- There are lots
of questions flying around concerning how this world-wide economic
situation is affecting Hawai'i. How I would love to tell
you that it isn't!
- The real estate
thing is very different here than on the mainland. We don't have
the huge numbers of repos and short-sales here, but prices are
definitely on the down slide. It helps me to look at the bigger
picture, though, instead of what is happening right now compared
to one or two years ago. Let's go back to the early '90s, for
example. That's when I moved here and bought a really nice house
on an acre of manicured grounds for a whopping $119,000. Some
three years later, my wife and I sold that house and took a loss
considering what we had spent on it for remodeling. That didn't
really matter, though, because we bought another house in Kapoho
in that same down market and paid the same price for it as we
got for our old house.
- My rationale
for "it didn't matter" is this: Let's say the market
had actually gone up instead of down and let's say we had sold
that first house at a huge profit. In that same up market, we
would have had to pay that much more for the replacement house,
so the actual dollar amounts didn't matter. What mattered was
that we in effect traded the house we left behind straight across
for the one we wanted.
- If I have an
apple and you have an orange and we decide to trade, it doesn't
matter whether those two fruits are each worth ten cents or ten
dollars as long as we are trading value for value.
- Moving right
along, the market started slowly coming up in the late '90s.
It was a steady increase, kind of a positive thing, in line with
"normal" inflation. But then in 2005, things went nuts.
Seemed like half of the mainland West Coast decided they had
to either move here or at least invest in some property. Oprah
announced that the Big Island was the last affordable tropical
real estate. Way to go, Oprah,
- They came in
droves, mortgage brokers fell all over themselves writing shaky
mortgages for properties that these "investors" paid
way too much for, and the house of cards was under serious construction.
- Well, we all
know the rest. If we don't, we're living under a rock because
that's all the media has been ranting about for the last year
or so. Those houses that the ill-informed investors bought with
their shaky 100% mortages are now on the market for half of what
these people paid for them and our tax dollars are bailing out
the mortgage banks.
- But here's where
this story is going: Instead of just looking at the current down-slide
from the crazy, unreal and ethereal boom time, let's skip that
part as though it never happened and compare where the market
is now to right before it went nuts. Guess what? It's not too
far down from there. That house I bought in '93 for $119K? It
would probably sell right now for $150K. During those two short
years of gonzoness, $300K.
- We bought a
house in Hilo for $235K in 2004. We have it for sale right now
for $348K and will probably get close to that, as we have it
priced competitively with other houses of similar value in the
same area. So it's not exactly doomsday here, but it is a buyer's
market. That same house would have brought $450K in a heartbeat
back in '06. So much for our investor prowess, right?
- Mortgage interest
is at an all time low, house prices are low, and if you find
a fixer and can do the work, those are the best deals of all
since buyers now have a choice and most don't want to buy fixers.
And there are mortgages available, too. We received an offer
today on our house for sale and the buyers have an approved FHA
mortgage ready with 3 1/2% down payment. I thought those days
were history, but I guess not.
- What's been
bothering us in the last six months especially is the number
of sharks around here trying to take advantage of people in financial
distress. We get these spam emails every day with lots of imaginative
ways for these unscrupulous and deceptive people to end up owning
our house for way less than it is really worth. I've even traced
some of them to companies who train them how to sit at a computer
all day and find likely prospects. Sad, what we've come down
to. Integrity is an uncommon trait these days.
- Aloha has also
given way to greed in many other areas of trying to make ends
meet here. Grocery prices are going up so fast that just about
every time we go shopping, everything is noticeably higher than
last time. It's like everybody wants to get theirs now.
- The fact that
we are getting systematically ripped off is made clear when we
make out bi-monthly trips to Costco in Kailua-Kona. Just about
everything there is half - or less - than it is in any of the
rest of the grocery stores. Bread: How about $6 - 7 for a loaf
of any kind of bread that's worth buying? At Costco, the same
identical bread is $2.50 - 3. And that is typical for the differences.
- The only reason
for these kinds of prices is because the stores know they can
get away with it, and sadly, most of the folks here don't ever
go to Costco so they think these prices are normal and necessary
for these stores to stay in business. Well I think not. Safeway
certainly enjoys every benefit that Costco has regarding purchasing
power, shipping groceries to Hawai'i, and every other aspect
of running a business. But the good folks at these stores are
more and more operating under the guidelines of charging what
you could get it for at Costco, plus the gas it will cost you
to go there.
- We're hoping
that this is not a trend that will continue to spiral out of
control. This is a lousy time for companies like Safeway - and
our own locally-owned grocery stores - to be holding us at ransom
on food prices . . . just because they can.
- As I point our
over and over in Affordable Paradise, you can still
do pretty well if you will take the trouble to shop around. Follow
the sales. Make an occasional trip to Costco for anything that
will keep that long. Include a stop at your favorite white sand
beach while you're over there, to make the day's trip worthwhile.
Buy a small, efficient freezer so you can buy when the price
is right. Shop farmer's markets for any produce. Produce prices
are insane in the grocery stores, and the stuff is all shipped
in from mainland mega-farms where they use every known chemical
to grow their tasteless products.
- Hey, I was at
one of our local markets tonight and saw zucchini for $2.59/lb.
That comes to about $2 for a zucchini, the easiest thing in the
world to grow. How about $4/lb. for pinkish white tomatoes that
taste like cardboard? I can't figure out why anyone would buy
those when you can buy organic, vine-ripened, tasty local tomatoes
for half that price.
- Back to our
recession. Tourism is down, vacation rentals and hotels are running
half empty, some businesses have shut down, but all the economist-guru
types are saying that anyone who can stick with it will see the
resurgence of our economy toward the end of the year. Let's hope
is no worse here than in most places right now, and of course
in its never-ending obsession to get bigger and bigger, the County
is always looking for new hires. We just lost our only Chevy
dealer here, so there go another 40 jobs or so. But these kinds
of things are specifically mainland fallout and not specific
results of Island life.
- There are always
other considerations that we don't hear about. Like yeah, tourism
is down. Why? Who is going to pay $1000 for a round-trip ticket
to Hawai'i from the West Coast? Why are the airlines doing this
to us? Why can you fly round-trip any day of the week from CA
to NY for $300? That's a longer flight so it costs the airlines
more for that precious fuel, the cost of which they blame for
these fare prices. We were planning on making a trip to San Francisco
to see our kids later this year, but unless some magic happens
and we manage to score some flights we can afford, we'll stay
here. So we'll become a part of that statistic about fewer flights
to and from Hawai'i. We'd fly if the fares were anywhere near
reasonable, so whose fault is the tourism drop to Hawai'i?
- OK, enough ranting.
It's a beautiful, warm, balmy evening and I need to get outside
to enjoy what's left of it.
- Aloha Nui!
- You are also
welcome to check in to the Affordable Paradise
Blog and talk story about your concerns. You can read some of
the many postings there and learn from the conversations of others,
too. You can also go on konaweb.com and punaweb.org and either
participate in the discussions or just eavesdrop for a while!
- We wish you
all the best, and never forget to
- Mahalo for
- Skip Thomsen