As the second biggest vacation home market in the country right behind Florida, Hawaii has seen major ups and downs in real estate cycles, but it’s mainly been upward until the financial crisis slammed its markets. Fallout from the crash in housing is likely to have a lingering hold on Hawaii. But bargain priced properties will send it into better times.
REO homes or foreclosures that have been repossessed by bankers are in short supply in Hawaii, where bargain hungry investor types want to buy to get a deal on a condo or home. But a problem lies with banks and mortgage companies that are concerned about flooding the market with an over-supply of foreclosures at the same time, sending home and condo values further down the tube.
Most of the troubled inventory is now being handled as short sales by lenders, who cooperate sometimes after months to sell a property for lower than what’s owed on the mortgage. Tourism supports as much as three-quarters of the states economy and much of the rest was real estate related. But the building boom has slowed to a crawl with condo and home sales as the state sustains the worst economic downturn since the 1970s.
In Honolulu, the federal tax credit got more buyers to bite but sales slowed after the incentive expired. Home and condo prices are declining and are projected to drop further as the market deals with the excess inventory of properties for sale. Foreclosures are selling at discount prices, but the majority of the troubled inventory is being handled as short sales. However, often time’s lenders are so slow to react to an offer to purchase that buyers withdraw their offers before getting a response.
A rebound in the market isn’t projected to develop for at least another year, possibly longer for this island state. Average housing prices, including condos and single family homes are forecast to deflate 12.9% in Honolulu in 2010. Prices haven’t yet gotten to the point that triggers a flood of interest with the troubled economy.
The slowdown in Hawaii developed behind the mainland as bankers flush with cash lent to just about anyone who could sign their name. Now a troubled tourism economy is contributing to a slow recovery.
Low mortgage rates and bargain priced short sales are drawing activity in the states second most populated area, Hilo. But sales are still off as the market deals with fewer tourists to sell homes and condos to these days. Residential properties are forecast to decline an average of 11.1% in Hilo in 2010 as buyers delay purchase decisions until they see signs the economy is improving.
However, the sale of lower priced condos and homes are driving slightly more transactions in Kauai, where only dozens of sales take place a month. Few second home buyers make their way to Kauai, where restrictive building codes limit high rise condo developments.
But the lower prices will also lead housing values further south as the market makes inroads to stabilization. Kauai prices are forecast to deflate an average of 14.7% for the year.
In Maui the market saw more sales for a time, but any sort of economic incentive must be driven by lower prices since second home buyers don’t have to make a purchase. Record low mortgage rates just aren’t enough to pull the market out of its doldrums. As bargain priced foreclosures are listed sales are projected to rise. But the road to recovery in Maui is projected to be a lengthy one with average housing deflation forecast at 11.3% for the year.