On Top of the Aloha Beat BLOG

The front page of this morning's Honolulu Advertiser has a story above the fold about the controversial Hawaii Superferry integrating so new high tech devices on their vessels. According the Advertiser, the  Hawaii Superferry is installing a high-tech thermal imaging system that could detect whale spouts more than a mile away and reduce the risk of collisions with humpback whales.

Perhaps this will address one great level of concern about the ecological soundness of this transportation alternative. Read the full story about whale tech on the Hawaii Superferry.

My friend Ken Stokes, from the Kauaian Institue, will be on the radio at  Noon hosting the Friday talk show on KKCR normally honcho’d by Keone Kealoha and Andrea Brower of Malama Kauai.

Click here or on the KKCR graphic to listen live

Keone and Andrea are at the Bioneers conference in San Rafael, and will be calling in to report on the opening days’ plenary roster of inspiring speakers. That’s the air attack bit.

On the ground,Ken is  down for the consultants’ briefing on the County’s “energy sustainability plan” RFP, and hopes to be part of a team to get this contract. Nothing is more important than Kauai anticipating ‘peak oil’ and forging contingency plans for supply disruptions.

The ’see’ bit is from Pacific Business News, where  Janis Magin quotes  Ken in a piece on ‘greenwashing’ in Hawaii (via PBN, sub req).

Magin had called to inquire about Hawaii companies who might be engaging in ‘greenwashing’…and voila! I’m quoted as saying there is little of this going on out here.

What Magin didn’t mention was the second part of my comment, which was there is little ‘green’ marketing, period. Hard to greenwash if you’re not trying to brand your stuff ‘green’, ya know?!

Ken maintains my favorite Sustainability blog and I quote him frequently. You can subscribe and read it yourself. Ken states:

"I’ll soon be posting impressions of the sustainability network in Seattle and Portland, where Susan and I spent 3 marvelous days apiece. Wudja believe we say the mountains (Rainier and Hood) every single day, and actually caught some sun at Cannon Beach? Are we blessed or wot?

Meanwhile, turn up the volume! We’ve all got lots to think about and talk about as the sustainability imperative looms…"

Here is an interesting adaption of Warren Buffet wisdom applied to the world of real estate. I think Michael makes some very astute points. I frequently speak to buyers who are "waiting for the bottom of the market". Meanwhile, interest rates went up half a point in the last week. I believe IT IS A GOOD TIME TO BUY...

Trees Lounge in Kapaa, behind the Coconut Marketplace, is just about one year old. In their first year, Owners Mark and Candice have turned this urban-like environment into the happening spot for life music and chilling for all of Kauai. Trees has built a local clientelle and so despite a dip in tourism on Kauai, Trees is going strong.

Tree mean's three in Pidgin, Trees Lounge offers Jamaican, New Orleans, and Hawaiian culinary delights served pupu style or "sharable". Trees Lounge provides locals and visitors an exceptional dining experience in a lounge atmosphere. Indulge in one of our inventive cocktails or a nice glass of wine while enjoying authentic flavors and sounds from Jamaica, New Orleans, and Hawaii. The Trees experience combines a swank lounge feel, while enjoying live entertainment.

Here's the lineup for the next week or so:

OCTOBER:

16 Island Grass - country music, Kauai Style

17 True Bruddahs - Funky Reggae to chill by

18 Randy Carnevalli and friends - Randy is Kauai's veteran bass player who always has some rockin' musicians by his side

19 Norman Ka'awa Solomon, Hawaiian - my good friend Alan Thomas produced Norman's last CD

20 Randy Carnevalli, Dan Parslow, Ron Rhoades, Blues/Rock - Funk and Blues with Dan the Man, a classic rock guitar virtuoso

21 Rosie and friends

22 Sean Carillo - Hawaiian style

23 Kundala - eclectic trancy jazz and fusion featuring Estabon on guitars and Bill on keys and effected trumpets

Beautiful Bar-height tables, comfy booths and velvet chairs to relax in at Trees Lounge Kapaa

I'll be performing at Trees Lounge on November 25th blending an assortment of jazz, fusion and R&B funk with the soulful James Norman. Hope to see you if you are on Kauai

You've heard about fractionals right? No?  Well, you must live in an urban area with mostly full time residents. If you live in a ski area in Colorado or British Columbia, you've probably heard about fractionals. Hawaii law defines a fractional as ownership for a minimum of sixty days, to be delineated from the concept/product known as timeshare.

