Friday, September 21, 2007

Maui real estate: Bleak...

I was last on Maui in February of 2007, (See More thoughts on Hawaii housing). I saw a sea of for sale signs then and it was not hard to see where things were going from there. In fact a monkey could have worked it out, but sometimes the obvious eludes us. While on Maui I attended a party of old friends, most with real estate investments on the island. After the lubricating effects that a couple of glasses of wine had on me, I opened my mouth and spilled the beans about what I saw coming in the real estate market and what looked like a prelude to decline. I was met with stunned silence, then I was faced with turned backs. I was an instant pariah… Just add wine…
That is how I remained among my real estate invested friends for the rest of my stay. I can’t say that I blame then though. I can’t say that I didn’t know better.

Da’Nile’, - it’s a warm river, a nice place to slip into when you’ve found you’ve made a wrong turn and you know you’re screwed. I’ve been guilty of that indulgence once or twice myself and I won’t hold it against my friends. If anything, I wish I could have saved them some grief, the inevitable loss that looms over their largest investment and security; their homes.

*****

The following is a copy of an e-mail-newsletter from ‘Haiku Properties’ on Maui, brought to my attention by good friend and long time Maui local, Eva Bluminstein.

Thanks for the heads up Eva!

I lived on Maui for close to ten years and never have I experienced forthrightness from a real estate agent on the island like what follows.
A big tip of the hat to Peter Slate for telling it like it is.

From: "Peter Slate"
Date: Wed, Sep 12, 2007 Sep 12, 2007 - 11:04AM
To

Subject: Maui Real Estate Overview

Aloha,This newsletter serves a very objective perspective on Maui's real estate market. As most realtors will quickly tell you what you want to hear, we decided to forego the "sugar coating", and tell it "how it is". The newsletter will cover two parts: Maui in general, and our specialty: Upcountry

Sales figures for Maui as a whole from the end of July 07 through the end of August 07 show a 5 % decrease in Single Family Residence (SFR) sales, 8 % increase in Condo sales and a 17 % decrease in land sales. Sales figures for Maui from August 06 compared to August 07 shows a 19 % decrease in SFR, 55 % increase in Condo and 50 % decrease in land sales.

Digging a little deeper, I researched the number of SFR properties and vacant land parcels that are in escrow against those actively listed in the Upcountry area. The Upcountry area includes: Makawao, Olinda, Pukalani, Kula and Keokea. I found there are 162 SFR listings, 21 (13%) of which are in escrow. Similarly there are 62 parcels of vacant land listed, and only 4 (6%) in escrow! Over the last year 177 SFR and 17 vacant land parcels have sold Upcountry. This would indicate, with no new listings, it would take a little under a year to sell all the SFR listed, and 3.6 years to sell the vacant land currently available on the Upcountry market. Another aspect to consider: the average days on market before a SFR sells is 172 days, and 264 days for vacant land. In our opinion, a red hot market shows 45-50% of listings in escrow, a medium market
30% in escrow, and a cool market 20% in escrow * 15 % and below *. Down right bleak. You'll want to remember, not all escrows are successful.

With my curiosity piqued, I decided to enter into the most volatile section of Maui's real estate: the Kihei Condo market. I broke it down into Maalea, Kihei and Wailea. I found:Of the 45 listed condos in Maalea, there are 0 in escrow. In the last year 20 sold. This indicates that with no new listings, it would take 2.25 years to sell off the inventory. Kihei has 376 active listings, 49 (13%) of which are escrow. There were 457 condo sales in the last year. Wailea has 152 active listing, 16 (11%) of which are escrow. There were 215 Wailea condo sales in the last year. Judging by these percentages, we have no other choice than to rate the Kihei / Wailea condo market as bleak.

Expanding further, there are currently 812 active SFR listings, 1332 active Condo listings and 484 active vacant land listings on Maui.

A couple reasons. With so many Banks and financial institutions going bankrupt (149 lenders in one year) over sketchy mortgage debt, the remaining banks and lenders have made it significantly more difficult for borrowers to get
financed, especially in the non- conforming, jumbo range, where most Hawaii loans are placed. Another reason, investors looking to the stock market for better returns.

Our Conclusion:With the explosion of wealth worldwide, and the growing number of people who have a net worth of $ 5 million or more, we know there are very capable buyers, who are in a position to purchase real estate at any time. Given that Maui remains one of the worlds most desirable resort destinations, and that the population is ever increasing ** Maui is not the problem! We conclude investors need only overcome their psychological hurdle before returning in force. With investor confidence restored, we believe Maui real estate will experience a strong rebound. There are currently two Upcountry properties that we feel are exceptional buys.

If you have any questions or comments regarding this newsletter please contact us directly at (808) 276 4017 or at the office (808) 878 6800. If you know of anyone who is thinking of buying or selling real estate on Maui, please refer them directly to the telephone numbers above.

Thanks you for reading our Newsletter.

Regards,John Papazian R (B)

Peter Slate R(S)
Haiku Properties

Vern's Note: The increase in condo sales is most likely the product of steep price declines in that sector. Also before you go buying real estate, I have a bridge for sale.

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