On Top of the Aloha Beat BLOG

I hope that the administration can catch up to the actual reality of our market. Increasing the LTV on refinances is hopefully a step in the right direction.

Jeff Belonger is a savvy lender who understands FHA. I just am in the process of doing my first FHA loan here on Kauai. At our prices, most of my buyers are not FHA compliant. I'll be interested to see how the tax credit now or the amended one should the number be increased, assists my clients in their first home purchase.

As I've mentioned before, when Hawaii passed Act 137 last year with the intention of protecting consumers from Mortgage Fraud, they made one very drastic mistake in my opinion. THey disallowed realtor's from helping their clients and thus took away one of the consumers best resources. Well, our legislature got the word from the Hawaii Association of Realtors leadership and the results of those efforts have finally paid off.

Hawaii’s Governor Linda Lingle signed Senate Bill 34 into law.  This amendment to Hawaii’s Mortgage Rescue Fraud Prevention Act (Act 137), provides an exemption for licensed real estate brokers and salespersons from being defined as “distressed property consultants” under Act 137. Most buyers and sellers were comletely unaware of this law or its consequences unless they attempted to buy or sell a property that was defined as a “Distressed Property”.  A Distressed Property” is defined as any property where the owner/borrower was 2 months or more behind in payments to ANY lien holder.  Originally, Act 137 prohibited Realtors from communicating directly with lien holders on behalf of their clients OR from coaching their clients on how to communicate and deliver information to their lien holders about the sale of their property!

People who had legitimate hardships, who could no longer pay their mortgages, were left completely ‘unrepresentable’ by Realtors under Act 137.  For example (just one of MANY), we’ve represented clients who suffered debilitating illnesses which cost them their jobs and their ability to pay their mortgages… but once they were 2 months behind on their payments, we, their licensed agents and fiduciaries, were no longer allowed to speak with their creditors or even coach our clients on how to proceed with the sale of the property that they hired us to sell!

So, the end result was that people in Hawaii who needed the assistance of a Realtor the most were prevented from getting it.

This new law will be Act 66 of the 2009 Legislative Session, and is effective immediately. The bill also prohibits a licensed real estate broker or salesperson from acquiring an ownership interest in the distressed property, directly or indirectly, within 365 days after a listing agreement for the same distressed property has expired, or is terminated. You can read the letter from our Hawaii Association of Realtors to our Governor. Hawaii’s property owners who are faced with financial hardship, and perhaps foreclosure, will now be able to have the guidance and expertise of Realtors who in many cases understand the dynamics of short sales, foreclosures, and dealing with banks.

Did you have to deal with this type of legislation in your area?

Over fifteen hundred people, and that's a big crowd on Kauai, showed up this morning for this year's 31st Visitor Industry Charity Walk. The Charity Walk began at the Historic County Building, headed down Rice Street, turned left on Ho‘olako Street, went up Ka‘ana Street, turned left on Kapule Highway, left on Ahukini Road, turned  left on Umi Street, and ended at the Historic County Building.

Streets were closed to accomdoate the large groups beginning at about 6:45 this morning. The CHARITY WALK is a statewide event that occurs simultaneously on Oahu, Maui, the Big Island and Kauai on the 3rd Saturday in May. In 2008, more than 9,500 walkers raised over $1.12 million and helped over 190 of our local charities. In 1974, the Hawai'i Hotel Association sponsored a charitable "Superwalk" to benefit one major charitable organization. In 1978, the Hawai'i Hotel Association members voted to extend the reach of support offered by the Walk's fund-raising capability. The Visitor Industry CHARITY WALK is the result of this decision. Over the years, the HHLA's annual walk has grown to become one of the largest single-day fundraising events by a non-profit organization in the State of Hawaii. Since its inception in 1978, over $20 million has been raised, helping hundreds of local charities throughout the State.

As with so many fundraisers in these challenging times, all of the numbers statewide were down. Despite the large turnout on a beautiful sunny morning in Lihue, the mass of people did not meet the goal of $200,000 as it was  announced that total collections amounted to roughly $165,000.

Overall, the Walk, sponsored by the Hawai‘i Hotel & Lodging Association, raised a total of $925,000 statewide, states a release from McNeil Wilson. There were a total of 6,585 walkers taking part in the effort on O‘ahu, Maui, Kaua‘i and the Big Island to raise funds benefiting more than 100 Hawai‘i charities.The Walk is one of the largest single-day fundraisers in the state, providing an opportunity for the visitor industry to collectively give back to the local community.