In this buyer's market, seller's have long been desiring to do something different that makes their offering unique. Well, a fractional allows a seller to sell their property in six segments, each 60 days long. It's a great approach to "lifestyle living", meaning, only own the time you are going to use. If you live in Nebraska and want to spend January and February in warm, tropical Kauai, then you only need to purchase those two months of ownership. So, that's the basic concept.

Unfortunately, only a couple of sellers on our island have done the due diligence to properly equip and document their fractional LLCs and also created the marketing to help agents understand and sell the product. In Princeville there are several condos and a a couple of nice homes for sale as fractionals. An owner can buy  a 1.5 million dollar home and live it for a couple of months for only $365,000. That works for some people.

Anyway, it's nice to have options. To learn more about Kauai fractionals, check out one of the leading developers' sites, Island Fractional Homes. The developer has built a beautiful web presence and is doing all the right things to be successful. Here is a list of the current fractional offerings in Princeville:

The listings on Kamehameha Rd. and Kaa`humanu Place are single family homes. The remodeled one on Kaa`humanu Place has a cute little lap pool and is right on the Makai Golf Course.  The two different units at Villas of Kamalii (VOK) are very tastefully appointed and developed by the developer i mentioned above. The VOK units are some of the nicest Princeville condos in the entire market.

If you know anyone who has an interest in this type of property, I can mail you a physical packet with pictures, FAQ, and lots of good supporting collateral.

When fractionals began appearing formally about four years ago, all the transactions were CASH ONLY. Now, there are some lenders who will provide loans for the fractional investment.

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This spacious two bedroom condo at Emmalani Court, a beautiful Princeville condo complex that was built in 1992. Emmalani Court borders the Makai golf course and affords both golf course and ocean viewsThis unit, #412, just went on the market today. The listing agent promoted that the property is qualified for ExpressPath financing. As a Fannie Mae REO i wanted to know what that meant.  I searched on AR and found this answer from Bill Cherry, Dallas Realtor who wrote:

The property owner gets the appraisal and inspections out of the way via the Express Path Financing lender -- a virtual lender. When you, the buyer, apply for the loan through the Express Path lender, the approval/disapproval can be quickly determined from your financial information and cerdit score. The cost of the appraisal, inspections, etc. is hidden in the sales price of the home. The concept seems ok to me, but if you check around, there seem to be a lot of questions about it. Whether the lender is OK or not I don't know...

You can find out more about ExpressPath by google searching like I did. Bottom line is, there have not been any 2 bedroom Emmalani Courts that have sold for  under 600K since the summer of 2005. Now, there are four listed under 600k, and it's a great time for a buyer who has an affinity for this fine Princeville condo location.

Call me or email me if you want further details:

Entry to Emmalani Court

Rear View of Emmalani Court from Makai Ocean's #8 Hole

Emmalani Court Fannie Mae REO with views of the ocean

Wednesday is the day reserved for Caravan's in Princeville. There is a caravan usually two times a month on the North Shore and one of them is for Princeville itself. This week's Wednesday caravan featured a nice assortment of homes and condos as usual. Here is the niced home and the nicest condo i found. These are both beautiful offerings.

Queen Emma's Bluff - This street is located on the east end of the main Princeville neighborhood and runs along the Prince Golf Course ( Hawaii's #1-rated golf course) and towards the ocean bluff, hence part of the name. This home was built in the 90's but remodeled and upgraded in the last couple of years. Here are a few snapshots taken from my iPhone that show the views out your back door.

View of Mt. Namahana looking south from Queen Emma's Bluff

View across the 8th hole and towards the great Pacific

The home is 3,389 sq. ft, 3BR,2.5 Baths and is listed at 1.895M. View it online to learn more and see the interior photos.

