Compared to a year ago, January foreclosures in Hawaii have nearly tripled. The 174% rise represents 337 foreclosures filed in the first month of 2009, making this the seventh consecutive month with a triple-digit increase in foreclosure rates. The continuing real estate woes make a recovery highly unlikely. There are far too many risky loans and the impacts of unemployment are just beginning to show. While foreclosures in January are down roughly 30% from December, there is no indication that this is anything but an anomaly. Lenders temporarily suspended new foreclosures but experts expect activity to resume by spring.
Currently, the government is attempting to create solutions to the foreclosure problem and as such many lenders have taken a wait-and-see approach but more and more evidence suggests that this is just the beginning of a cycle. Many buyers have taken on more debt than they can handle and as such the number of foreclosure, short sale, and distressed property sales is growing rapidly in Hawaii. Moreover, with home prices dropping as foreclosures rise it has been incredibly difficult for homeowners to avoid losing their homes. Owners are unable to save their homes through equity or quick sale and there are other economic factors coming into play. Overall, the tourism and construction industries in Hawaii are also suffering and this brings business closures as well as layoffs. All these factors combined, foreclosures, falling house prices, weakening industry and subsequent layoffs and closures, support the theory that recovery is not in the near future.
Still, there is a glimmer of hope in the sense that Hawaii is faring better than the rest of the nation. While the national average for foreclosure rates exceeds 2 per cent, the same rate in Hawaii is less than 1 per cent. In fact, Hawaii ranks 30th nationwide with respect to foreclosure rates. In addition, there is a great amount of variation in foreclosure rates from neighborhood to neighborhood. While most neighborhoods are affected by foreclosures, Honolulu, Ewa Beach, Kailua Kona, Kihei, Waianae, Kapolei, Kahului, Hilo, Lahaina, Wailuku, Waipahu and Waikoloa have seen the most activity.
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With regards to housing and the Obama Stimulas Package, here’s a great letter from the 2009 National Association of Realtors President, Charles McMillian:
Dear Fellow REALTOR®,
Here’s our take on the Stimulis Bill and Treasury announcements made this week. We look at the Stimulis package AND the Treasury’s package holistically, in compliment with each other - mostly because that’s how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have). Here they are: 1) get loan limits raised for high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to push interest rates down (which are higher than they should be due to systemic risk right now) by 200 basis points, and 4) help provide solutions to the foreclosure/short sale problem.
So here’s what we have achieved: 1) the loan limits will be raised to $727,000 in high cost areas, 2) the tax credit will be raised to $8,000 with NO payback [a true credit], 3) interest rates have come down 125-150 basis points, and 4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES’s thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.
In addition, we preserved what we have - which some tend to forget is always on the table when these negotiations start up again - mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).
We did make a run at the $15,000 credit — and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of ‘what we are willing to give up to get a $15,000 tax credit’ and kept the debate again, on how much it should be. It’s pretty hard to complain when they give you what you ask for and you lose something you never had.
While we study the Treasury specifics on their major role in providing the rest of the housing solution — there is much more to come and we are working diligently with the Administration to help ‘unclog the pipeline’ and get capital flowing into housing again.
Sincerely,
Charles McMillan, CIPS, GRI
2009 NAR President
Mahalo,
The Smith Team
Gregory P. and Melissa Smith R(B)
Ken and Jeremy Smith R(S)
Coldwell Banker Island Properties
Shops at Wailea
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It’s no surprise that with the recent economic downturn and weakening real estate market that foreclosure rates throughout Hawaii are rapidly increasing. In fact, over the past two years foreclosure rates have quickly been approaching the levels of the last real estate market contraction in the mid 90s. Last year alone saw a 230% jump from 2007 with nearly 3,200 homeowners in Hawaii facing foreclosure. Experts predict that somewhere around one in 30 Hawaii homeowners, or approximately 4 per cent, will suffer from foreclosure before the end of 2010.
These shocking statistics make it necessary for lawmakers to intervene with legislation to slow the growing rate of foreclosures. The economic health of Hawaii will be greatly served by a proposed bill to give homeowners experiencing foreclosure more time and assistance to prevent losing their property. This bill, which is about to be introduced to the state Legislature, focuses on delaying the foreclosure process by a month or two. Senate Bill 1623 was introduced by Senate Majority Leader Gary Hooser in an earnest effort to halt the prevailing trend of foreclosures.
Recently, lawmakers have introduced a number of bills in order to address the problem of foreclosures. SB 1623, along with similar legislation, offers a clear sign that the Senate is committed to protecting homeowners in danger of losing their homes. Essentially, this bill requires lenders to contact a homeowner, either by phone or in person, to discuss the financial difficulties and alternative options available before starting the foreclosure process. Furthermore, lenders would need to establish a toll-free hotline for homeowners to reach a federally certified counseling agency. As it stands now, lenders can start the foreclosure process by simply mailing a letter of notice of foreclosure. Under this proposed bill, lenders would have to wait thirty days to begin foreclosing, and this period can be extended if homeowners engage in follow-up discussions with their lender.
SB 1623 is clearly focused on owner-occupied homes and will likely exclude investor-owed units and would apply to loans made between January 1st, 2003 and December 31st, 2008.
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