Sunday, March 11, 2007

More thoughts on Hawaii housing.

With inventories of houses on Maui reaching four times what they were a year ago I think it is safe to say Hawaii has joined the rest of the nation in the housing downturn. What I found remarkable was the number of projects still under some phase of construction. I have included a few shots of projects in Kihei on the south side of Maui. I have however found many more and quite larger projects than these under way in the area. Over capacity? I think so.

I also included a photo of a condo project in Wailea, a little further south of Kihei. Condos there are expected to start at 2.4 Million dollars. Some experts say a downturn will not effect this group of well healed buyers and wealthy baby boomers. I say the economy is connected and a broad downturn in economic and housing markets will make this group less wealthy and less willing to shell out the multi-million dollar price tags being asked for units such as these. We’ll see…

My over riding question however is who is going to fill all of these units? With cost of living fundamentals out of whack, I have found many friends had left the islands in the three years I was absent. I suspect that might be a trend. Some people are packing it in and going to the mainland for easier living.

You can see a number of empty houses and condo units for sale on the Maui MLS. Photos of empty units always spell ‘Flipper’ to me. But what ever the cause of the units being empty the net effect is more capacity.

I see a major choke point coming. Either real wages have to rise in Hawaii significantly or the cost of living must come down. I’m not talking about government cost of living figures where they exclude food, housing and energy, leaving only flat screen TV sets as a measure. I’m talking about basic costs. If not, soon you will have no one to check you out at the grocery.

I’m guessing also that there will be a large over capacity of housing coming to the market by next year, driving down prices and wiping out equity for many current home owners, bad news for those who managed to hang in there.

All that without mentioning the effects of the state and county tax shortfalls that will surely ensue.
Maui already has the worst Methamphetamine problem in the nation, fueling ever increasing crime. Currently Maui County is advertising for police officer trainees to fill gaps left by other officers who left Maui because they couldn’t afford to live there any more. They are currently offering a pay and benefits package of $40,000. plus use of a laptop computer. At and average price of over $650,000. for a one floor cinderblock home you have to bring home more bacon than that to buy a house.
Sign me up!

Here you can see from the current photo the first phase of a new condo project in South Kihei Maui
As you can see from this photo from two weeks ago, condos are still under construction on South Maui.
Here is a shot from the same time period in central Kihei. Just breaking ground.
This is a condo project curently under contruction across the street from the Grand Wailea hotel. These condos will start at $2.4 Million


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