LIHU‘E — Residential home sales rose 80 percent in May on Kaua‘i compared to last year, but the increase was based on an already “tiny number” in 2009, said University of Hawai‘i Department of Economics Professor Byron Gangnes.
The number of homes sold in May 2009 on island was 15; last month the total climbed to 27, according to Multiple Listing Service. By comparison, sales in 2004 and 2005 for May were around 60.
“So I wouldn’t get too excited,” Gangnes said Wednesday.
The increase is still likely due to the first-time homebuyers tax incentive, said Kaua‘i Board of Realtors President Kelly Liberatore.
“There is also a distinct possibility that sales will fall off somewhat now that the tax incentives for new home buyers are pau,” Gangnes said.
Sales under the incentive are required to close by July 1, Liberatore said.
And rising home sales are not as much of an indicator of economic growth as new development and construction, said University of Hawai‘i Associate Professor of Economics Dr. Carl Bonham.
The University of Hawai‘i Economic Research Organization’s recent report said its “projection for new residential construction permitting this year” was reduced.
“We now expect the cost-adjusted contracting tax base to be unchanged in 2011, after one more year of sharp decline,” the report says. “Because the sector will remain weak, there will be little net hiring until 2012.”
However, Liberatore said she “hesitates” to agree that residential home sales are not indicative of an improving market “because when consumers spend money on anything, including homes, it means they feel confident to do so.”
The increase in sales could mean a sign of recovery, “but one month’s activity is not enough to verify any kind of long-term trend,” said Kaua‘i County Finance Director Wallace Rezentes Jr. “There could have been an anomaly that caused the jump.”
And although Liberatore also said second home purchases are “still soft,” real estate agent and distressed property expert Ron Margolis said it is currently a “second home market.”
In 2005, “you couldn’t find a home in resort areas for under $1 million,” he said.
Now, non-residents can purchase properties for “as low as” under $500,000, specifically in the Princeville area.
“Obviously it’s people whose businesses have been able to be more resourceful in this economy,” Margolis said regarding those who are still able to invest in homes during a troubled economy.
While it is “still hard to buy a home” on Kaua‘i because of steep prices, the marketplace is presently “advantageous” to all buyers, Margolis said.
Some condos and homes on island are selling for as low as $170,000 to around $300,000, he said.
The median sales price on the island decreased 30 percent last month compared to 2009, going from $600,000 to $420,000, according to MLS.
And FHA loans have an “affordability factor,” offering as little as 3.5 percent down for first-time homebuyers, Margolis said. These loans have “replaced what used to be very easy money” lent through stated income loans where income verification was nonexistent.
The declining value of homes are creating prices which buyers have not seen “in many years,” Liberatore said.
“What we’ve been seeing is a lot more short sales and bank owned property coming onto the market,” she said.
The creation of more jobs will be one of the conditions which will correlate to the value of homes rising again, as they will “help prop up the economy” because of its relationship to currently delinquent homeowners and foreclosures, Liberatore said.
“I don’t believe we are out of the woods yet,” she said. “I think we’ll have bumps in the road.”
• Coco Zickos, business and environmental writer, can be reached at 245-3681 (ext. 251) or czickos@kauaipubco.com.
