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A 20 Year Kauai Market View – The Perspective From 30,000 Feet

I had a sales mentor once who often talked about the 30,000 foot view. You know, the view from up above, the bigger picture? Well, as we head into 2011 with a country recovering albeit slowing from a recession, an improving stock market, low interest rates, and yet still a bit of uncertainty as our nation extends its debt to the 15 trillion dollar range, I thought I’d take a moment to show you the “bigger picture” of Kauai real estate. Special thanks to our Captain, Matt Beall, PB, for providing some of the Excel data to make my job a bit easier.

For most of the years since I started in real estate, the Kauai Board of Realtors would bring economist Paul Brewbaker to speak to our Realtor community, and help us to understand real estate values in the context of other “asset classes” as economists like to call them. In 2007, as we looked back on the peak years of 2005/2006, the market came to a screeching halt.

In economics, Mr. Brewbaker described the phenomenon as tranquility. Tranquility is that phase in the real estate cycle where the market stops. In the STOP phase of tranquility the market lost its energy. Each year there were fewer transactions and less energy in the marketplace. In the GO phase of tranquility we start to see an increase in the frequency and numbers of transactions. And, after a certain period of time, the prices stabilize and start to eventually move up.

Take a look at the total dollar volume of our marketplace in this graphic below of the last 20 years of transactions. The dollars spent on residential real estate in Kauai in both 2009 and 2010 were relatively close, not a lot of growth in the sales volume. The sales of land and condominiums, however, were up in 2010.

Kauai sales volume—in 2010 residential was flat, condos and land were up

Now, look at the graphic below depicting the number of transactions, and when you put the two pictures together you get some insight to our market. There were more transactions in 2010 (more velocity in the market). We are having more transactions at lower dollar values which explains why the residential volume was pretty flat. We had many more single family home sales, but the homes are selling for a lot less, and will continue to do so until the inventory is depleted and/or the demand begins to exceed the supply, which it certainly has not.

2010 was the year we finally started to see adjustments in the top of the market, the multi-million dollar estates. A five unit luxury CPR where the developers had invested close to 8 million dollars sold at auction for just under $3.7 million. 6 golf course homes originally priced from 1.7 to 2.2 million dollars sold for prices in the $800,000 to $1.1 million range. And we’ve had some bank foreclosures in several homes priced above $3 million. You can be pretty sure that when these bank REOs resurface, they will provide some high-end deals.

Increasing velocity in the number of transactions on Kauai in 2010

In the final analysis, it’s important to recognize that in a small real estate market like Kauai, a few transactions can greatly skew the numbers. As I write this blog post, just past the halfway point in January sales, we already have a 59% increase in Kauai sales volume due to the closing of two North Shore properties for $7.5 and $8.5 million respectively.

While this final graphic below portrays we may have reached the bottom, there’s likely to be a wide bottom as we continue to cycle through distressed properties from the low to high end of the market. A hui hou. 2011 is going to be a great year!

Kauai median prices through the end of 2010

View Kauai Deals in my Kauai Foreclosure Gallery →

Review homeowner options at Realtor Ron’s AVOID FORECLOSURE Website

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Lucy

January 20, 2011

Ron, thanks for the market data. Looking at these graphs seems to suggest that the market may have reached a flat spot with things turning slightly up. Will look forward to data over the next 6 mo, but it looks like it is improving to me! Good news. Lucy

Lucy

January 20, 2011

Ron, thanks for the market data. Looking at these graphs seems to suggest that the market may have reached a flat spot with things turning slightly up. Will look forward to data over the next 6 mo, but it looks like it is improving to me! Good news. Lucy

Matt

January 20, 2011

I think we’re likely to have a few more years of flat-lined sales volume, similar to the period from ’91 to ’97. There might continue to be corrections in the values, with more sales at lower price points accounting for more of the volume, but I doubt we’ll see any drastic fluctuations in any of these charts in the next few years.

Who knows, though? The cycle lengths could be shortening. We’ll see…

Matt

January 20, 2011

I think we’re likely to have a few more years of flat-lined sales volume, similar to the period from ’91 to ’97. There might continue to be corrections in the values, with more sales at lower price points accounting for more of the volume, but I doubt we’ll see any drastic fluctuations in any of these charts in the next few years.

Who knows, though? The cycle lengths could be shortening. We’ll see…

Ron Margolis, RA, ABR

January 21, 2011

I agree, more sales at lower price points. More short sales too as banks are finally realizing their net yields on their assets are significantly higher with a short sale. The notion of a property going from a homeowner to a homeowner is something the banks embrace rather than letting the property go to REO.

Ron Margolis, RA, ABR

January 21, 2011

I agree, more sales at lower price points. More short sales too as banks are finally realizing their net yields on their assets are significantly higher with a short sale. The notion of a property going from a homeowner to a homeowner is something the banks embrace rather than letting the property go to REO.

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