LIHU‘E – The number of homes and condominiums selling on Kaua‘i has continued to increase over the last six months, but average sale prices have also continued to decline, MLS reports indicate.
“I think we’re really subject to the distressed sales,” said Michael Olsen, president of KBR. “In terms of condos, (foreclosures) are dominating the market. We did have a lot of conversions from hotels to condos. Those projects all tanked; the developer got stuck with a lot of product. They went down in value by 50 percent, Kaua‘i Beach Resort by 75 percent.”
Real estate owned (REO) sales, otherwise known as foreclosures, and short sales, meaning bank-negotiated sales, comprise distressed property transactions.
“The conditions we have are the direct result of the distressed market and the expectations of the market,” Olsen said. “Buyers are out there that are capable of purchasing now, and there are a lot of cash reserves on hand, but people in the upper middle and beyond range are still holding on to money because they feel they can do better. They’re sitting on the sidelines waiting for the price to drop.”
Kaua‘i County had 1,444 real estate listings, including residential properties, vacant land and condominiums, and 66 sales for May. Based on these figures, there are approximately 22 months of inventory on the market.
Prices will start to rise as the excess inventory is absorbed and becomes scarce, real estate experts say. Traditionally, more than four months of inventory is considered a buyers’ market.
Six months ago, there were 1,179 listings and 65 sales, representing about 18 months of inventory.
May’s year-to-date sales volume, which measures total transaction values, rose 20 percent to $177 million for all real estate asset classes.
Compared to 2010 levels, sales volume has climbed 25 percent to $118 million for residential properties but remains flat at 0.28 percent for condos with $30 million in sales.
Of May’s 66 house, condo and land transactions, 10 were short sales and 20 were real estate owned (foreclosed/REO) properties, representing nearly 46 percent, or nearly half, of total sales.
May 31, Kaua‘i Dreams Realty listings showed 24 REO homes, four REO vacant land lots and 38 REO condos currently on the market.
Olsen said some of the properties are going to have to pull off the market because of the state’s newly enacted 14-month moratorium on traditional foreclosures.
A Fannie Mae National Housing Survey for the first quarter says nearly one in four mortgage borrowers report they are underwater, meaning their mortgage is greater than value of their property due to declining property values.
While the number of Americans who perceive home ownership as a safe investment has been declining, the survey says, 57 percent still believe that buying a home has “a lot of potential.”
As far as who is shopping the market locally, Olsen said there have been more “Canadian snow birds” showing interest.
“We have had buyers from Canada, a small percentage compared to those visiting,” he said.
But Kaua‘i’s rainy weather during the last two months has discouraged the “true sun birds,” who are also flocking to the warm climates of Arizona and Las Vegas, where mini mansions can be had for the mid $300,000s.
Bankrate.com on Saturday showed the average interest rate on a 30-year fixed mortgage as ranging between 4.35 and 4.78 percent on Kaua‘i and averaged 4.65 percent nationally.
The rate falls between the 4.25 percent average of last October and 4.89 percent in December.