During the recent recession, affordable housing has become a major concern of local councils. Maui County Council members therefore have been working toward changing the county’s residential work force housing guidelines in order to encourage more development of affordable housing. Members will continue to tinker with the policy which was originally written in 2006 to ensure that as luxury properties were developed so would be affordable housing projects.
Unfortunately, the economy’s recent nose dive hasn’t helped matters much and in its entire life span, this affordable housing policy has only been applied to three housing projects. Many are pointing to these facts as proof that the ordinance isn’t getting the job done. On the other hand, supporters of the ordinance are quick to mention the fact that the poor economy is stalling all new housing projects, not just affordable housing projects. With nobody building due to the recession, little has been done to ensure affordable housing for county residents.
Regardless, something needs to be done to kick start the fledgling construction industry and most people are looking to the government to take the necessary steps to provide housing opportunities for Maui residents. As such, the local government is taking the first steps to revising this ineffective policy.
In their efforts, the city council is reducing the number of affordable homes that must be developed in a new sub-division with five or more homes. Indeed, the first draft of the new ordinance calls for only 25 per cent of new homes in a development to fall into the category of “affordable.” Previously, 40 per cent of new homes in a development were required to be affordable options. If the new ordinance passes, County Council suggests that it apply only to projects in which the houses are expected to bring in $600,000 or less in the open market.
Last year, the average single-family home in Maui sold for around $720,000. With regards to the existing law, when a developer works on a project with market rate homes starting at more than $600,000 at least 50% of these properties are required to be affordable.
Essentially, changes to the affordable housing policy are being lobbied for by local developers and contractors. Hoping for the limit on affordable homes to be lowered to 15%, developers are arguing that the county needs to do something to get construction back on track. New construction will provide new jobs as well as affordable homes.
However, not everybody agrees with these changes. Non-profit organizations and charity groups would prefer a higher threshold, perhaps 30 per cent. As you can see, the county is faced with the challenge of making a compromise. The county needs to take the necessary steps to increase construction but without giving developers the opportunity to take advantage of any loop holes and create neighborhoods only for the wealthiest members of society.
There are also problems with the language of the ordinance that makes it difficult to understand. When a developer works on a project of 100 homes, they can build the affordable homes either “on-site” or “off-site” and this changes the requirement for affordable homes. At the moment, a company can build 100 luxury homes and then have the choice to build either 25 affordable homes at the same site or 40 affordable homes at another site in the same planning district. Local groups want the requirement for off-site affordable homes to be raised to 50 per cent. But some locals are concerned that these kinds of laws will lead to class segregation where luxury homes would be built in one neighborhood and affordable homes in another. The idea of homogenous neighborhoods is a concern because of the difference in community services often seen in neighborhoods of varying wealth.
Nevertheless, the county voted 5-0 in favor of the current ordinance changes and the mayor gives them full support. Over the past year, developers and real estate representatives alike have been submitting proposed changes to this work force housing policy as they want to lift deed restrictions and get rid of a companion law that would force developers to provide their own water sources.
Approximately 3,100 homes have been proposed since the work force housing policy was passed but some of these projects are still in the planning phases while others have lost funding or are hoping for the market to improve before they proceed. Other changes that might be accompanying the housing ordinance are geared to encourage development of affordable housing while preventing owners from selling these affordable homes at market rates.
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Years after the last housing boom, Hawaiians are still paying too much for rent. However, things are starting to change and the slowed real estate market is encouraging landlords to decrease their rents. Indeed, for the first time in more than a decade, property managers and landlords are looking for new ways to fill vacancies which could mean anything from free parking to lower rents for tenants.
Even urban properties throughout Hawaii are seeing lower rents encouraging suburban and rural renters to make the move to the city; a move they couldn’t afford in the past. Without question, we’re seeing more of a renters market throughout Hawaii and this is giving more power to the tenants. They’re in a position to ask for lower rents or property improvements for the first time in a very long time.
Landlords have been suffering from very long waits to fill vacancies which is why many are lowering rents by as much as $100 or more in order to fill the vacancy or to encourage current tenants to stay. Whereas many renters in the past expected to pay as much as $1,025 for a studio, many one-bedroom apartments are available for as low as $800 in some places.
Indeed, many renters are looking for lower monthly payments so they can start saving for a mortgage or other big purchase. And landlord urgency to fill apartments is only helping renters secure better deals. Many stories are floating around about people who are looking to move in a month or two only to have property managers request that they move in sooner.
There are so many rental properties available right now that it’s hard to imagine anybody not finding a place that suits their budget. Yet Hawaii’s rental market is much stronger than those on the Mainland. Some properties that have fallen victim to the housing collapse remain empty for months at a time. Landlords are resorting to gimmicks and other offers to attract renters. You can expect anything from slashed rental rates to free gift cards and even major renovations.
Unfortunately, this renters market is ameliorated by the economic situation faced by many potential renters. They are often facing difficult times as employment figures continue to drop and companies cut salaries and hours. As such, lower housing costs aren’t making a major difference in their economic picture. In fact, much of the reason for increased vacancies is the fact that many renters cannot afford to go it alone anymore. This means renters are downsizing or doubling up to share the cost of living and as a result there is an increase in the number of vacancies.
