While the Maui real estate market has a way to go before returning to peak levels, there were definite signs of improvement throughout 2009. In early late 2008 and early 2009, the housing market was hit hard by the economic downturn. Average prices fell drastically and total sales tapered significantly, but as the year went by, slow but steady improvement defined the market.
Housing construction in Western states, for example, is up 8.9 percent in January 2010 from the previous month, and although the figure is still low from a year ago, this is an early indication that the market is beginning to pick up again. If you look at the same figure but exclude apartments and condos, there was a 21.7 per cent increase in housing starts from January 2009 to January 2010.
The slower West coast real estate market has had a considerable impact on the Hawaii market as out of state buyers have dropped off. Still, the shift to in-state buyers has lead to improved sales, specifically as a result of signs of financial recovery in the stock market, historically low interest rates, and the new Home Buyers Tax Credit. Buyers are now beginning to see that the current market is a very favorable one.
The condo market in Hawaii has remained calm most likely because buyers are looking to cash in on bargain-priced homes but even this market is predicted to recover in the coming months. As construction picks up and development of stores, restaurants, and other community facilities returns to pre-2008 levels, the condo market will recover.
In the meantime, motivated sellers are offering some of the best deals seen in Hawaii in more than a decade. Most sales are completed at about 90 to 95% of the asking price and when you combine this with low interest rates and lucrative tax credits, first time buyers and retirees are confident that they’re going to get a great deal. Moreover, investors are beginning to return to the market as they know that low prices now will invariably lead to big profits down the road.
In fact, the Hawaiian real estate market has been quite stable compared to other states. California, Arizona, and Florida suffered from major market crashes, but Hawaii has managed to maintain a 10 year average with regards to average price and the number of sales. Buyers who continue to wait for prices to drop further are likely to be disappointed.
Currently, the Smith Team has already completed $2,000,000 in sales in the first 6 weeks of 2010 and we have more than $10,000,000 in sales pending. So while many experts continue to be concerned about the real estate market in Western states, the evidence seems clear that Hawaii is poised for recovery. Still, the market is obviously bolstered by the bargains that are widely available and buyers should not wait too long to take advantage.
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Obviously the Maui real estate market has been experiencing some dramatic lows but things appear to be turning around, finally. Compared to the same month a year ago, there has been a 48 per cent increase in house sales.
The strong rebound comes on the heels of big jumps on O’ahu, Kaua’I and the Big Island, marking a huge return after record lows. In fact, January 2009 sales were the lowest since in more than a decade. To see such disappointing figures you have to go all the way back to February 1997.
Another discouraging figure has been the median sales price of homes which have dropped 16 per cent to $469,000 from the figure of $558,000 a year ago.
However, a mere 71 condo sales were recorded last month which represents a 31 per cent drop from a year ago. In January 2009, a total of 108 sales were recorded. Still, this 2008 figure was somewhat surprising since it was the most number of sales since 2007 when the Maui real estate market was still going strong.
In all likelihood, a new condo project in Ka’anapali was responsible for the jump in sales figures. The project, named Honua Kai, boosted sales in January 2008 as previously owned and new homes were both included in the data.
Still, the median price of condos has taken a dramatic hit. In fact, the median has dropped nearly 50 per cent to $424,000 down from $805,000 a year ago. Again, experts attribute the huge difference to the Honua Kai project where eight condos were sold last month for a median of $722,500. Compare that to a year ago when 69 condos were sold for a median price of $1.17 million. Because the median price is the point where half of sales are above and half are below the median, the sale of many luxury condos will force the median price up.
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- Feb
- 12
Maui’s Sugar Future
The economic struggles of Maui have been no secret. Businesses are closing down, citizens are losing their jobs, and real estate prices have fallen drastically. Now, in one more blow to the struggling economy, sugar producers are debating whether there is a future for growing sugar on Maui.
Hawaiian Commercial & Sugar Co. (HC&S) currently employs around 600 Maui residents but has recently fallen on hard times. While the company has been a mainstay on Maui for more than a hundred years, their 2009 third quarter results were dismal and a comprehensive review of sugar operations was set in motion.
