Bad Real Estate News In Perspective

Richard F. Gaylord, President of the National Association of Realtors, said it best in the January 2008 issue of Realtor Magazine, "Every foreclosure is a tragedy, but when newspapers talk about foreclosure spikes, they ought to provide context. The problem is predominantly with subprime loans, which are held by less than 10 percent of home owners. Most subprime loans will never go into foreclosure, and not all those that do will be foreclosed on. The foreclosure rate on prime loans is only 0.6% In addition to low interest rates, most areas of the country are experiencing employment gains, inflation is under control, and the gross domestic product is growing. " Maui for the most part is a second home destination and purchase. Hawaii lenders scrutinized local loans differently than mainland lenders thereby resulting in lower Hawaiian foreclosures. The Maui real estate economy is different, and it will not be long before the typical buyer figures this out. The Wailea multi-million dollar condos continue to sell on Maui. Do the people who can afford these condos see the "doom and gloom" touted by the media differently? After all, if there were to be downward pressure on the market of 10% or more, those would amount to big loss numbers for the wealthy. These buyers don't believe Maui will fall victim to large price adjustments. It is different on Maui, as it attracts a different buyer over those buyers found in the mainland suburbs.

Snooze You Lose...

As many buyers continue to sit on "the fence" trying to time the tide of the Maui real estate market, most will end up "missing the boat" in an attempt to try to buy at the bottom of the curve. Real estate is cyclical, and those who try to time the bottom and top always lose. This brings me to interesting news coming out of the financial markets this past week. More money is moving away from treasuries and into corporate notes, bonds and financial stocks. A sign the fear of major financial calamities is fading away. Furthermore, some experts opine the declining dollar may be bottoming out as it is beginning to see a strong improvement against the yen and euro. The Feds justifiably harbor concerns regarding inflation and will not lower interest rates much further, if at all. In fact the consensus on Wall Street is the Feds will soon start raising rates as it continues its balancing act of stimulating the economy with low interest rates, but also trying to control inflation. Canadian buyers trying to take advantage of strong exchange rates better get off "the fence" and act quickly before the exchange rate changes with an improving U.S. dollar. Likewise, interested mainland buyers better get off "the fence" and consider the effects of an inevitable rising interest rate against an erroneous attempt to save money by timing the bottom in the market. If you have been trying to decide when to buy a Maui home or condo, now is the time.

Maui Real Estate Statistics

The Realtor Association of Maui (RAM) recently released new 2008 statistics. First quarter 2008 Single family home sales in Maui County are down from 341 in 2007 to 228 in 2008. The median single home price for the same period is down from $625,000 to $602,783. The median condominium price in Maui County in the first quarter of this year was up from $552,500 in 2007 to $587,000 in 2008. Much of this was attributed to high end sales in Wailea and not necessarily condos in less affluent sections of Maui. The number of days on market for a condo in March 2005 was 104 days, and at the peak of the real estate boom, to March 2008 was 162 days. For a single family home during the same period was 123 days versus 162 days. What this tells us is Maui is feeling the effects of the mainland market crisis in a slow down, but clearly not at levels being experienced in California, Florida and elsewhere. For all intensive purposes, the sales volume is healthy for an island with 140,000 residents. What obviously drives the Maui market is the wealthy vacation home buyers. What has dropped off were those leveraging their mainland properties to buy a Maui property. Now the market has shifted and we are seeing a flood of Canadian buyers snapping up deals with a strong exchange rate in favor of the Canadians. These buyers are not concerned about any major downward price adjustments. They realize as with any investment, prices will fluctuate to some degree and they are not here to buy and flip. They see it as a buying opportunity and will be the real winners in the short run. If you are a mainland buyer interested in a second home on Maui, now is the time to buy. There is a lot of inventory to choose from thereby offering beautiful properties in beautiful ocean front locations.

Hawaii Real Estate Will Not Melt Down

According to a March 12, 2008 article in the Pacific Business News, "Hawaii's low rate of foreclosures and its stable mortgage industry suggest the state won't experience a 'real estate meltdown' like on Mainland, according to the latest report from Prudential Locations. Hawaii is somewhat insulated from housing troubles. The report noted the limited supply of land, universal appeal as a place to own a second home, steady influx of military personnel with housing allowances and tight mortgage lending laws have protected Hawaii from the mortgage crisis. 'Currently, Hawaii has the lowest mortgage delinquency and default frequency in the U.S.,' said Bank of Hawaii chief economist Paul Brewbaker. While home sales in Hawaii have been declining since the end of 2004, home values across the Hawaiian Island have remained more stable than mainland counterparts."