As seems to be the case for much of the country’s real estate market, Maui’s market is still marked by both positive and negative aspects. While some experts are putting positive statements out there, they are typically cautious or modified by somewhat less optimistic follow-ups. The reason behind this mix of good and bad is simply that certain aspects of Maui’s real estate market have begun to improve but others are still lagging behind.
For example, Maui sales volumes are on the rise but such increases have occurred at the expense of sales prices. As compared to the first and second quarters of 2009, Maui has experienced a 64% increase in condominium sales volume so far in 2010. Volume increases of 43% and 42% have also been recorded for residential property sales and vacant land sales respectively. Sales volume increases for West Maui in particular have been 16% for condominiums, 59% for residential properties and 120% for vacant lots.
While those numbers looked at in isolation would suggest a strong improvement for the Maui real estate market, such statistics must be compared to other numbers for a more complete picture. As previously mentioned, the rises in sales volumes have been accompanied by declining sales prices. The median sales price for condominiums dropped 32% for Maui as a whole and 3% for West Maui. There have also been respective declines of 7% and 16% for Maui and West Maui residential properties as well as drops of 31% and 32% for vacant lots.
One of the most predominant characteristics of Maui’s current real estate market is the marked excess in inventory. At the moment, there is more than an eight month supply of both condominiums and residential properties, and more than an 11 month supply of vacant lots. Of course, the number of distressed properties is still remarkably high as well, with a significant reduction unlikely to occur anytime soon due to the backlog of properties in some state of foreclosure.
When taken all together, the above statistics and information can be boiled down to this — for potential homebuyers, now is an excellent time to look for some great deals on the Maui real estate market. With low asking prices and low mortgage rates, there are many opportunities for good real estate investments. For sellers, on the other hand, this is not the best time to put a home on the market, unless the homeowners are truly serious about selling.
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The latest word from economists is that the downward trend that has characterized the Maui real estate market over the past many months should be at its end. It is expected that real estate prices will not drop much further, if at all, and Hawaii as a whole is believed to now be in the wake of the recession. However, even though Maui’s economic climate is not expected to get any worse, recovery will be neither fast nor instantaneous. As one economist stated, Maui’s recovery will be a jobless recovery and it will take time for the positive changes to become evident.
That said, however, economists are warning potential Maui homebuyers that there is not much time left to wait to look for real estate bargains. Those who decide to wait a bit longer to try and save a few more dollars may regret that decision in the long run, as they could end up missing out on the best bargains. A rise in housing prices in California most likely foreshadows a similar trend for Maui, as Maui typically follows in California’s footsteps in such situations. The lack of new housing on Maui’s real estate market is also expected to raise prices as demand will begin to outweigh supply.
Compared with Maui’s rising population, the proportion of new housing projects on the island has been declining at a steady rate. The main reasons for this have been government regulations and the slow response to keeping up with the demand for infrastructure. Such factors are likely to keep the proportion of new housing low in the near future, resulting in an increase in prices for available housing as Maui’s economy enters into the recovery stage.
In other words, while it may not be obvious to the average person and while many homebuyers may still feel cautious, Maui’s economic tide is about to change. And with that change will come the recovery of the local real estate market. That is why now is a good time for homebuyers looking for bargains to get out into the Maui real estate market and make their move.
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The first half of 2010 has brought a marked increase in sales activity in Maui’s residential real estate market. In fact, single-family closings have increased by 42.6% to 422 as compared to the first half of 2009 when there were 296 closings. Condominium closings have experienced an even greater increase, rising 63.6% to 666. However, while sales activity has shot upwards in recent months, the same cannot be said for Maui’s residential real estate prices.
While the average price of a Maui residential home is now $768,866, an increase of 2%, condominium prices are down by 11% to an average of $756,119. Many who are actively involved in Maui’s real estate market believe that the current pricing situation is not likely to improve significantly until the number of distress sales has gone down. As a result of the economic downturn, many homeowners have found themselves in the difficult situation of having mortgages that are more than the current value of their home.
This unfortunately common scenario has lead to a shortage of clean offerings and a high number of short sales. One of the major problems with short sales is the fact that they can be stalled or frustrated when second mortgages are involved. However, many local real estate professionals are now taking steps to become educated on the short sale process which will hopefully lead to better management of such sales and, in turn, market improvement.
Despite the static nature of housing prices, Maui’s real estate market has seen increased turnover in most residential areas, especially in Maui Meadows, a South Maui subdivision where closings have increased from two to 11 in just the past year. Wailea-Makena and Kaanapali have also experienced marked sales increases, with Wailea-Makena’s sales doubling to 18 and Kaanapali’s sales doubling to 12.