At the moment, experts are predicting further decline in rental prices throughout the United States. High unemployment and little hope for economic recovery suggest that rents will stagnate well into 2010 and further drops have not been ruled out. The average asking price for apartment rentals fell 12 per cent in 2009 while the asking rent for homes dropped 4.7 per cent and townhouses fell about 2.7 per cent.
Still, let’s keep these rental prices in perspective. Despite lowering costs, Hawaii is still one of the most expensive states in which to rent and we’re in desperate need of affordable housing. The average rent in Hawaii was actually the highest in the country and more than half of renters spend more than 30 per cent of their income on housing. Surprisingly, more than 40 per cent of Hawaiian residents are renters and as such they are welcoming the news of lower rents.
Declining rents are a definite boon for renters and low-income families. Some renters even have the opportunity to negotiate cheaper rents which has been unheard of in the last couple of years. And more importantly, landlords are willing to drop their rents. Unfortunately, many o f these negotiations are the result of less income for the renters – lost jobs, cut wages, or fewer hours have made economic responsibilities harder to meet and the only option for many is to cut living costs.
For the first time, Hawaii tenants are in a highly favorable bargaining position. New appliances, upgrades, carpeting, and other renovations are a few of the perks to this troublesome housing market. Landlords don’t want to lose tenants so are willing to make some compromises that they might not have been willing to make in the previous housing market.
But these lower rents don’t equate to more affordable housing. Policy makers and local councils need to be aware of the lack of affordable housing for low- and middle-income families and these drops in rent are not being seen by people in these income groups. So although rental prices are dropping, this is not affecting the neediest people in Hawaii and the government still needs to work toward providing affordable options.
Photo Credit: jessicafm
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The end of 2009 was about as good for Maui real estate as the beginning of the year. The number of units sold was down overall, although there was a slight improvement in the number of condominiums sold. Still, house sales have taken a major hit and condo prices have fallen considerably. While single-family house prices have not fallen as much, they’re still down almost 15 per cent.
Nevertheless, available inventory appears to be declining suggesting that there are some reasons to be cautiously optimistic about a real estate recovery in Maui. At the moment, there are still more than enough properties to satisfy the market for the next year or 18 months and since said inventory continues to include a wide variety of short sales and bank-owned properties the picture is not entirely rosy.
In other words, now is not the time for sellers to test the waters. The market is fairly saturated with highly motivated sellers so unless you need to sell your home you should wait for further market improvement. Dozens of new foreclosures every week help to maintain this buyers’ market.
Current selling prices tell the story fairly accurately. The average price for a single-family home in Maui is down to $713,946 in 2009 compared to $830,578 in 2008, more than a $100,000 difference. Moreover, prices in 2007 were higher still averaging $920,807 making the total drop in average price more than $200,000 in just 2 years.
Similarly, condo prices have also suffered. In 2009, the average condo sold for $719,993 compared to $920,468 in 2008. Condo prices have fluctuated much more than single-family home prices as 2008 prices were considerably higher than those the year before. In 2007, the average condo price was around $817,000 but we can still see a drop of about $100,000 for condos.
Even median prices have shown a decline. Typically, median prices are consulted in order to exclude rare sales and inexplicably expensive houses. Regardless, the median price for single-family homes in Maui has dropped more than $160,000 since 2007. The median prices for these properties were $630,069; $577,774; and $498,106 for 2007, 2008, and 2009 respectively.
And the statistics for condos are not really any better. Since 2007, condo prices have fallen $100,000 from their 2007 and 2008 medians of $550,000 to the 2009 median of $450,000.
However, even though these are disconcerting figures, it’s important to understand that the Maui real estate market is doing considerably better than the national picture. According to experts, the average single-family home sold for $172,600 in November 2009.
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Who is buying Maui Real Estate?
In order to answer this question, we should first look at what has been selling. Last year, there were a total of 1687 properties sold that were as reported through our MLS.
This includes Homes, Condos, Commercial, Business, Timeshares, and Land. The sales broke down as follows:
Timeshares = 40
Homes = 694
Condos = 824
Vacant Land = 109
Commercial = 19
Business = 1
Let’s take a closer look at the two major categories, i.e. homes and condos.
The average sales price of condos was $719,000 with a median price of $450,000. 71 sales were REO’s and 59 were Short Sales. The 3 highest sales were at The Residences of Kapalua with the highest one being $5 Million. 70% of all the sales were over $300K, and of these approximately 90% were bought as part time vacation condos.
The average sales price of homes was $715,000 with a median price of $499,000. 116 sales were REO’s and 46 were Short Sales. The highest sale was $11.25 Million for a beachfront home on Keawakapu Beach in South Kihei. 93 sales were at or above $1 Million.
Probably no surprise to anyone, but our market continues to be dominated by off-Island Buyers. In future issues, we will provide a more detailed profile of who these Buyers are.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. Shortly, you will be able to search sales going back 12 months for any search criteria you might enter.
