The busy winter season officially began on December 15th and will continue through April 15th. Although the busiest time of the year has not yet arrived, it is just around the corner. El Nino conditions have returned, and this is causing major storms to affect many areas of the Mainland with more expected to come. El Nino affects Maui in just the opposite way. It causes drought conditions here. In fact, just last week The Water Department issued an Emergency Drought Warning for the Upcountry area. Maui visitor count may very likely reach record levels again due to the weather conditions that are unfortunately expected to plague the Mainland in the months to come.

The Maui real estate sales market is affected by many factors such as consumer confidence, unemployment, job security, interest rates, demographic trends, new household formation, the State of the Economy, etc. Although, we don't pretend to be economists nor do we have a crystal ball; we would, nevertheless, like to make some observations about the current state of the real estate market on Maui and where we might be heading. Please keep in mind that these are our own opinions and there are certainly no guaranties that we are right. In fact, we have been wrong before, and will be wrong again. That is the nature of forecasting. Even economists disagree with each other, and no one gets it right 100% of the time.

First off, it is obviously apparent that the high end market (over $1 million) has stalled in most areas of the country. In fact, some areas that were highly inflated such as Silicon Valley, have seen substantial price deterioration over the last 8 months or so. As we have noted before, inventory levels relative to sales in the high end market on Maui are also out of line, so overall prices will probably adjust lower in the near term as Sellers realize that they are not going to get as much as they hoped for. There are, of course, many exceptions where sellers have correctly priced their properties to sell quickly.

In the mid-end of the market $500,000 to $800,000, the market is quite healthy on Maui. Inventory levels are at reasonable levels and sales are occurring at a good pace. In fact, in many cases, demand for new homes is outpacing the supply, so there will most likely be continued upward pressure on prices in this segment of the Maui real estate sales market. In case you missed it from one of our previous issues, please read the informative interview with two prominent economists talking about the future of the real estate market in Hawaii.

The low end of the market (under $400,000) is still extremely hot. Record low interest rates, lack of inventory, a tight rental market, and high demand from both first time home buyers and trade up buyers are the major factors causing this condition. We don't see anything in the near term (next 6 months) that will greatly change the direction of this part of the market; although, there will undoubtedly be some slowing in the rate of increase in prices which is unsustainable, in our opinion. Homes that sold 6 months ago for $300,000 are now selling for $375,000. That translates into a 50% appreciation rate which clearly cannot continue. It has created a crisis in affordability for young first time home buyers. In the long run that is not a healthy situation for any community as it will cause people to leave in search of areas where they can still afford to own a home.

Speaking of trends in the market, please read this eye-opening article titled "Baby Boomers on the Move" about the effects that are likely to be felt from the first wave of Baby Boomers getting ready for retirement in the next 10 years. This article is sent to you compliments of Jacob Hoag at City Bank.

155 Pulehu Road Lower Kula $1.875 Million (Fee Simple) Click Here for a Virtual Tour

In the case of Wailea Beach Villas, we are having a great deal of difficulty holding back our enthusiasm. The location and quality of this new project will, in our opinion, insure that Wailea Beach Villas becomes the preeminent condo project on Maui for those desiring a luxury primary/second home or vacation rental. But please, don't take our word for it. Go to their website and see for yourself why we are so excited. We have been told that the fully operational website will be up by Friday December 20th.

If after viewing the website, you would like to discuss a potential purchase, please drop us an e-mail or give us a call right away. Although most of the information is available on the website, we would also be happy to express mail you a hard copy of all the marketing materials and contracts for your review. Time is of the essence as the project may be largely sold out the first day it is released which is January 2, 2003 at which time we would not be surprised to see increased prices on any unsold units.

Mahalo Nui Loa,

Ken and Greg Smith