2011 Year End Kauai Real Estate Market Update
How was your 2011? Are you glad it's over and looking forward to a more prosperous 2012? This seems to be the general sentiment although many people experienced a strong 2011. Whatever your situation, we know that we are 1 year closer to market stabilization in our real estate sector here on Kauai and nationally. This is an election year and the outcome in the Congressional and presidential elections will have a significant influence on the economy this time next year. Our world is becoming increasingly global and our local communities are affected by events taking place in Europe or other foreign countries. As housing inventories continue to decrease, banks begin to loosen up a bit on the lending criteria and consumer confidence gets a little boost, I am hopeful that we will see an improvement this year.

In This Update:
National Housing and Economic Factors
Kauai Real Estate Market
A Look Back at 2011
Foreclosure Filings Hit 4 Year Low in 2011


National Housing and Economic Factors The year 2011 is ending on a high note nationally as a number of economists anticipate some signs of recovery ahead. Prices appear to be reaching their trough in several key metropolitan areas, visible supply is on the decline (see Kauai market comments), and banks are beginning - just slightly - to loosen lending standards, according to market analysts. These signs, while encouraging, however don't point to an immediate recovery. We must take in to account the historic ratio between disposable income and housing prices...homes were undervalued by 23 percent in the third quarter. Homes have not been this undervalued since at least 1975. Non distressed home prices in particular seem to have bottomed out in most areas. Job creation over the net couple of years will have a direct correlation to the growth in the real estate market. Our population continues to grow as does the need for housing, but you must have a job to qualify for a loan!

While home prices declined 4 percent nationally this year, prices of non distressed homes fell only 0.5 percent. This is a good sign. There was a 20% reduction in inventory of homes listed for sale; however, shadow inventory is threatening to slow this pace down. Here on Kauai we usually trail the mainland by a few months as it relates to market conditions. That being said, this is no ordinary recession, so all bets are off. We could actually perform better going forward.

There is a growing world-wide unrest festering across the globe as you all know. The effects of European monetary crises and the instability of the European Union have already been felt here in the U. S., and it's unlikely the efforts towards stability will be successful in the short term. Similarly, unrest in the Middle East could easily lead to instability or significant increases in oil prices. These types of situations are beyond our control and are variables that will have a direct effect on the recovery in our housing market.

Kauai Real Estate Market Our real estate market here is not too dissimilar to most places on the mainland. It is searching for a bottom and responding to the myriad of factors influencing our local, national and global economy. We are seeing the inventory levels in all price ranges predictably declining but with sufficient inventory that won't allow prices to stabilize yet. We are seeing a trend that tells us there is not enough new properties being offered for sale to replace the ones that have sold at most price levels, especially the lower end. This is necessary in order for there to be that necessary balance of supply and demand (typically 6 months of inventory) for prices to stabilize. For buyers, while prices will likely see some additional downward movement, it means there will be less to choose from. I envision this playing out for most of the year. That being said, I believe we may have already seen prices stabilize on lower end single family homes on several parts of the island, e.g., Princeville. While the multi million $ properties have not reached this point yet, we are seeing an increase in sales due to foreclosures/auctions and a realization by property owners that prices must come down in order for them to sell.

As you can see from the actual #'s below, 2011 revealed a mixed bag of increases and decreases. Total unit sales for condos were up and single family homes and land were down compared to last year while median prices were down as expected for condos and single family homes but up slightly for land. I sense that we will see a greater sense of urgency by most buyers as the year goes on as they realize we are getting closer to price stabilization. It will take longer for condos than for single family homes to get to this point due to the amount of inventory available.

Kauai is a highly desirable place to live full or part time and should see a better rate of increase in property values than most places on the mainland and the other Hawaiian Islands once we have reached that balance of supply and demand. There are a lot of cash buyers ready, willing and able to purchase property here that are trying to guess when the market prices will bottom out here. Many of them will miss the bottom by waiting too long. Financing is still at record lows of 4%+/- for a 30 year fixed rate loan. These rates will have to start going up as inflation heads our way and the government continues to print money recklessly increasing our debt and weakening the U.S. $. If you are a buyer, don't wait. Take advantage of the market conditions we have today. If you are a seller, price is your biggest lure in most cases. Don't let your emotions win out over the right business decision.


A Look Back at 2011 I started thinking about all the significant events that happened around the world in 2011 and realized that the events bringing about change were more significant that we have seen in a few years. Here are a few to ponder on and think about what impact they have had on our world going forward.

• U.S. commandos kill Osama Bin Laden in a raid in Pakistan
• Republican Congress woman Gabrielle Gifford gets shot in the head and survives
• Japan suffers a 9.0 earthquake, tsunami and resulting nuclear crisis
• Egyptian protestors end the 30 year reign of Hosni Mubarak
• Libyan Rebels battled supporters of Mommar Gadhafi which ultimately led to his death in a NATO bombardment
• Apple founder and CEO Steve Jobs dies of cancer at the age of 56
• The U.S. unemployment reaches 9%
• Occupy Wall Street protests initiated in New York and spread across the country protesting current government and big business tactics
• The largest tornado outbreak on record swept across the country highlighted by 247 touching down on April 27th and killing 346 people
• The S&P lowered the U.S. credit rating from AAA to AA+ following a raising of the U.S. debt ceiling
• The U.S. is now a record $14 trillion in debt with no plan to reduce it constructively - the so called "super committee" failed to agree on a deficit reduction package of at least $1.2 trillion
• New York became the largest state to allow same sex marriages
• Approval ratings for Congress are at an all time low as Republicans and Democrats can't agree on anything
• The European Union was hammered by relentless turmoil and insolvent countries
• Mexico's drug cartels fight for control and thousands more people were killed
• Civil unrest in many countries including Iran, Syria, Egypt, Libya and more
• Tim Tebow shuns the critics and uses his pro football plaform to raise the level of awareness of the importance of having a strong faith in God

We are living in an increasingly hostile and changing world which further emphasizes the need to look at the positive side of life. Enjoy your family and reach out to others in need. We can all make a difference in this world and it starts by helping make just one other person's life better.

Foreclosure Filings Hit 4 Year Low in 2011 The number of U.S. homes that received a foreclosure filing fell to a four-year low in 2011 as aHouse for sale sign slowdown in processing hit the market according to RealtyTrac. Foreclosure filings include scheduled auctions, default notices and bank repossessions. They fell by 34% nationally in 2011 and bank seizures of homes dropped to 804,423 from 1,050,500 in 2010. A good part of what is increasing the slowdown is the extended foreclosure process. Here on Kauai, Act 48 allows homeowners who are in default to request a judicial foreclosure that will increase the normal process by a year or more. For the 5th year in a row, Nevada had the highest foreclosure rate with one in every 16 houses receiving a foreclosure notice. That state however saw a 31% decrease in foreclosure activity for the year.

The length of time for foreclosure processing continued to increase in the final quarter of the year. Homes took on average 348 days to move through the process, up from 336 days in the third quarter and 305 days in the fourth quarter of 2010. While the total # of foreclosures seems to be slowing down, the length of time it takes to process them means they will be around for a few more years. While approximately 25% of our total sales here on Kauai are foreclosures or short sales, we are still below the national average.

I wish you and your family a great start to the new year and hope that 2012 is your best year ever for health, prosperity and a multitude of blessings. Please let me know if you or family and friends are considering a sale or purchase of real estate here on Kauai. It would be my honor to work with you.

February 2012

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