The Continuing Real Estate Saga
March, 2005
It's a challenge keeping up with the still-escalating real estate prices. The frenzy is still going strong, although you'll hear differing evaluations from different real estate professionals. Some say the market is stabilizing and others insist that it is still nuts. I'm going with nuts.
We keep on top of the market pretty well and there are some interesting reasons why from some perspectives, the market appears to be "stabilizing." Our sense of this comes from some of the properties that have been on the market for months. Any time there are properties on the market for long periods, it seems like things are slowing down. But when you take the time to examine these properties and figure out why they're still available, it all makes sense.
It is our experience that any reasonably-priced properties still sell almost instantly. So what we have here are some sellers, and perhaps they are encouraged by their agents, who price their properties way beyond reasonable. They do this because they are in no hurry to sell, or worse, don't even care if they sell. They just figure, hey what have I got to lose? Some nut from San Francisco might come over here with a boat load of money and pay this insane price, and if not, it costs me nothing to list the property.
There are some homes here in Hilo that have been on the Multiple Listing Service (MLS) for many months. We've looked at most of them and it is obvious to us why they don't sell. Apparently, it is obvious to all the eager buyers, too, because the houses just sit there, unsold. So having a bunch of unsold properties on the MLS makes it appear that the market is no longer in a frenzy, when in fact it really is.
We've looked at a number of houses in just the last few months that we felt were a bit overpriced, and they are usually in escrow within the first few days on the market. Homes that are priced right on today's market value often sell the day they're listed, so yes, we still have a strong market. Observe the listings at Hawaii Information Service for your own evaluation. If you see what appears to be a reasonably-priced property, check it again in a few days. More than likely, at the bottom of the listing will be a notation like: "This property is in escrow but the seller is taking backup offers." And as I described in my last Report, some properties are also sold before they ever make it onto the MLS. If you want to know how this works and haven't read that report, check it out.
My last Report on real estate values was nearly a year ago, and according to most sources, property values have risen anywhere from 30 to 60 percent in that period. Why the big range? Again, it depends a lot on where you're looking. Premium properties have had the highest increases, while outlying properties are still going up, but nowhere near as fast as anything right in town, with an ocean view, or on the now-really-expensive Hamakua Coast.
Hamakua Coast properties have gone from double to triple what they were only two years ago. It is absolutely unbelievable what people are now paying for 20 acres of cane field. We thought these subdivisions were high at $150-200K. Now they're going for $400-600K. It's hard to imagine paying that much for the land on which you will be building a home that will likely cost you another $200,000 or more. And some of these properties are beyond the utility lines, too. Some have really basic access, like a half mile of road that looks like a washed-out river bed. We've looked at some of these properties that were four-wheel-drive access year 'round with the caveat that after a heavy rain there's no way of getting in or out for a while.
Mortgage rates are climbing again, and that will eventually cool of the buying spree, but not in the near future. So if you are seriously planning on buying a home or land in Hawaii, you might not want to wait until prices come down. There are some who will tell you about the market surge in the late '90's and then how the bottom fell out two or three years later. "History repeats itself," they like to warn you. Well, history does evidently repeat itself, but it seems to choose its own course of time. The forces driving today's market surge are not the same as any that have come before. Blame it on the boomers, blame it on word-of-mouth about "discovering" Hawaii, blame it on the fact that even at the higher prices, Hawaii real estate is still a bargain compared to a lot of places on the Mainland. This applies well to West Coast property values, and that's where a large percentage of our new arrivals are coming from.
The bottom line: Expect to pay at least $250K for a decent house in Hilo. They come up for that price from time to time, but you have to be on top of it to score. This means you must be here at the right time, and not on the Mainland looking at ads. In this market, that won't work.
There are too many buyers who are lurking around the Island, cash in hand, diligently following up every lead. Unless you are one of them, you'll have t count on extreme luck.
News Flash! As I just drove into our driveway here in the beautiful hills of Hilo, I saw a "for sale" sign posted on the house next door. Surprise! So I immediately went to my computer and was again surprised to see it listed for $249K. This is a 1440 sq. ft. house on a large lot that backs up to Forest Reserve. The street is a very quiet dead-end and it's in the desirable DeSilva School district. I wish we could afford to buy it, because it is certainly priced right. I wish our neighbors had told us they were going to sell, because removing the $15,000 commission that the realtor will receive would have made it irresistible. Anyway, my point in bringing it up is that there are still great deals to be found, even in Hilo.
Prices in the huge East Hawaii subdivisions have gone up again, too. Expect to find prices of $40K on up for the one-acre lots in HPP, slightly more in Leilani Estates. There are far cheaper properties in Orchidland and up in the Mountain View areas. Hawaiian Beaches and Shores subdivisions are showing some reasonable prices for both homes and lots - as long as there is no ocean view!
What is surprising is that the values of East and West Hawaii properties are now quite comparable, where only two years back, Kona-side values were substantially higher. Unfortunately, East Hawaii has indeed been discovered, and there are lots of investors actively engaged in escalating prices for everyone. It's making it really hard on the folks who have lived here forever and can no longer afford to buy a home. We see many properties listed on the MLS, then they disappear only to reappear a few months later at twice what they sold for.
Greed is never a pretty thing, and it sure isn't helping anyone other than the profiteer here. We're hoping that things do level off a bit so that the people who are in it just for the money will go elsewhere and let those who cherish the idea of living in Hawaii have a chance.

That's it for now!

A hui hou!

Skip Thomsen
Updated 3/6/05