One of my friends was telling me yesterday that our economy is like a two-legged stool. Those two legs he said are tourism and construction. Of course he's in construction so he may be a bit biased. Still, tourism is essential to our island economy and even with tourism down 25% for the year, it's great to the see the community come out and support this Charity Walk event

Safeway said today it has completed purchase of the land for its Hokulei Village shopping complex between Lihue and Puhi and is going forward with development of a new Safeway Lifestyle store and surrounding retailers. Sale of the property — a 22.8-acre commercial-zoned parcel at the corner of Kaumualii Highway and Nuhou Street owned by Grove Farm — was finalized last week.

Now Safeway needs to secure a couple of more tenants and according to the news release in today's Honolulu Advertiser, they are currently talking to fourteen potential tenants. If you look at the aerial overview below, you will see planned Hokulei Village on the left of the image. There are also a number of commercial lots for sale in what is known as Kukui Grove West. Despite the pricing correction that is happening in the residential market of Kauai, the commercial market is still strong because there is very little commercial space on this entire island.

It will be great to have another large supermarket in Lihue in addition to Star Market and Big Save. And then of course, there's Costco, whose prices are amazing but their selection is sometimes limited.

Read the article in today's Honolulu Advertiser, detailing Safeway's commitment to Hawaii and Kauai. Here's to the hopes that they are able to follow through in today's economic climate.

In this buyer's market with uncertaining lending conditions, it's really a good idea to get pre-approved. Standards for debt to income ratio's have gotten more stringent, and if you are at all leveraged, best to know what you can qualify for. Read this simple list below of eight benefits of pre-approval. Aloha from Kauai...

I just read a pretty provocative article about the GMO efforts happening on Kauai's west side and how much of our food on island is chemically processed and imported. Did not make me feel too good although we buy most of our produce from locally held farmer's markets. Read this compelling  story about Kauai and some of the research that happens here. The author is clearly passionate but i felt there was enough good info here to link to it. THis little snippet below is taken from the article. I'm fortunate to have a good friend who grows organic dwarfed apple bananas and papaya on Kauai's NOrth Shore and shares them with me every week.

Kauai's  North Shore is a lush place of almost heartbreaking beauty with a vibrant, racially mixed local culture. There, the Waipa Foundation hosts a weekly farmers market selling organic local food to support its work reviving traditional foodways. Like many Native Hawaiian organizations, they have a Hawaiian-language immersion school that integrates traditional food, farming, and fishing into their curriculum. They connect local farmers with schools, which are getting young people out of the classroom and into the mud of the taro patch. Activists on the island and throughout Hawai‘i are working toward food security. They achieved a ban on genetically modified coffee and are bringing back the original “gift economy” of exchanging traditional varieties of taro.

Just up the road from the Waipa farmers market, Limahuli Garden is restoring the traditional Hawaiian land-use system called an ahupua‘a. Kawika Winter, an engaging young ethnobotanist, Native Hawaiian, and the garden’s director, says the name lima huli means “turned hand.” It refers to a Hawaiian proverb which, roughly translated, says, “If your hand is turned up, you will be hungry; if your hand is turned down, toward the soil, your belly will be full.” The up-turned hand, Winter says, is not a positive symbol for Hawaiians. It is a sign of supplication. The down-turned hand, however, represents the hard work of cultivating the land.

Winter explains that the work they are doing there is all about remembering that the land is our ancestor. “We know that the way to get through difficult times is to use what was left to us—our land and our traditional knowledge. That will carry us into the future,” he says. “This is also our gift to the world.”

Visit Kauai's Sunshine markets to procure some of the locally grown and organic food available on the Garden Island

On April 8th, The Garden Island published an article about a new value allocation approach being applied to Kauai condo's. According to the article, "After conducting site visits to all condominium properties on the island, the real property assessment office determined that the allocation of values between building and land for these properties needed to take into account differences in view planes and location within each project to better mirror their market values". This, according a a county news release.