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As previously announced, Maui Land & Pineapple (MLP) has pulled out of the pineapple business completely at the end of 2009. The culmination of MLP restructuring has cost 285 pineapple cultivation workers their jobs after a year of turmoil for a company desperately trying to remain in business.
Early in 2009, MLP started selling assets like their Plantation Golf Course, which drew $50 million, to try to pay off growing debts. Then in February, MLP announced it would be laying-off around 100 employees at the Kapalua Resort and at the Kahului headquarters. Moreover, employees who managed to keep their job were required to swallow a 10 per cent pay cut. Unfortunately, the company’s woes did not end there and in May then President and Chief Executive Officer Robert Webber resigned after a short 6 months in the position and board Chairman Warren Haruki stepped up as the interim CEO.
Still, the company continued its dive into the red and reportedly had lost nearly $93 million by October; even more than the $71.6 million they had lost in 2008. For the most part, losses were blamed on a struggling Maui real estate market which saw the value of MLP real estate investments nose-dive. Moreover, all the company’s investment in Kapulua Bay Holdings was also lost as well.
Nevertheless, when the news dropped last November that MLP would end pineapple operations, employees and community members alike were somewhat shocked. For the most part, people had hope that a resolution would be found and that operations would continue. Sadly, this was not to be and pineapple operations officially ended in December 2009.
Perhaps what’s even more surprising is a report by auditors that reflected serious doubts that MLP would be able to stay in business at all. A report filed by the company with the Securities and Exchange Commission outlines the problems faced by the struggling company; yet, MLP officials are holding on for an improved economy and are hoping to reverse their financial woes through a secondary equity proposal to current stakeholders.
Some good news has come from this story, however. At the end of 2009, the recently formed Haliimaile Pineapple Co. announced plans to take over MLP pineapple farming operations saving 65 or more jobs.
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- Jan
- 14
The Tide is Turning
The tide is turning. You know the market is shifting in to a higher gear when you receive 10 offers on one listing and 5 offers on another one within days of listing the property.
This was the case with two of our bank owned properties that we listed last week. Unfortunately, the bank jumped the gun on one of the Listings and we had to cancel it, due to the fact that the sale had not yet been confirmed by the courts.
If you think it is only REO properties that are garnering attention, think again. Our new luxury property listing at 120 Manalo Street (see Featured Property above) is also attracting considerable attention.
Our real estate market on Maui is cyclical. Remember 1980 to 1985, we were in a downward trend as a result of high interest rates.
1985 to 1991, we had a booming market with Japanese investors pushing values to unprecedented heights.
1997 to 2006, we experienced our last big boom in real estate prices which was partially due to the availability of money and easy financing qualifications.
If we could project ourselves ahead to 2015, and look backwards, we believe that the period between now, and then will mark the next big wave in our periodic cycles.
Do you want to take advantage of this next upswing in the Maui Real Estate market? Whether you want to buy a luxury multi-million dollar estate, or your first affordable home or condo, we are ready to help you.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. One of the key factors in any sustainable recovery in our Maui real estate market will be how tourism is faring. It is the driving force of our economy. We are happy to report that occupancies are way up again for the first quarter of 2010.
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2009 is almost in the history books. It certainly has been a challenging year for many people, and especially those in real estate.
Fortunately, we were able to buck the trend again, and had another outstanding year with closed sales over $19 Million.
Although we are understandably proud of our accomplishments this year; we take even greater satisfaction in knowing that we helped many folks get some terrific deals as well as helping others sell their properties in challenging times.
We are looking forward to an even better year in 2010. If you are thinking of buying or selling, please let us know how we can best assist you in that process.
We want to wish everyone a very Happy, Healthy, and Prosperous New Year.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. At times we hear about owners who are extremely motivated even though the price may not seem to reflect it. Such is the case with two oceanfront homes at Maluhia #5 and Makena Place #1. Don’t be shy about making an offer on either of these properties.
Gregory P. Smith R (B), Melissa Smith R (B), Ken Smith R (S), Jeremy Smith R (S)
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- Jan
- 05
Looking Forward to 2010
It is the start of a New Year and a new decade. Although we know there are many naysayers out there predicting doom and gloom; we are certainly are not in that camp at all.
On the contrary, we are extremely bullish on the future. In fact, we are going on record that 2010 will be a turning point for Maui Real Estate. With each succeeding month showing increases in sales and shrinking inventories, we feel that 2010 will see the bottoming out of real estate prices on the Valley Isle.
In fact, if you have been following our weekly Market Watch, you will notice that this past week showed a record drop in inventories coupled with nice increase in sales in all categories
Where do you want to be 5 years from now? If you want to be owning property here on Maui, then this year would be an ideal time to act.
Call or e-mail us today to ensure that you are part of the next bull market cycle in Maui real estate.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. Ken recently announced that 2010 would be his last year as a full time member of The Smith Team. He will still be available for consulting on a very part time basis, but mostly, he will be pursuing his other passions, such as traveling, long distance running, playing with his grandchildren, and Tournament Scrabble®.
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