not just the democrats either, the republicans aren't contributing, they're too busy bad mouthing the dems.  It's time to fire each and every one of them, every senator, every congressman and woman and start over.  A bunch of rank amateurs couldn't do a worse job, who knows, they might even do a better job than what's being done now.

Tax increases have historically, never worked.  Tax cuts have historically, always worked.  The unions need to pitch in here too.  It's time to end the gravy train union bosses have put in motion to preserve their own jobs.  No more huge income for life, full medical and dental till you die and all the rest of those insane perks that are driving big business out of business.  Unless I'm mistaken, I believe that today there are more people retired and being paid near full salary and benefits at the big three automakers than are in the actual work force.  No wonder they need government money.

Once we get people back to work meaning once we make it attractive for business to do business we'll see an end to our problems.  It won't be over night but it will happen.  We need to make American products competitive, hello unions, we need old fashioned American quality and pride of workmanship and we need tax incentives.  Laying around on unemployment may sound like fun but there's nothing like a good days work to make a person feel good about themselves. 

It's also up to each of us to be qualified to do something.  This is a time for education, a time to learn a new trade or profession.  It's time to go back to school whether it's high school, junior college or whatever will give you the skills to compete in this new world.  I remember the story of the 75 year old starting college.  Someone walked up to her and said, "Are you crazy?  You're going to be almost 80 when you graduate."  The little old lady looked at the young girl and said, "I'm going to be 80 anyway you look at it."

Despite our current administration's attempts to destroy our economy by redistributing wealth thereby making everyone poor and dependent on the government, there will be a recovery.  It's going to take a little while but do not underestimate the American spirit.  The recovery will be because of the people and not the government; dear Mr. Obama, butt out!

I came across an article in The New York Times written by Thomas Friedman.  In it he says, "[T]here are still two really important things that can't be commoditized.  Fortunately, America still has one of them: imagination.  What your citizens imagine now matters more than ever because they can act on their own imaginations farther, faster, deeper and cheaper than ever before - as individuals.  In such a world, societies that can nurture people with the ability to imagine and spin off new ideas will thrive."

Enter the American, the thinker, the garage tinkerer, the builder and the dreamer.  We haven't come up with much because we haven't had to but hit an American with a challenge then stand back and be prepared to be awed.

What does this have to do with South Kohala?  Waikoloa Beach Resort and the Mauna Lani Resort have been in the doldrums for some time now.  The problem is a lack of investors.  North Kona is picking up because we have soon to be retirees here in droves looking for that perfect retirement home.  Very few, if any, are looking for that perfect retirement condo in a resort area.

Now that Americans have been kicked around for a while they're starting to wake up.  The complete failure of all government efforts at recovery have shown us that it's up to us to pick this country up and it's going to happen.  We're seeing the average person's frustration with government on the whole, not just one party.  We've watched them live like kings and queens totally oblivious to the plight of the American people and now it's pay back time.

Americans are becoming motivated to act.  They are stepping out of their comfort zones and letting their voices be heard.  While Washington tries to play down the size of the discontent it will show itself in the coming elections.  We can take a lot and will take a lot until a line is crossed.  We let our representatives get away with a lot but when they are no longer listening to us, no longer working for us but instead working for their friends in high places, we say no more.  That's where we're at.  Look for us average guys who love our country and the freedoms it gives us to begin our work.  We will create and invent and in doing so provide jobs and opportunities.  The tide is beginning to turn and soon, we'll see people with some money in their pockets once more.  When that happens, watch out South Kohala because they will be ringing your bell looking for the beautiful condos on beautiful beaches with beautiful weather.  Prices continue to drop making those properties even more appealing.  It won't be long, hang in there.

For almost two months the median price of Single Family Residences (SFR's) and condos in North Kona have slowed their free fall.  Until January we were watching prices drop at about 20% per year but not anymore, at least not for now.  Most recently, the median price of a SFR is down just 3% and condos are near 3% from 4% last month.  While these may not be huge numbers they are large degrees of change in a short time.

In South Kohala, they could only hope for such things.  There, prices continue their tumble still running around 20% per year.  One reason may be that the buyers we're seeing in North Kona are soon to be retirees.  These are people who are looking ahead a few years and deciding to buy now rather than wait for either higher interest rates (they are coming) or higher prices.

These are the people who were smart enough to stay out of trouble; they didn't refinance their home just because there was equity to be gained.  They didn't buy with some dark alley, no down, no show of income or ability to repay loan that so many fell for.  Greed is a bad thing in any form but these were not the people who got sucked into it.

These people are looking more towards Kona for residential neighborhoods rather than the vacation areas so prevalent on Kohala's Gold Coast.  With the new FHA rules that no longer prohibit "flipping" property, we may see the return of the investors in South Kohala.  As prices continue their slide towards yesteryear they may become attractive enough that investors will begin buying the foreclosures and start the recovery there.  At some point, prices do become attractive regardless of the economy.  There are lots of people out of work or working for less than their worth but there are also those who aren't in that situation.  There are those still working, those with strong savings and balanced portfolios.  Watch for those wise ones to engineer any recovery in real estate in Hawaii.  It's not going to be some government program that brings back our island, it's going to be conservative, smart, deal seeking individuals who grew up knowing the value of a dollar.

Median price has slowed from an average 20% decline per year to just over 3% in January compared to January of 2009 in North Kona for Single Family Residences (SFR's).  Condo prices which were also dropping at about 20% per annum are down to 4% this year compared to last.

In South Kohala, however, not much has changed and prices continue their downward moves at around 20% per year.  In both North Kona and South Kohala the sales activity does continue to climb.  Most of the sales remain in the lower prices ranges which make up first time home buyers and people looking for second homes and investment properties.

According to Title Guaranty Escrow in Kona, only roughly 20% of the sales in the last month have been to owner occupant buyers.   My guess is that it's about evenly split between second/retirement home buyers and investors for the remaining sales.  There are quite a few people looking ahead a few years to retirement and buying now when prices are down.  Some will rent out their purchases until they actually move and others will save them for their own use until that magic day arrives.

Problems for the first time homebuyer credit and the "movin' on up" credit.  Since the first offering of the $8,000 was for a short time only, most of those who could did.  The number of takers on the extended offer are few.  Most of those who would like to take advantage of the $6,500 offer is they sell and move to a new home are unable to do that, their current home isn't worth what they owe on it so no sale.  Both tax credits were good ideas but poorly thought out.

There doesn't appear to be any long term thinking going on at the federal level.  Short term band aid fixes for small business are going over like the proverbial lead balloon; $5,000 tax credit for new employees, etc.  The ill timed home buyer credit isn't going anywhere and the loan modification programs have been a dismal failure.  It's like their heart's in the right place but there's no intelligence to go along with it, no one smart enough to make it work.

I'm still watching for unemployment figures to improve before I'll believe there is a recovery.  I don't believe we're going to see that until there's a major overhaul of the tax payer system and a refining of our business tax laws.  Positive changes there may boost the building industry and once that gets moving the entire economy will start an upswing.

It's scary to think that the longer we wait the more outdated becomes our manufacturing capabilities.  Our factories are old, our technology is old and those skilled in the business are even older.  If the unions want to be in business 20 years from now they better smarten up.  Companies can not possibly be expected to stay in business when half their payroll is for people no longer working but receiving handsome salaries and full benefits.

Times have changed but little of our thinking has kept up with it.  It's time for new business models and a new middle class.  Not everyone has to have everything.