While most areas have seen housing prices drop or remain relatively the same, there are some exceptions. Prices for single-family homes in East Maui’s Haiku, for example, have risen 10% to $607,000 and those in West Maui’s Lahaina have increased 8% to $947,000. However, the median price for a Maui single-family home, including the Molokai and Lanai markets, has dropped nearly $35,000 to $469,000, and it is expected that it will still take some time before Maui’s housing prices begin to experience the same strong upward trend as the market’s recent sales activity.
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Here are five smart reasons to buy a home now.
1. Low Mortgage Rates
2. Houses are in move-in condition
3. Terrific houses are coming on the market
4. Appraisal regulations are finally aligned with market realities
5. Plenty of programs
So, if you are looking for a home, please allow us the opportunity to work with you to find the perfect property to match your needs and budget.
As a reminder, you can search all MLS listings from our website. After you have selected your criteria, and done a search, hit Save Search. Then, whenever there is a new listing matching those criteria, you will be automatically notified.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. Ken will be on vacation for 4 weeks beginning August 6th. Follow his exploits on Facebook, or check out his progress during the National Scrabble Championships. He is entered in the Intermediate Division.
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What the Mortgagor Needs to Know
As a mortgagor facing possible foreclosure you are probably feeling a lot of pressure. The stress of losing a home through foreclosure is also usually compounded by a variety of other life stresses and therefore can be an extremely difficult time in your life. Indeed, it’s important to understand that although you may be looking at foreclosure, you have some rights.
First of all, you have until 3 days before the sale to prevent default by paying the debt and other costs associated with foreclosure. Hawaii foreclosure law attempts to protect the borrower by ensuring that you receive ample notice about an impending foreclosure. Even when a power of sale clause exists, the bank must give you what constitutes a minimum of 4 weeks notice before they can attempt to auction your property.
More importantly, when your lender has provided you with a notice of intent to foreclose, you are free to sell your property on your own. In many cases of foreclosure, the mortgagor often gets less than the value of the property. By selling your property before foreclosure, you are more likely to get a fair price.
What the Foreclosure Home Buyer Needs to Know
Foreclosure home buyers need to understand that the process is fraught with loopholes and these sales are rarely straightforward. Nevertheless, when you purchase a foreclosed property, you often save a great deal of money.
Still, home buyers who are interested in foreclosure properties must often accept a property without having seen it and you must also accept that other parties are going to be interested in bidding on the property. Non-judicial foreclosures are usually more straightforward for home buyers as with judicial foreclosures bidding doesn’t stop until a court confirms sale. This means you may win the auction and still lose the property in the end.
The timeline for foreclosure sales is usually around 60 to 90 days but depending on the property and the legal matters involved a foreclosure sale can take up to a year to finalize. Legal complications with foreclosure sales are simply a part of the process and you must be prepared and patient when you’re shopping for foreclosure properties.
Nevertheless, foreclosure properties are fairly common throughout Maui because of the current economic climate and you may find a great deal on a beautiful property if you follow the foreclosure route.
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According to noted economist, Paul Brewbaker, “If Maui real estate prices haven’t already hit bottom, they’re not going to get much lower.”
He further stated that it wasn’t worth looking for the last 5 dollars, and if you want a bargain, the time to act is now.
In addition, even if prices do drop further, the likelihood is that interest rates will more than offset any possible savings for those who are financing their purchases.
The uptick in housing prices in California, fortells an uptick here, as Maui closely follows the trends in California; although normally with a lag time. Read the full article.
Next week, we will put up a link to the video, so you can see for yourself the data which Mr. Brewbaker is using for his forecast.
Have a wonderful week!
Mahalo Nui Loa,
The Smith Team
P.S. Ho’onanea at Lahaina is a brand new D.R. Horton project with terrific pre-construction pricing. Here are three representative Listings.
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Pre-foreclosure
The pre-foreclosure period is essentially the time when the lender notifies the home owner that they are in default of their loan and that foreclosure proceedings will begin. As already mentioned, in a non-judicial foreclosure, the lender must provide a notice of intent to foreclose.
Alternatively, with a judicial foreclosure, the lender must ask the court to rule that the borrower is in default. The appropriate documents are filed and the lender provides the borrower with notice of the court filing. Otherwise, if the lender is unable to establish contact with the borrower they may publish a notice of the court filings in a newspaper circulated in Maui.
From the time this notice is sent or published, the borrower has 20 days to respond. After 20 days they are automatically found to be in default and the lender is given the power to proceed with the sale of the property. If the borrower responds promptly to the notice, the court will hear both parties and determine if the borrower is in default. Once default has been established, the borrower may appeal the decision within 30 days.
