Kauai Property Market Reflects National Housing Recovery

The climate for real estate on our Garden Island remains optimistic and positive as we move forward into 2013. The dynamic of a shrinking inventory, and many first time home buyers, continues to contribute to an environment where many well-priced listings are sold within the first week of being on the market, often with multiple offers.

Kauai’s Year End 2012 Real Estate Numbers

Kauai’s year end 2012 Real Estate numbers are right in line with the national housing market. For the nation, total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 5.9 percent to a seasonally adjusted annual rate of 5.04 million in November from a downwardly revised 4.76 million in October, and are 14.5 percent higher than the 4.40 million-unit pace in November 2011. Sales are at the highest level since November 2009 when the annual pace spiked at 5.44 million.

Lawrence Yun, NAR (National Association of REALTORS®) chief economist, said there is healthy market demand. “Momentum continues to build in the housing market from growing jobs and a bursting out of household formation,” he said. “With lower rental vacancy rates and rising rents, combined with still historically favorable affordability conditions, more people are buying homes…”

On Kauai, lenders can document the completion of a year with more first-time home buyers than we’ve seen in years. The number of total real estate sales for 2012 was up 16.56% for the year (see chart below) over the previous year. The dollar volume resulting from those sales was also up 19.91% for the year. That’s better than the national average.

Kauai Median Existing-Home Prices Up

The national median existing-home price for all housing types was $180,600 in November, up 10.1 percent from November 2011. This is the ninth consecutive monthly year-over-year price gain, which last occurred from September 2005 to May 2006. Prices on Kauai have not rebounded as robustly. We still tend to lag a bit behind the pricing trends on the mainland. On Kauai, the median price of single family home was up ½ a percent island-wide for the year. But, each district and property type has its own characteristics.

For example, on the North Shore, the Hanalei district, the median price of a single family home moved up 22.03% from $758,000 to $925,000. That move is likely from a combination of higher end luxury transactions, and the fact that many of the distressed properties (short sales and REOs) in Kilauea and Princeville, have sold, so there’s not much distressed inventory in Kilauea, Princeville, or Hanalei.

In the Lihue district, median condo prices moved a whopping 115.83% from last year’s median price. Again, that number is a bit misleading. Because there were fewer condotel sales at the Kauai Beach Resort (which is technically in the Lihue district) the median sales prices rose dramatically.

The median sales price of a single family home in Kapaa (Kawaiihau District) was down slightly, 3.85%, but that trend is not likely to continue in 2013. While the median price is at $375,000 for a single family home in Kapaa/Wailua, there are still homes available under $300,000 enabling young families and other first time buyers to get into the market while its still affordable and interest rates are low. Those homes sell quickly now. There’s not enough inventory to satisfy the pool of home buyers in this price range.

2012 Distressed Property Sales Statistics

Nationally, distressed homes – foreclosures and short sales sold at deep discounts – and they accounted for 22 percent of November sales (12 percent were foreclosures and 10 percent were short sales), down from 24 percent in October and 29 percent in November 2011. Foreclosures sold for an average discount of 20 percent below market value in November, while short sales were discounted 16 percent.

In December on Kauai, we had 92 transactions close. 7.5% were foreclosures and 15.2% were short sales. Our market has a higher percentage of short sales to foreclosures because of legislation, Acts 48 and Act 182, that have slowed the foreclosure process on all the Hawaiian islands.

“The market share of distressed property sales will fall into the teens next year based on a diminishing number of seriously delinquent mortgages,” Yun said, commenting on the U.S. market as a whole. That may not hold true for Kauai if the foreclosures currently in our circuit courts get processed and those properties are returned as REO/foreclosure listings.

2012 First-Time Buyers Down From 2011

First-time buyers accounted for 30 percent of purchases in November, down from 31 percent in October and 35 percent in November 2011. Those numbers are harder to track on Kauai as it is not currently listed in our MLS. Of course, the majority of luxury high-end sales are from off-island owners.

Overview: What Does This Mean For the Kauai Real Estate Market?

Nationally, total housing inventory at the end of November fell to a 4.8-month supply; it was 5.3 months in October, and is the lowest housing supply since September of 2005 when it was 4.6 months. Here on Kauai, at our current November and December sales rates, we still have close to a year of inventory.

Prices have stabilized, median prices are starting to rise and interest rates. So if you are thinking of buying a Kauai home, what exactly are you waiting for? Especially if you are looking at a distressed property, you need to have all your “ducks in a row” and be ready to pounce. You may want to download my Foreclosure Opportunities Toolkit.