Additionally, I received an email sent to all Realtors from the Real Property Review Officer further explaining, "For 2009, there was a major shift in how the total market value was allocation between land and building.  Since land tax rates ($6.90 per $1,000) are lower than building tax rates ($7.90 per $1,000), it made sense - in lieu of a single assessed value and/or single tax rate - to reevaluate this means of allocation.  The method utilized in prior assessments is known as “building extraction”, which places enormous weight on the improvements.  In trying to be more equitable, the relationship between land values (as derived from vacant comps) and building values (as determined from the replacement cost less depreciation) was examined and applied proportionally to the overall values.  The City & County of Honolulu began using these ratios to allocate total value between land and building before they eventually switched to single values.  With the Real Property Tax Initiative before the Kauai County Council, albeit deferred for the time being, it is imperative to appropriately account for the value contribution between land and buildings since the recommended tax rates for land and building may have a 3:1 relationship (i.e. $9.00 for buildings and $3.00 for land). Naturally, with the current market conditions continuing to deteriorate in 2009 , I’m sure it is difficult for property owners to see their assessed values above what they believe they can now sell their properties for.  Unfortunately, I am required to render the valuations as of a specific point in time using empirical data that was available to me prior to that date.

"In the Garden Island article, there was a small column stating that active listings not subject to distress situation were utilized as collateral data AND that the short sales, real estate owned properties and foreclosures were regarded as indicators of liquidation rather than market value. HELLO! Are these people serious or totally out of touch? The liquidation value IS the market value. Between 30 to 40% of the actual sales are distressed sales and it's the great bargains on Kauai that are finally moving the market. How the assessor can disregard this fact is completely beyond me. I have clients with a lot for sale at $995,000. We have not yet received offers after four months on market, YET, their assessment went up 35% percent for 2009. Adding to the confusion, many appraisals done for lenders are now coming in LOW. Appraisers and assessors are obviously working from a different playbook.

Walter Lewis, a frequent contributor to the Garden Island, published an article entitled, Not a Fair Fight, where he detailed the "kangaroo court conditions" that appear to be the modus operandi of the Kauai County Council and their tax constituency. We would like to see the county taxation reflect the reality of our realty market, not what was true several years ago. Unfair taxes have a way of hurting everyone.

What are the tax assessors doing in your community? If you live in a market that experienced great appreciation, are your assessed values reflecting the current market conditions? Let me hear from you...

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Ken Stokes reports on his SuSHI  sustainability blog about the ag forum that happened on Kauai this weekend. Read all about  Kauai Ag Forum and Sustainability

Be sure to check all of the links in Ken's posts. They are each little pearls of wisdom unto themselves. I saw Ken for coffee last week and he mentioned a community in Toronto where a group of people are growing food in people's back yards. In other words, the property owners let this group manage their garden because they know how to, and perhaps the owners are too busy. Then, this food is distributed amongst the 500 folks who are participating in this system. And that's in Toronto.

Imagine what would be possible on an island like Kauai, where everything grows whether you want it to or not!

Spring is here and our market is definitely picking up. Hooray. There were 49 transactions that either went into escrow or went into escrow and sold in the month of March. That's a pickup in activity for kauai real estate. That is far more volume than we've seen in January or February. Buyers are sensing the good values to be had and are making their moves. Interest rates are still at historically very low levels. This week I heard rates of 4.75% on a 2nd homes (better rate than a pure investor rate), and 5.25 on a jumbo loan with 30% down on the jumbo loan. Jumbo loans(non-conforming) for Kauai are under $722,000.

Of the 53 sales, over 80% of the sales were under $500,000. As our affordability index improves, owning a property in the islands becomes more doable all the time. And with the first time home buyer's tax credits and great FHA programs, first time buyer's have a better chance than in a long time to purchase their first homes on the Garden Island.

Take a look at the chart below which tracks the number of sales of Kauai real estate the first quarter of 2009 as compared with sales in 2008

While the sales volumes are down from 2008, and the prices may still be retracting, it's clear that there are more and more buyers out there when properties are correctly priced. Some listings sit on the market for a year and never sell, but others are sold in less than a week when the deal is attractive. Notice in the graph below that while numbers of transactions are down from last year (when credit was easier to get and lenders were more flexible) there is a spike upwards in March and i suspect April and May will demonstrate more of the same. You may also notice that the residential segment, single family hoes, makes up the largest percentage of sales, while land sales make up the smallest number of sales.

If you've been thinking that the pricing is getting attractive on Kauai, well it is. Let me know what type of properties you wish to monitor and you can receive an update whenever there is a change in the portion of the market that most interests you.