2011 First Quarter Kauai Real Estate Market Update
After a noticeable improvement in sales activity in 2010 over 2009, the 1st quarter of 2011 has continued to provide reason for some optimism going forward. Whatever your position, whether it be as a buyer, seller or merely an observer, these are very interesting times in the real estate market. I hope you find my insight and data on the local and national real estate market below interesting and useful.

In This Update:
Kauai Real Estate Market
U.S. Homes With Negative Equity
REO Inventory Levels

Kauai Real Estate Market We are now through the 1st quarter of 2011 already. Activity has remained consistent with what we saw here in Q4 2010. However what we are beginning to see in many cases is a standoff between buyers and sellers. Potential sellers are holding off putting their homes on the market, fearing they won't come close to getting their asking price. Many current sellers are reluctant to consider lower offers as this would put them in a short sale situation. Buyers, seeing prices fall, are holding out for a steal. We have been seeing deals being made however in all price points. The most activity continues to be in the lower price levels but inventory is shrinking, and the better deals are harder to come by. I would expect to see the median price sales figures to stabilize in the lower end going forward in some areas of the island given this depletion of lower priced homes, in particular single family homes. Remember the median price figures only reflect what has SOLD for a given period.

Let's start with single home family sales. Unit sales compared to the 1st 3 months of last year have increased nearly 20% and median price values rose 2.71%; however median price values have fallen in this 1st quarter compared to the 2010 twelve month average of $475,500. Condos continue to show an increase in sales as inventory remains high and sales prices continue to decline. The condo sales during the 1st quarter reflect a weighted activity on lower priced units as the 2010 twelve month median price was $344,500. We are seeing continued lender tightening on projects with historical vacation rentals, time share, fractional ownership and/or projects considered as "condotels". Land sales are starting to show some increased activity (up 45.55% from the same period in 2010) and on pace to surpass last year's total of 110 sales. The increase in median price levels are not an indication that land values are increasing but rather a few sales of expensive parcels that raised the median values.

As we move in to Spring, I would expect sales volume to pull back a bit due to less visitor traffic compared to the winter months and the "standoff"referred to in the 1st paragraph above. Something will have to give, and it will likely be at the expense of the sellers. The rule of supply and demand will ultimately dictate how this sorts itself out Here are the 1st quarter island wide sales statistics and how they compare to the same period in 2010.


U.S. Homes With Negative Equity Negative equity refers to properties that are worth less than what was originally paid for it by the current owner. CoreLogic released earlier this month negative equity data showing that 11.1 million, or 23.1 percent, of all residential properties with a mortgage had negative equity at the end of the fourth quarter of 2010, up from 10.8 million, or 22.5 percent, in the third quarter. The decline in the values of homes overall led to this additional increase. In addition to this, 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter. Together, negative equity and near-negative equity mortgages accounted for 27.9 percent of all residential properties with a mortgage nationwide.

If you are wondering how your state is is holding up in this regard, see the chart below. You will notice that Hawaii is doing pretty well compared to the other states although not without its share of "upside down" properties. There are only 6 other states in better condition. In Nevada, 65% of the homeowners with mortgages owe more than the house is worth. Expect foreclosures and short sales to continue for some time until the market stabilizes, inventories reduce further and market trends show some signs of increased property values.

A look at the national picture is important because what happens on the mainland U.S. has a direct bearing on the # of potential buyer we see here on Kauai and how much they have to spend. Our market here historically trails the mainland (primarily California) in property values and unit sales trends by approximately 6 months.

Government Owned REO Inventory While REO (Real Estate Owned - Foreclosures) properties don't appear to be increasing, the available data doesn't show that they are decreasing yet either. The vast majority of the mortgages nationally are owned by Fannie Mae, Freddie Mac , FHA or the Treasury. The banks you make your payments to are usually the ones that originated the loan, sold it to a government agency and remain as the entity that services the loan. Many of our properties on Kauai in the resort areas are second homes, retirement homes or investment properties. They encompass a smaller percentage of distressed loans since many were purchased all cash or have low loan to values. Keep in mind that there are a lot of REO properties that are not yet listed for sale due to a variety of reasons.

As a buyer of an REO property, you are dealing with a very motivated seller who has already incurred on average $50,000 in legal expenses to foreclose on the property. They do not want to carry this non performing asset on their books any longer than necessary, and they price it at or within 1-2% of what it will sell for in current market conditions. These properties are generally sold in "As Is": condition and include minimal and some times no seller disclosures.

I encourage your input on future material you would like to see in these quarterly updates. Addiitonally please contact me any time if you or someone you know is looking to buy or sell real estate here on Kauai. Blessings to you all.

April 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