Having just returned from a 2,000 mile tour of the West Coast and the California Association of Realtors (CAR) mid-year meetings in Sacramento, I have to say that as tough as the market seems in Hawaii, California and Oregon have it much worse.
The central valley in California from Bakersfield up past Sacramento to Chico is seriously depressed with some areas such as Stockton having up to 90% of their closings either REO and short sale closings. The good news is that it appears that they are reaching a bottom as investors are now scooping up properties.
On Maui, we are about at the 50% rate of closings being short sales and REO properties, up from around 20% at the beginning of the year. With the amendment of Act 137 by Act 66 at the legislature this year, REALTORS are once again allowed to talk with lenders without breaking Hawaii state law. This has started to expedite the flow of short sale closings finally. Also, as a result of no dialog with lenders over the past year and lenders hoping that President Obama would deliver them with a silver bullet, there has been an incredible backlog of pending foreclosures. These are now being delivered in to our Hawaii real estate inventory at a rate 400% higher than last year. In other words, we are seeing what California saw 18 months ago and Las Vegas saw 24 months ago.
Maui prices are dropping at about an 18% annualized rate right now. Lots of bargains are popping up across all parts of the market with primarily newer homes and condos that were financed with ARMs , 100% financing, Pay Option ARM being the bulk of the REOs. Over the past 2 months, my son Jeremy and I have sold 4 condos in the $50,000 range on Maui that actually cash flow at about a 7% positive rate. We are working with an Entrust group that has investors bringing in cash from their IRA, HSA, Roth IRA and 401K programs and buying condos at Harbor Lights in Kahului Maui. This is hard work sales with commission checks that often don't have a comma in them, but it is nuts and bolts survival in this market.
The recent rise in interest rates is moving buyers off the fence. Last week, the SticeTeam opened 5 escrows, with two of the buyers being clients that we have worked with over the past 18 months, waiting for the market bottom and the interest bottom. Obviously the sting of rates jumping from 4.5% to 5.5% in a couple of months brought them to a reality check. They both quit haggling with counter offers and finally accepted the deals.
The high end has all but disappeared on Maui. Sales over $1,000,000 are few and far between. What is happening is a huge accumulation of inventory in this price range. The lack of motivation for these high end sellers is keeping their asking prices out of touch with the entire market. The majority of these owners paid cash for their properties or they can actually afford the mortgages.
Tracy Steven Stice, Broker ABR CRB CRS e-Pro GRI RSPS Tracy@SticeTeam.com
Licensed in Hawaii since 1979
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