The nicest condo on this week's Caravan was Puu Poa Unit #405. There are currently 10 units for sale in this project which consists of 56 units all with great oceans. This unit is on the top floor (#4) with the most dramatic views. The 2 BR/2BA condo has been completely renovated and tastefully so. While it is not the lowest priced Puu Poa on market ( #103 is 1.399M) this unit priced at 1.59 Million may indeed be the finest value.
View all the listings pictures if you want.


Beautiful white water views with a peak of Bali Hai in the left corner.

Stunning Living Room with wide ocean views and lanai perfect for coffee and star gazing.

And at least for the next nine months, while the Hotel is closed it's very, very quiet at night.

Here in Hawaii our market tends to follow California. Whatever movement or trends happen there tend to flow here whether sooner or later. The pundits say it takes 12-18 months but I experience that it happens a lot sooner. Our CEO posted this article from Real Trends to share the good news as we get ready for the weekend of open houses and prospecting here on Kauai.

September home sales show market beginning to stabilize as sales are up 1.9% in September 2008 over August 2008; Pricing pressure remains but is easing in a number of regions, according to REAL Trends.
 
Year-over-year results reverse from September as sales post 1.9 percent increase while prices down 9.6 percent versus decline of 11.9 percent in August.  Increase in sales first signal that market for housing unit sales may be approaching bottom.  REAL Trends believes that the market is showing sign of measurable improvement as closings increased slightly in September 2008 over August 2008. 
 
It is more evidence of a "sloppy bottom", a term coined by Realogy CEO, Richard Smith, where monthly results seem to vary significantly from month to month.  The strongest region was the West where unit closed were up 27.1% from a year ago.  The Midwest was also up 7.9% from the same month a year ago.  Lagging was the Northeast where closings were down 10.2% from a year ago.
 
Prices continued their softness with the average price of all closings was down 9.6%.  This showed improvement from the August report where prices were down 11.9%.  The best region was the Northeast where prices were off 3.9% and the worst region as far as price declines was in the West where average prices on closed homes were off 21.3%.
 
"These results are very promising and show that the housing market is moving towards a sustainable floor.  We don't know what impact the decline in equity markets will have or the weakening general economy although historically none of this is good news for housing.  A decline in interest rates and a significant rise in affordability may be enough to offset some of the other negative economic news. 
 
While one month does not make for any confirmation of a housing market turnaround, housing consumers and investors are buying up significant numbers of lower priced foreclosures according to brokerage firms and sales professionals.  Any strong housing turnaround will start with recovery at the entry level.  The recovery in closings in California, Arizona, Nevada and Florida due to sales of lower priced homes is a signal that Americans continue to see housing as a good investment."
 
            September 2008                    August 2008
        Closed Sales    AVG Price       Closed Sales    AVG Price
 
National     +1.9%         -9.6%         -17.5%             -11.9%
 
Regional Report
Northeast   -10.2%      -3.9%           -23.4%            -4.3%
South         -8.6%       -5.0%           -19.8%            -12.9%
Midwest     +7.8%       -11.1%         -19.1%              -7.5%
West         +27.1%     -21.2%          -6.1%             -21.3%
 
Now the Californians and Arizonian's just need to get on a plane here and we'll show them what value looks like on Kauai, right?

One of my friends and clients here on Kauai is a personal financial planner. If you want to know more about him, check out Personal Financial Consultants, Inc. That's Loren's company. Talk about a rough business to be in these days. Makes real estate seem like a walk in the park. Loren has an office in downtown Kapaa and is available for clients both on island and on the mainland. Whenever the market goes on a roller coaster ride, he usually has a bit of calming insight. I particularly liked what he said in his message yesterday and he is allowing me to publish it here. When I went to bed last night, I was watching the foreign markets start 10% lower. When i awoke early this AM, the market was under 8000. But, it did finish higher although it was a brutal week to be sure. How you find some wisdom in these observations.

Loren says...

Let me outline what is going on, what is real, what is permanent, and what is temporary.

