SPECIAL REPORT The Changing Real Estate Picture
Here's the News Flash: The real estate picture is changing at a rate reminiscent of some of the recent boom times on the West Coast. Across the State, values are going up, offerings are becoming scarce and the demand for the premium offerings in any price range is high. Do we have your attention?
Well, it's not as bad as all that, because for those of us seeking affordable housing, there are still plenty of homes and properties not generally considered "premium offerings." In this market, the premium offerings are mostly anything that has an ocean view or is oceanfront. Oceanfront homes rarely ever even make it onto the realtors' listings, as the demand is so high that they are usually sold before they get listed. Even if they do get listed, they'll be sold with a phone call or two and so the listing never gets published. You can be fairly certain that if you find a listing published for an oceanfront home and the home is still for sale when you call, the price is way too high. The same applies to oceanfront bare land, too.
Sellers are getting savvy about the eager buyers and some are listing their homes at grossly inflated prices just hoping that some over-anxious and under-informed buyer from the Mainland will jump in with a full-price offer in fear that somebody else might get it first if they don't. If you're on the Mainland, you probably understand that mentality. The buyers coming over here are in a near frenzy to get something while the getting is good, and full-price offers are common now.
We can remember only about four years ago when homes in our little ocean-front community would stay on the market for years without an offer, and then finally sell for substantially less than the listed price. Those days are history. Do your homework! If you are looking for properties on the Internet and you contact the listing realtor, don't be afraid to ask how long the place has been on the market. This will give you a good idea of how much overpriced it is. (If you find it on the Internet, it probably is either overpriced or already in escrow.) If it's something you are genuinely interested in and is still available (read: overpriced), put it on your shopping list for when you come over and put in a low offer. You might just be surprised!
Another thing happening on occasion is that some of the realtors are suggesting huge asking prices to their potential clients. This happens for two reasons. One not-so-subtle reason is that the high price is a juicy enticement to the seller to list the property. The seller thinks her home is worth, let's say, $150,000, and along comes this "knowledgeable" real estate professional who says the place could sell for $250,000! Wow! Sure, let's list it! The second reason is that the realtor has nothing to lose and everything to gain. Should some eager-beaver come along and write a check for the full amount, that makes for an even more generous commission for the realtor. And even if that never happens and the house eventually sells for what it's really worth, the realtor still gets a commission. The only loser here is the seller, who might have sold the house a long time ago had s/he listed for what it was worth in the first place.
To be fair, most realtors with integrity try to discourage sellers from listing their properties at inflated prices, and many realtors don't even bother showing properties that they know are way overpriced.
The upside of all this is that the above applies mainly to the premium offerings. Now, "premium" means different things to different people. If you happen to be looking for a premium little farm with no ocean view, you're in luck! If you would be happy with a premium home in one of the many established communities here, you have a good selection at great prices awaiting you. But be advised even these are going up now. Slowly, but certainly.
Here's a little picture for you to envision. We manage about 14 vacation rentals. Over 90% of our guests are here looking for property, and probably half of those who are looking actually buy something before returning home. Now expand that little picture to all of the vacation rentals and many of the hotels on the Island and what do you see? Can you say "buying frenzy?"
We've personally seen some of these eager folks who just have to buy something-anything-before they go home. As their departure day comes nearer, they get even more anxious and less particular in their searches. Along comes the first place that looks even a little bit doable, and in fear that somebody else might put in a higher offer and they only have a few days to pull this off, they put in a full-price offer and of course the astonished seller says YES! We've even seen homes sell for higher than the asking price. Really eager buyers will put in higher-than-asking offers right up front to ensure they come in above anyone putting in a full-price offer. This is distinctly a Mainland process common to folks who live in the already overpopulated areas where any housing is "premium." They're used to that sort of thing so they bring it over here.
Our recommendation is still to take your time, but once you find what you really want, don't hesitate to put in an offer right away. If you wait around for a few days, you might just come in second and lose the deal. Do some research. Go to the tax office (or click on www.hawaiiinformation.com) and find out how much the seller paid for the place and how long ago. How long has it been on the market?
While you're there, you can also find out how much the taxes are, if they are current, and all sorts of other information that is all on public record.
Ask the realtor what the seller's reason is for selling. Sometimes you will not get that information, but often it's right there and that could help, too. For example, in some cases the seller may just be in a better position tax-wise to carry the mortgage than to take cash. That could save you a bundle in closing costs and paperwork. Write your offer that way and see what happens. The more you know about the seller's situation, the better your position to bargain.
Get your own realtor, too! Avoid using the seller's realtor. S/he he is committed to get the best possible deal for the seller and is in no way obligated to look out for your best interests. Find a realtor you can connect with and tell him or her what you're looking for. Then call that realtor and have him/her show you the property you found. The seller pays the commission either way, but with your own realtor, you will have the professional on your side.
The bottom line is that prices are climbing nearly everywhere in the Islands right now, but it's still a good time to buy. The best deals are in the rural areas and in some of the huge housing tracts. Homes right in Hilo, and anything on the ocean are going up in value much faster and are becoming scarce. If you happen to prefer the Kona side of the Island, the same thing is happening there, but there are many more homes for sale to choose from, and that in itself is keeping the prices somewhat under control. When there are a lot of similar homes on the market, there's a lot more room for bargaining.
One thing to keep in mind if you're into these kinds of things, history is said to repeat itself. Many of the people who are buying property here now got burned in the recent stock market crumble and are moving their investments into real estate instead. Whenever this has happened in the past, it drove up the prices at first, leveled off in about three years, and then the real estate market softened again. We're in the second year. Just food for thought . . .
We caution people to avoid speculation and buying Hawaii property just for the possible financial gain. We don't believe that this is what Hawaii is all about. We encourage you to find your place-and your peace-here if that is what you seek. But beware if you are just in it for a fast buck. Hawaii has the reputation of being a cruel hostess to those who should not be here, and as I point out in Affordable Paradise, we have known some of her casualties.
We'll cover that topic in detail in another Report on this Web site.
A hui hou!