Larry Barton
REALTOR ® (S), SFR
Kauai Real Estate
2010 Year End Kauai Real Estate Market Update
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A Look Back at 2010 in the U.S.
Kauai Real Estate Market
Tips for Buying a Foreclosure
2010 has come and gone. For some of you this may have come too soon and others may be glad to turn the page. The world is a different place than it was a few years ago and we are all learning to adjust to changes. I can't think of a place I'd rather be than Kauai. Our unemployment rate continues to be below the national average and we are seeing more signs of increased tourist traffic and people's willingness to spend their hard earned money.
We experienced some very positive increases in real estate activity here on Kauai in 2010 and are inching closer to that balance of supply in demand. I have outlined below a review of the real estate activity in 2010 and some thoughts about what to expect in 2011. I also thought it would be interesting to revisit some of the key events that took place in 2010 and offer some tips on buying foreclosure properties.
A Look Back at 2010 in the U.S. There was no shortage of significant events that took place in our country in 2010 and too numerous to mention all of them here. However here are some that I feel are worth noting that will shape our country for many years to come. Of course what happens on a national level often times has a direct effect on us here in Hawaii. It has also been interesting to watch how the misfortunes in other countries can affect us here as well.
- Unemployment remained near where it started the year at 9.7% - Conservatively 15 million Americans remain out of work.
- U.S. banks repossessed over 1 million homes.
- The Fed decided to buy $600 billion of government bonds.
- The Dow Jones stock index increased from 11,606 to 11,722 from January 1st to December 31st.
- Financial reform clamped down on risky trading and brought new consumer protection.
- General Motors offered the biggest public stock offering in U.S. history.
- Apple released the iPad.
- Republicans completed a landslide victory in the mid term elections taking back control of the House of Representatives and gaining more Senate seats.
- The BP oil spill that begun April 20th was the largest accidental marine oil spill in the history of the petroleum industry.
- The Tea Party gained considerable power and influence and helped shape the mid term national elections.
- Americans were at considerable odds over the passage of Obamacare.
- Several key officials resigned from the Obama administration leaving doubts as to the stability of this administration going forward.
- Mortgage interest rates reached an historic low of 4% for a 30 year fixed rate loan.
- The U.S. national debt reached an astonishing $14 trillion bringing each citizen's share of the debt to over $45,000. The U.S. budget deficit is $1.3 trillion.
Kauai Real Estate Market We definitely saw a marked improvement in the # of sales for 2010 compared to the previous year. Property valuations continued to drop however, inventory levels in most sectors remain high and interest rates began rising in late November. While the median prices of properties that sold showed a slight improvement in land and single family home transactions, we have still not seen a stabilization of property values as a whole. The median values shown in the charts below only reflect the values of properties that sold.
2010 was the 1st time in 4 years we have seen a significant increase in properties sold over the previous year. Despite tighter credit requirements and high unemployment rates, total unit sales increased island wide by 38.17% and 48.45% for single family homes and condos respectively. In Princeville alone single family home sales increased 150% in 2010 over 2009. Land sales also increased over the paltry 2009 numbers but have a long way to go before showing consistent improvement. Short sales and foreclosures still dominated the market as far as sales go and continued to dictate property values.
Kauai will continue to see a steady influx of foreclosures coming on to the market for sale, some experts believe more than last year. The banks are sitting on a huge supply of foreclosures (called "shadow inventory") not yet released on the market, more so on the mainland than here on Kauai. Short sales, while still a major force, I believe will begin to taper off by mid year as buyers become increasingly impatient with the long period to process a transaction, sometimes taking up to 12 months! While hopeful, I am not convinced we will see price stabilization across the board this year. It's possible we will see it in some sectors like lower priced single family homes in specific locations where there has been considerable sales activity depleting inventory. Financing for condos will continue to be difficult as lenders are leery of units in projects with a history of vacation rentals, time share and fractional sales as well as condotels. Well qualified buyers should be O.K.
We have seen the last of 4% fixed interest rates as they began rising in late November and are expected to continue to rise in response to inflation. See your lender for more insight there. Significant increases in unit sales last year suggests that many people feel we are at or nearing price stabilization. I am not one of those. Inventory and unemployment levels are high, credit requirements continue to tighten, many people are being cautious and taking a "wait and see" attitude and there is a sufficient pent up supply of properties that will be hitting the market.
All that being said, there is reason for encouragement. We are moving in the right direction albeit at a slower pace than we would like. Be patient. The market will stabilize. I'm just not sure if it will be this year. This is a phenomenal time to buy while interest rates are hovering just below 5% and your negotiating position is always stronger as a buyer before the market stabilizes. The information below will give you a glimpse at how the market responded in 2010 compared to 2009.
Tips for Buying a Foreclosure Buying a foreclosure involves homework, patience, diligence and a thorough understanding of the local market you are interested in. It requires a significant investment of time by you and/or your Realtor. Determine if you are best suited for a pre-foreclosure (short sale), auction or an REO ( Real Estate Owned by the bank). The REO has the least amount of risk, but may not be the best deal. These are distressed properties and are in virtually every case sold "as is". Here are a few tips on getting your foreclosure strategy organized and set up to work for you. Foreclosures will continue to play a prominent role for a couple more years not only here on Kauai but nation wide.
- Keep an organized file of your research and prospective properties.
- Determine if you want to use a Realtor - it basically costs you nothing and the expertise is critical for making an informed decision.
- Determine good sources for foreclosure listings - the Internet and your Realtor in particular.
- Prioritize the items that are the most important to you in your future home.
- Find specific properties that match your criteria. Narrow it down to a manageable number.
- KNOW YOUR MARKET! Do your homework in addition to your Realtor.
- Find out as much as you can about your "short list" of properties from city/county assessors', recording and tax offices, subject property's neighbors, current seller, and of course your Realtor.
- Know the comparable sales comps and currently listed homes, how long the property has been for sale, property history, assessed value, etc.
- Be sure you have been pre-approved by a lender or can provide proof of funds if paying cash.
- Be decisive - when you find the right property, don't lose out to someone else because you couldn't make a decision.
I would like to wish you and your family a great beginning to 2011 and hope that your year is filled with prosperity and good health. Please contact me any time I can help your or someone you know with any real estate needs here on Kauai.
January 2011
Larry Barton, REALTOR ® (S), SFR, CENTURY 21 All Islands Kauai
P.O. Box 223700, Princeville, HI 96722
(808) 639-7532 Cell / (808) 826-9884 Fax / Email Larry
P.O. Box 223700, Princeville, HI 96722
(808) 639-7532 Cell / (808) 826-9884 Fax / Email Larry