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Kauai Real Estate Sales Stats – July 2008

Now that we’re into August, we have another month’s worth of statistics to be mindful of. Here are July’s Kauai real estate market statistics. I have removed Commercial and Business sales for clarity.

Here’s my quick commentary (I know it comes on the eve of Paul Brewbaker’s speech tomorrow, but I’m sure its similar information):

In terms of number of sales:

  • We are at the lowest point in more than 12 years.  We have been there 4+ months.  You can see a graphical representation of this trend on the stats chart of our Kauai real estate page. The chart is at the bottom of the page, with the blue line showing the # of sales and the red/brown showing the Median Prices.  Keep in mind that the charts on our site are still a few months behind… if we were to include the last 3 months, you would see the continuing decline.

Stubbornly, all of the median prices on the island are still high:

  • Part of this is a natural expression in the market. Most of our new inventory has been high-end in price, and buyers who can afford higher-end properties are less impacted by the mortgage crises, so the number of higher-end transactions holds steady (or goes up) while the lower-priced listings sell less frequently. So the ‘median’, literally the middle of all of the sales, gets dragged up.
  • Part of it is also sheer denial on the part of people who are trying to sell their homes, and the Realtors they hire. Prices are just too high compared to the demand, period.  Now is the time for clarity, honesty, and pragmatism when it comes to pricing. Take condominiums as an example: There are currently 564 condominiums listed for sale on Kauai. The market is on pace, at best, to sell around 220 this year. The simple math tells us that the average seller is going to be on the market for 2.5 years. Our clients are not expecting this.

We have to take a pro-active role in pricing the products we’re hired to sell.  The facts are, if the property isn’t priced AHEAD of the slowing market, then we have to prepare our clients to be on the market for an extended period of time, like 18 months to 2 years.

OK… that’s my take on July’s stats.  Bring on August.

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June 2008 Kauai Real Estate Sales Stats | Hawaii Real Estate Blog

August 1, 2008

[…] Hawaii Life « Press Release 06/04/2008 Kauai Real Estate Sales Stats – July 2008 […]

David

August 3, 2008

Using the search engine on this site, there are 73 active listings for unimproved land (at least one acre) on the north shore of Kauai (all neighborhoods). Exactly ZERO of these listings are contingent (I assume contingent means “under contract”). So … I give up. What is going on with sellers? Does no one want to “price to sell” (I love that expression)? The market for vacant land seems to have ground to a halt. Right now, all listings are “priced to sit”

Home sales are better (than ZERO!), with an active/contingent ratio of 12:1 for SFRs having asking prices between $1M and $2M. I don’t know if this is correct, but I have read that approximately 50% of all Kauai escrows do not go through. That seems high, but if true, the ratio is really 24:1. I gues buyers (like us) assume prices will fall and don’t want anything that is not deeply iscounted, while sellers cling to the hope the can still get yesterday’s inflated prices. The result is that no one buys or sells.

Matt Beall

August 4, 2008

You’re exactly accurate about listings that are “priced to sit”. And, in fairness, the buyers have to realize the situation, and start making offers. This isn’t happening very often (in part because bona fide buyers are so few and far between).

The margin between the listing prices and sales prices is simply going to have to grow.

When the market was flush, ‘lowball’ offers were much more common, despite sellers holding firm. Now, in a time when there’s a glut of inventory, short sales, etc., most buyers are on the sidelines watching the prices stay stagnate and the interest rates go up.

The false sense of entitlement is on both sides.

David

August 4, 2008

“And, in fairness, the buyers have to realize the situation, and start making offers.”

We are “bona fide” buyers (cash). Bona fide buyers are the market. Not posers with free-wheeling lenders behind them. Those guys won’t be back for a while. Not to mention the mainland housing bubble deflation that has left other would-be buyers without a source of down payment.

We made two offers in July, both rejected. One was about 15% below asking, and we would have gone up a bit if a realistic counter was made, but the sellers countered at nearly full asking price (mind you, we were offering a cash deal with no financing contingencies). Our other offer was admittedly too low, nearly 25% percent below asking, but their asking price is completely unrealistic (it sat on the market for at least a year, was pulled for a while and back on at the same price). We told their agent we would have gone higher if a realistic counter had been made, but we got no response. I assume they do not need to sell and will wait however many months/years to “get their price”. Maybe they will. Who knows?