At the center of the issue appears to be water. The company is waiting for rulings by the State of Hawaii Commission on Water Resource Management regarding water allocations in East and West Maui which are set to be handed down in early 2010. A favorable resolution is critical to continued sugar operations for HC&S.
Expecting more than $30 million in operating losses in 2009, HC&S has a difficult decision ahead of them. Fortunately, the company is taking a more optimistic approach by basing their decision on their view of the future rather than past financial problems. Recent droughts have brought declining yields making the water issue very important.
Employees are concerned. They are hoping that HC&S will stay in the sugar business long enough to transition into more profitable markets like alternative energy as the future of sugar production on Maui is not promising. There are more than a hundred countries around the world producing sugar; most of them with cheaper land and labor than the United States.
The price of sugar actually rose last year, because of poor weather in countries like Brazil and India which are major sugar-producing players. Unfortunately, HC&S were unable to capitalize on these increased sugar prices because they had sold off their sugar supplies before the spike.
Plus, Maui has been suffering from a serious drought for the last 3 years. During its best year, HC&S produced 227,800 tons but because of the drought were only able to produce 125,000 tons last year. Some experts are pointing out that the commodities often vary drastically from year to year with regards to production. But the concern for HC&S is that they would need to have 4 record years of profit in order to climb out of their current financial hole.
Still, the parent company of HC&S relies very little on farming for profit. Alexander and Baldwin (A&B) credited HC&S with a half a billion in sales which is around 12 per cent of their corporate assets. The trend for A&B in the past has been to sell struggling assets.
At the moment, agriculture accounts for a meager 7 per cent of A&B assets and HC&S is unlikely to positively affect their profits. Even in their best years, HC&S had little impact on A&B’s bottom line while management efforts to improve profitability require a lot of resources.
As such, the argument for selling off HC&S to an owner who would concentrate on sugar production is appealing. But in this case, the land itself becomes a focal point. Part of HC&S sugar plantation land could be developed into homes or commercial property, as has been the trend for A&B. Yet, there is little market for undeveloped land in Maui at the moment.
A&B seems to be committed to maintaining their farming assets. Intending to keep 37,000 acres of Maui sugar land, the company is looking into alternative ways of profiting from farming. Energy alternatives like ethanol is one of the ways they hope to make their land profitable.
Again, we return to the issue of water. A&B is willing to invest hundreds of millions of dollars in developing ethanol and other energy alternatives but only if they’re guaranteed a water source. Environmentalists have been petitioning in recent years to reduce the amount of water available to plantations in order to maintain water flow in streams and lakes.
While they’re not trying to put HC&S out of business, they are also concerned about sustainable fresh water sources on Maui. Currently, the water commission has decided that 13 million gallons of water per day should be saved for streams but is considering raising that amount. Meanwhile, HC&S is asking for a minimum of 13 million gallons of water per day.
Summer droughts have been reducing the amount of available water. The crisis point for HC&S is 20 million gallons of water in the East Maui watershed. The county has access to 7 million gallons leaving exactly what HC&S needs to continue operations. Clearly, the likelihood that the watershed will drop below that level means HC&S is left out in the cold.
So water is a critical issue in maintaining operations and poor weather may be enough to decide the future of sugar on Maui.
Photo Credit: Bret Arnett
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Opportunities abound as more and more Sellers get realistic on their pricing.
With new REO’s hitting the market each week, Sellers are either dropping their prices or accepting offers well below asking. Some of these are on short sale listings, which are not guaranteed of closing; however, what do you have to lose.
With interest rates close to record low levels, now is the time to lock in a great deal before prices and interest rates both go up.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
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- Feb
- 11
Homebuyer Tax Credit
Did you know that you can take advantage of the Homebuyer Tax Credit even if you are not a first time home buyer?
The tax credit which was set to expire on November 30, 2009 has been extended to April 30, 2010, and it has also been expanded to include existing homeowners. Read more.
There is good news in paradise. The market is heating up with sales of homes in January 2010 up 48% over the previous year. Read more.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. Don’t see what you are looking for. E-mail us your criteria and let us see what we can come up with. Currently, we have 6 Bank Owned Properties (REO’s) that are in the pre-list stage. One of these may be perfect for you.
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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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