 The credit markets have seized up.  This is real and it is temporary. Almost  all large public and private companies issue commercial paper - short-term debt instruments that mature in less than 270 days to help meet their short-term liabilities.  This debt in the past has been very liquid and quite secure.  It is what has been owned by most money market funds to help them give savers better returns than they would get from owning Treasuries. Since concern has dramatically increased about corporate balance sheets and their ability to meet even the shortest of obligations, two things have happened.  People have fled money market funds, which means that those funds must sell their paper and there is no market for the new paper that is being issued.  When you heard about the "need" for a rescue package, this is the main reason why.  The Fed and the Treasury are trying to create an avenue of liquidity for these instruments.  This part of the plan is what will eventually hit Main Street.  The reason that this is temporary is because it  is too significant to not be worked out.  Everything from hospital payrolls to inventory purchases are dependent upon this mechanism, so it will be  fixed.

 Wall Street is broken.  This is real and it is permanent.  Some of the largest investment banks were using a tremendous amount of leverage on opaque instruments that created even more leverage.  This industry will continue to change and change dramatically.  Access to money will not be as easy, which means profits for these companies will be compromised. Eventually they will come up with new and different ways to make money, but regulation will inevitably make it harder to make as much as they did for contributing as little as they had.  This will inevitably change what types of investments will make sense going forward.  Less exotic will be back in vogue.

Diversification doesn't work.  This is real and it is temporary.  When we have a global melt-down, all investments, other than the very safest, fall. This means that asset classes initially fall together. And this is usually the case for around three to six months.  After that, the most mispriced asset classes come back more strongly than others. Making sure that you stay balanced, take profits in upturns and stay invested in downturns is critical during these periods.  It has worked for us time and time again in my twenty-nine years in this business.

Fear and greed own the day.  This is real and it is permanent.  Every day, stock prices are determined by sellers - who either need to raise money or are convinced their stocks are going down, and buyers - who believe that they are getting bargains on investments that will go up. In periods of turmoil, there are far more sellers than buyers. People get scared that their investments are going to fall forever and sell (often at the worst
possible times).  When markets are going up, people think that they have all the answers and end up buying at the worst possible times.  No one is ever completely rational, but successful investors tend to be less scared and less greedy than unsuccessful ones.

Valuation is never completely clear.  This is real and it is permanent.  You can pay thirty times annual earnings for a stock that is growing at 30% a  year.  You cannot pay thirty times earnings for a stock that is growing at ten percent a year.  All future growth rates are guesses.  This means that on a daily basis, you are never paying the exact right amount for what it is that you are buying.  In markets like this, though, you are generally paying less for future earnings than you did in 1999.  These low prices are ultimately the key to having success in investing over the next few years.

People are hurting.  This is real and it is temporary.  Jobs have been lostand more jobs will be lost.  People who piled on debt will have tremendous problems working their way out of the hole that they dug for themselves.The stress of seeing investments drop can add to the stress that each of us feel in raising a family, or work, or retirement or tending to our aging parents.

But the one universal truth of these times is impermanence.  Nothing lasts forever.  Lower interest rates will eventually lead to a housing rebound. Enhanced credit will help businesses expand and hire. During times like this, don't extrapolate what is happening today to fifteen years down the road.  Focus on the things that you can control.  If you have a well-reasoned strategy and plan in place, you will be fine.  We have worked with countless clients over two decades and have helped them retire comfortably and send their kids through school.  We have seen many types of markets during these times and through solid financial planning and intellectually sound asset management we have weathered the tough times.  We will do so here as well.

As a final note, Warren Buffet, the head of Berkshire Hathaway and the second richest man in the world, has taken on iconic stature in our society.
He plays the wise old grandfather whose advice is always right -sooner or later.  He has a very rational take on the current situation. My take away is this: Buffett has great confidence in the long-term health of the American economy. He has sat on $40 billion in cash for years waiting for
 the right buying opportunity, and is now putting that money to work.

If Buffett is a buyer, then I would not be a seller.

Here's a perspective from a mainland lender who keeps it short and simple. I just saw his blog post and whatdya' know, interest rates jumped almost 7/8 of a point today. Gosh, that really hurts. I'm sure those who are in escrow with interest rates locked in are feeling pretty good tonight, but it's not good for the overall market.