SPECIAL REPORT #19
Happy New Year!
January 15th, 2008
 
Aloha!
 
Wow! I just read some of the newest reviews of Affordable Paradise on Amazon. There are several that claim housing prices on the Big Island are two to three times the amounts shown in the book. Well, what can I say? Housing prices have been on a roller coaster ride here for the last five years or so, and during that time there have been no less than three editions of the book published, trying to keep readers accurately informed.
 
The Third Edition, published in '05, came our just before prices went through the roof, but the good news is that they have now more-or-less stabilized and the early-'05 prices are once again fairly accurate. In spite of the reviews.

One reviewer wrote that the Big Island's housing prices are on a par with Kauai now. Well, that would be nice for anyone seeking a home on Kauai, but it simply is not true.
Sure there are exceptions to everything, and if you want to use published price statistics, you can make them look any way you like. There are multi-million dollar homes on either Island (on any of the Islands, actually), but I'd sure like to see some $2-300K houses on Kauai. And contrary to another reviewer's claim that the only affordable housing on the Big Island is in the volcano zones of Lower Puna, that isn't true, either.
 
We just sold a beautiful 3-bedroom, 2 bath home, 1440 sq. ft. on a huge lot, ocean view, house completely remodeled, sold it fully furnished. It went for $340K and is in one of the most desirable areas of Hilo, five minutes from downtown and in one of the best school districts on the Island. I believe that compares well to the prices shown in the Third Edition, and it is typical of Hilo prices at this time.
 
Any of this can easily be verified with a visit to Hawaii Information Service <http://www.hawaiiinformation.com/>.
 
Premium real estate, like anything in the more desirable areas of Hilo, homes near the ocean or even with great ocean views, or most places on the Hamakua Coast, is still expensive. Compared to 2005 prices, they're down, but prices are still higher now than before that crazy boom. The upside is that if you choose to find residence in any of the Hilo-side subdivisions, like Paradise Park, Hawaiian Shores, etc., they're practically giving away houses there right now, and interest rates are the lowest they've been for many years and supposedly coming down more. Of course, this is the notorious lava-zone area of Lower Puna.
 
Brand new homes in Hawaiian Shores that were selling briskly for close to $400K in late 2005 are now being offered for around $249, sometimes with incentives like no payments for the first year, no money down, and so on. And when the brand new homes are going at those kinds of prices, the older ones are even cheaper. Yes, it is again reasonable to look for homes under $200K in Hawaii! We've also seen a few fixers right in Hilo in the mid-twos.

The not-so-good news is that in spite of the leveling off of housing prices, "Affordable Paradise" is getting less and less affordable with each passing day. The rising cost of fuel offers a convenient excuse for many vendors and suppliers to jack up prices on everything, even when their shipping costs are pretty much a non-issue. Some suppliers have, of course, used "shipping costs" as their excuse forever, and it just doesn't wash. For example, a few weeks ago I needed to replace a computer monitor. The one I wanted was available at one of the very few sources we have for such items, Office Max. Their price was $395 for this item that carried a manufacturer's suggested retail price of $330. Already knowing the dumb answer I'd receive, I asked the salesman why they needed a whopping $69 more that retail for this unit, and of course he said that's what it cost to ship it here. NOT!
 
So I found it on sale at Amazon for $300 with $20 shipping to Hawaii. Of course I ordered it. When you shop for a new appliance, they'll routinely gouge you from $70 to $100 for "shipping." (It's an invisible gouge, as it is built into the "Island price.") Well, you can arrange to have one appliance strapped to a pallet and shipped here for about that amount. Sears brings over many container-loads and it probably comes to about $10/appliance to ship them. They probably make more profit on the shipping than on the appliance!
 
So anyway, back to "affordable," what's the solution? This rule never changes: Shop around. If possible, never by anything that isn't on sale. When items are on sale, they're about what they should cost anyway.
 
Let's see . . . more ways to save money. Here's one: Own your home free and clear. If you are coming over here from the mainland and are selling an expensive home there, consider buying one here you can afford to pay for in cash. Look at the money you won't have to earn! Most people's mortgage payments are nearly all interest. So if you no longer have to make that $1500/month payment, that's about $2000 per month you won't have to earn. At least that much, actually, when you figure your net income after taxes. In addition, if you own your home, you won't be told by your mortgage company that you have to shell out that $1000/year for hurricane insurance to help them pay for all the hurricane damage on the mainland in the last few years.
 
Consider there has never been a hurricane on the Big Island when deciding if hurricane insurance is a good investment.
 
Save even more money: To anyone interested in building new, I can't stress enough the importance of considering a solar home! Yes, there is an investment involved, but when you are already spending $100K or more to build your home, it IS possible to shuffle things around to divert $20 - 30K into an electrical system that will cut your electric bills to near zero forever, not to mention the wonderful feeling of knowing that you have done something significant to help the environment. Speaking in terms of dollars, the average electric bill here is now $200/month, so the payback on that investment is pretty fast. In addition, there are County and federal tax credits available that can bring the cost of a solar system down significantly.
 
Electricity is one of those items that unless you create your own, you are held hostage to whatever the utility company decides to charge. We are now paying over .30/KWH here, compared to rates like .06/KWH in Seattle or .12/KWH in LA, and just about the time our beloved HELCO gets one of their regular rate hikes, they have an application in for the next one.
 
In my humble opinion, it is obscene to burn coal and oil to produce electricity in a place that gets the sunshine we enjoy in Hawaii. As with so many other environmental issues, the U.S. is behind just about every other developed country in utilizing renewable energy. Ironic, since we use more energy than anyone in the world.
 
All the rest of the "survival secrets" in Affordable Paradise still apply, but if you have any particular concerns, opinions, questions or whatever, please post them at the Affordable Paradise Blog! <http://affordablehawaiiliving.blogspot.com/>
 
 
And in the meanwhile, please, please,
~~~~
Live Aloha!
 
Mahalo for "listening."
Skip Thomsen & Ohana
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Updated 1/31/08