“Lowball” is in the eye of the seller. If sellers are priced unrealistically, they will view a realistic offer as “lowball”. Sooner or later, there will be sellers who actually have to sell, and price accordingly. We are picky about location and quality, and we are patient. We don’t “have” to do anything.

Matt Beall

August 4, 2008

So… you chose not to go up a bit in your price because you thought the seller’s counter offer was unrealistic?

Keep in mind that when you make offers using the Listing Agent as your representative, you’re effectively neutralizing the agent’s ability to influence the negotiation. When you create a Dual Agency situation, the Realtor can no longer (ethically) advise either party about price, terms, etc. So, no matter how wonderful your offer is, the agent can’t explain that to the sellers. As a result, the sellers are on their own, and they often respond from an emotional place that isn’t based in reason, or the reality of what’s happening in the market.

This is why we don’t attempt to represent both parties in a transaction. When my sellers get cash offers, I want to remain in a position where I can advise them about the benefits and price points.

This market requires a diligent buyer, and one that can take full advantage of representation.

David

August 4, 2008

Matt –

You may be assuming facts not in evidence. We did not make our offers “using the Listing Agent as our representative”. The agents owed us no ethical duty to not discuss the offers with their clients. For all I know the agents recommended rejecting our offers, and expect something better to come their way. Maybe there were other factors (unknown to us) that complicated things (e.g., mortgage balances or other encumberances). Who knows.

As far as both sides having “a false sence of entitlement”, maybe it is just semantics, but sellers are not entitled to buyers paying more, and buyers are not entitled to sellers taking less. In our case, for now, the sellers still have the property, and we still have the cash.

Matt Beall

August 4, 2008

Got it. You’re an exception to the norm. Most buyers don’t tackle representation on their own.

Well… all I can say is that if my sellers get a reasonable cash offer for their listings, I’ll encourage them to accept it.

I wish you all the best with your search.

David

August 4, 2008

Thanks, Matt.

I can see how my saying, “We told their agent we would have gone higher if a realistic counter had been made” would cause some confusion. I should have made clear that this was after the sellers had rejected our offer without counter.

I do not at all suggest that anyone go “agent free” unless they are up to the task. We have bought and sold several homes and properties in the past, sometimes using an agent, sometimes not (both as buyers and sellers). I am a lawyer, and I plan to use local RE counsel on Kauai if/when we do get under contract.

Also, thanks for your responsiveness on the blog. Hopefully, you will start getting more readers/commentors, and a dialogue can take place that may benefit both sellers and buyers alike, if you are willing to host such dialogue. I know many brokers are uncomfortable allowing free and frank discourse on their blogs.

David

Matt Beall

August 4, 2008

The free and frank commentary, and our commtiment to representation without conflict are all parts of our business model… The blog isn’t very promintently displayed on the site, and that will change with the next version of Hawaii Life. Thanks for posting. -matt

Peter Kuhbach

August 8, 2008

Actually, it should read “The simple math tells us that the average seller is going to be on the market for 2.5 years/2 = 1.25 years.” Why? Because if it will take approx. 2.5 years to sell all of current inventory, with the first property selling tomorrow and the last selling 2.5 years from tomorrow, then the AVERAGE seller will be on the market 1.25 years from tomorrow, right?

David

August 10, 2008

Peter,

You may be right on the math, but IMO the “average” seller will not sell their property at all, having nothing to do with the ratio of actives to pendings, but because average sellers are not pricing their properties low enough to entice buyers to buy. Average sellers look at that chart Matt posted and see only the sky high selling prices (not the tiny amount of sales); average buyers look at the same chart and think the bottom is about to fall out of prices. If it is not perceived to be a “bargain” (not just price, but “perfect” condition – don’t talk “potential”), average buyers are not interested. Yes, there are occasional exceptions (which just fuel the greed fire), but we are talking “average”.

I scroll through the Kauai listings, and seller after seller thinks their property is worth at least twice, and sometimes 3 or 4 times what they paid just a few years ago. That mind set is why they will not sell. I don’t know why realtors(R) waste their time (not to mention their money) listing and advertising these “priced to sit” properties.

Matt Beall

August 10, 2008

Peter-

I understand your point. Of course, it’s also a growing ‘Average’, since every month we see more inventory and less sales.

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