2011 Third Quarter Kauai Real Estate Market Update
Greetings! I hope this update reaches you prospering from an enjoyable and profitable summer and early Fall. As our country and the world experience continued turbulence and unpredictability, we should all be thankful for our health and that we live in the greatest country in the world. Furthermore, Kauai is arguably the best place to live full or part time in the U.S.

In This Update:
Housing Changes are Evolutionary
Kauai Real Estate Market
Homes For Sale Inventory Declining


Housing Changes are Evolutionary There is nothing typical about the housing market we find ourselves in today. And it's not just applicable to the housing market but the entire global economy is being transformed. Financial markets are struggling, housing prices are still declining, the stock market is volatile, foreclosures are continuing and what happens in Greece directly impacts us here in the U.S. How will the real estate and construction industry survive? The same as all industries do when the environment around us dictates it...change! It has been evolving for several years now from lender requirements, construction of new homes that more adequately satisfy the needs of the changing consumer, consumer perception whether it be right or not, professional Realtors working harder and being more educated, dealing with an enlightened and more informed buyer and seller, etc.

Many of the bells and whistles once thought to be necessary in homes are slowly being replaced by function and efficiency. Our market here on Kauai is a little different however in that many of our buyers are looking for 2nd homes and want the all the extras and "sizzle". The challenge is that they want it for a lower price. Supply and demand was and always will dictate price. Right now the supply is higher than the demand and prices aren't ready to stabilize. An adventurous and creative minority will prosper as they are willing to change and realize increased success as the environment around us dictates it. Be prepared as dramatic changes will continue to evolve. In the end, those who fail to adapt and change will be left behind. After all, I finally gave in to an I Phone, texting, etc. Don't be one of those who resists change because it's uncomfortable. . Be sure you are not only working with an informed Realtor who understands the trends and changes in the market but has a grasp on global issues affecting us all. What is happening around us will continue to be evolutionary.

Kauai Real Estate Market The summer and early fall of 2011 have come and gone. Total overall unit sales of residential properties through the 1st 3 quarters have been down compared to the same period in 2010 except for condominiums which are up almost 20%. Sales prices are down in single family home and condos, but vacant land is up slightly. With an uncertain economy and a president and Congress that can't get on the same page, the future is less clear than we would like. The good news is that the Fed chairman, Ben Bernanke has promised to keep interest rates at historic lows though a good part of 2013. This is certainly helping to make purchases more affordable for buyers.

Prices have not stabilized due to the supply of inventory we have and is not expected to this year or for the foreseeable future. None of us know in this global economy how long it will be, but we are closer than we were last month! Inventory island wide is slowly shrinking especially in the lower end properties . There are several quality lenders here on Kauai with a host of loan programs to offer at record low rates. They will however require full documentation in before issuing any loan approval. This has been the case for 18-24 months now.

Expect prices to continue to decline and have gradually fewer choices going forward for at least for the next year. Higher end properties above $1 million are showing increasing signs of life as reflected in the sales so far this year. Price continues to be the main determinant in virtually all cases. Expect more of what we have seen in the 1st 3 quarters of this year at least through the end of the year. Below are the Kauai sales statistics through September compared to the same period last year.


Homes For Sale Inventory Declining I just read an article addressing the inventory level of houses for sale around the country. Consistent with what we are seeing on Kauai, the country overall is seeing inventory of homes for sale consistent with what we saw in 2007. There were 2.19 million houses for sale nationwide at the end of September, down 20% from a year earlier. This is due to a variety of factors. Some people are taking their houses off the market because of where prices have fallen to. Part of the reason is as well that unit sales have remained steady or increased slightly without new inventory to replace the properties that have sold. However even though inventory levels are reducing, there is still a fairly high level of inventory available for sale.

Additionally banks are moving slower to foreclose on properties which might otherwise be listed for sale as foreclosures. Yet there is still a substantial "shadow" supply of foreclosures and other distressed homes, estimated to be more than one million nationwide, that is likely to stream onto the market in the coming years. The pent-up supply is another constraint on any of the price gains that might normally occur when supply falls. The general rule of thumb for price stabilization is 6 months of inventory. We have more than that here on Kauai in virtually all price categories. The National Association of Realtors calculated that there were 3.58 million single-family homes, townhouses and condos for sale at the end of August, down 28% from a year earlier, though still above levels seen in the first quarter of 2011. The calculation differs from Realtor.com's because it estimates the entire universe of single-family homes for sale. The NAR is in the process of recalibrating its methodology. Both sets of data show housing inventory at a historic low.

What all this means is that while inventory levels here on Kauai and and nationwide has been decreasing, other factors are limiting prices from stabilizing and seeing the flurry of buying that we might normally see. These are interesting times and are sure to get more intriguing going forward. Interest rates are at historic lows and coupled with soft prices there are some fantastic opportunities out there for the smart buyer.

I welcome your comments and questions as always. Please let me know how I may help you or someone you know if you are considering buying or selling real estate here on Kauai. I look forward to talking with you.

October 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