Notice of Sale and Auction
In non-judicial foreclosures, the lender follows the agreed upon guidelines or the guidelines regarding power of sale as outlined above. If the borrower is unable to repay the debt, the property goes to auction and is sold to the highest bidder. From time to time the auctions are rescheduled at the convenience of the lender but this requires that notices be sent and published again.
In judicial foreclosures, the court appoints a commissioner to sell the property, also at an auction. A notice of sale is published by the commissioner in a local Maui newspaper indicating the date and time of the auction and any associated open houses. Anybody is free to bid on the property but the winning bidder must pay 10 per cent of the bid by cash or cashier’s check. Still, this does not ensure that the highest bidder will receive the property as continued bidding is allowed at a confirmation hearing. In fact, the sale is not final until confirmed by the court as a fair price and anybody may reopen the bidding before this point by offering 5 per cent more than the auction price.
Finally, while some states allow a property owner to redeem their property by paying off the outstanding debt, Hawaii does not offer any rights of redemption to borrowers after the court has confirmed the sale.
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Overview
The foreclosure process in Maui and Hawaii is not distinct from other states but there are some challenges that buyers face when they attempt to purchase this type of property. Understanding the Maui foreclosure process will not only help you to find an ideal property, it will also help you to prepare for the unique demands that are associated with foreclosures. Whether you are a mortgagor or a home buyer, it is beneficial to understand the stages of foreclosure and your rights therein. In addition, it’s important to understand that the current homeowner also has certain rights, and taking some time to learn about the process will only make it easier to manipulate.
Types of Foreclosure in Maui
The two main types of foreclosure in Hawaii are judicial foreclosure and non-judicial foreclosure. While both methods are commonly used, they are slightly different.
Judicial Foreclosure
Judicial foreclosure involves a lawsuit wherein the lender asks for a court order to foreclose. This type of foreclosure is used whenever there is no power of sale in the mortgage or deed of trust. When the court orders a foreclosure, the lender auctions the property to the highest bidder.
Non-judicial Foreclosure
With a non-judicial foreclosure, a power of sale clause is written into the mortgage or deed of trust. Power of sale clauses are essentially an agreement where the borrower has authorized the lender in advance to sell the property and pay off the remaining balance on a loan in default. Whenever a power of sale clause exists, the lender has the power to sell the property. Either the lender or their representative, the trustee, must follow specific power of sale foreclosure guidelines.
What are the Power of Sale Foreclosure Guidelines
As a home owner, you would probably be reluctant to agree to power of sale if you thought the bank could up and sell your house whenever they felt like it. In fact, where there is a power of sale agreement, the lender must follow specific guidelines. Sometimes the power of sale agreement includes the details of sale including the time, place and terms under which a sale can take place. However, when these details have not been provided, the following guidelines hold true.
First, the lender must publish a notice of intent to foreclose once weekly for a minimum of three consecutive weeks. The last announcement of notice of intent to foreclose must be published at least 14 days before the day of sale and it must be published in a newspaper with circulation in Maui.
This notice is copied and delivered to all interested parties including the borrower, prior and junior creditors, and the state director of taxation. Also, this notice must be posted on the property at least 21 days before the sale of the property.
This notice of intent of foreclosure must also include specific details. The date, time and place of the sale must be written in the notice along with the dates and times of two open houses for the relevant property. If there are no planned open houses, the notice must reflect this fact. In addition, the notice includes the unpaid balance on the mortgage, a description of the property including the address, the name of the borrower, the name of the lender, and the names of any prior or junior creditors with a lien on the property. Finally, the notice of intent must also include the name, address, and telephone number of the State representative conducting the sale as well as the terms and conditions of the sale.
The power of sale foreclosure guidelines also ensure that the borrower may avoid default and stop the sale of the property by paying the debt and associated costs (including lawyer fees) right up to 3 days before the sale.
Photo Credit: respres
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Like most housing markets throughout the United States, Maui has seen significant drops in housing prices. The average price in Maui as of the end of April 2010 was $737,281 which represents a 3 per cent drop over a year ago indicating that housing prices continue to decline, albeit more gradually. Still, if you are an individual with sound finances and stable employment, there hasn’t been a better time to buy in Maui in more than a decade.
First time home-buyers and those looking for vacation properties have been finding some great deals on Maui real estate. The current buyer’s market is characterized by an excess of available properties and reasonable prices. As the inventory of available properties in Maui is increasing and housing prices are dropping, home buyers have an incredible range of choice. You have an unprecedented opportunity to be highly discriminating in your property choice while also finding some unbelievable prices.
Especially for vacationers, who travel to Maui annually, now is a great time to invest in a vacation condo. Condominiums and even detached homes make great vacation homes that you can rent out for extra income. Better yet, when you purchase a Maui property you have your own place to enjoy while you stay in Maui. Average condo prices are also down this year with the April 2010 average representing a 19 per cent drop from a year ago to $743,208.
Still, not only are prices down and inventories up, but interest rates are at historic lows. Together the unbeatable prices and low mortgage rates make Maui homes very affordable compared to a few years ago. There have been signs of stabilization in the market and economic factors are also looking up meaning that the buyer’s market in Maui might not be around along.
Indeed, if you are interested in Maui real estate you need to seriously consider the fact that right now the market strongly favors buyers. Maui properties make a great investment regardless if you are a vacationer who regularly visits Maui or a resident with adequate savings and secure employment.
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You’re starting to put together some of the necessary information for purchasing a home. You have an idea of the kind of home, neighborhood, price range and other factors but there are some terms that keep popping up that you don’t fully understand. What is the difference between “fee simple” and “lease Hold” or oceanfront versus beachfront property? Here, I’ll try to enlighten you on some of these terms and other tips for buying a home.
Fee Simple Versus Lease Hold
Although fairly common in the real estate world, the terms fee simple and lease hold are foreign to the average home buyer. Simply put, these terms refer to the two ways a Hawaiian property owner holds a title to property.
Fee simple is the most common way that real estate is owned in the United States and is a kind of freehold ownership. Moreover, fee simple ownership represents total ownership over a piece of property limited only by certain government powers like taxation. In effect, fee simple ownership means that you own both the land and all improvements on the land.
On the contrary, leasehold is another type of ownership where you pay for the right to occupy some land for an agreed length of time. In this case, you own only the improvements on the land, rather than the land itself. Generally, the land where the improvements sit is owned by a third party who owns a long term lease on the land and collects monthly rent for you to use the land.
Clearly, many buyers prefer the fee simple ownership situation because they are more confident with their rights over the land. Because leasehold ownership started in 1961 and the majority of the leases were 50 year terms, these leases are going to come to terms very shortly. If you enter into a leasehold agreement you need to be careful that you fully understand the terms of the lease and when the lease is up for renegotiation.
In theory, the market value of a fee simple property and a leasehold property are the same but there are certain factors that make a real world difference. Future lease payments and the growth rate of comparable Maui real estate have a moderate effect on the value of leasehold properties.
Oceanfront Versus Beachfront Property
We all want to live by the water, don’t we? Sitting on your patio, sipping cocktails, and entertaining guests while the sun descends over the ocean is our ultimate Hawaii dream. And so we come to talk about the difference between oceanfront and beachfront property.
So let’s talk about beachfront; and these properties are exactly what the name implies. A beachfront property would be adjacent to one of Maui’s sandy shores. Essentially, you would be able to walk from your house directly onto the beach.
Oceanfront property on the other hand are homes that are adjacent to the ocean but do not have a beach. This means you are right on the water but you likely have some rocky coast or cliffs in front of you rather than a soft, sandy beach.
Regardless of whether you have oceanfront or beachfront property, your property line stops at the vegetation line, the point where natural vegetation ceases. Typically, the vegetation line is a few feet past the highest tidal point. Under Hawaii law, any area between the vegetation line and the coast line is public property and fully accessible by the public.
Residential Versus Vacation Condos
Next we can take a quick moment to talk about the difference between residential condos and vacation condos; and this is an important distinction since you can save quite a lot on property taxes for residential condos. The main difference between the types is how you use the land. Residential condos are your primary or secondary residence while vacation condos are used for the purpose of renting out to secure income. Certain bylaws may restrict using condos as vacation property so be sure to speak to your Realtor® about your options.
Property Tax Exemption
The Maui County property tax exemption is available to anybody who has bought or is planning to buy a new home and will make that home their principle residence. This is available for any residential property type, whether single family dwelling or condominium, so long as you plan to live here full time and it is your primary residence. Secondary residences, vacation homes, and investment properties are not eligible for the property tax exemption; however, if you have recently purchased or are going to purchase a new home, you can save yourself as much as a third of your annual property tax.
Getting the property tax exemption is simple. Just ask your Realtor® to provide you with the property tax exemption form and they may even fill it out for you. The property must be your primary residence and the forms must be completed and filed before December 31st of the previous year to qualify for exempt status in the following year. In other words, to qualify for the property tax exemption in 2011 you must submit your forms before December 31st, 2010.
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