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Lower Real Estate Inventory on Big Island Reflects Nationwide Trend

When you have a feel for what is going on in your local market, it’s always nice to see that confirmed in a similar trend nationwide. Lawrence Yun (chief economist of the National Association of Realtors), in the August issue of Realtor Magazine, had some interesting comments on the diminishing real estate inventory and the effect this will have on prices.

Nationwide Real Estate Trends

According to Yun, the inventory of homes for sale nationwide peaked at 4.5 million units in 2007, which, in part, fueled the subsequent big drop in home prices. Today we have the opposite problem: there are only 2.9 million homes for sale despite an increasing demand.

At this point in a discussion of housing inventory, the idea of “shadow inventory” comes up. This is the large pool of distressed homes that are (or will be) foreclosed upon and which it is feared may flood the market.Yun feels this is no longer the threat that it once was.

While delinquent mortgages remain high at 7%, their share of the market is down from a peak of 10% in 2009. He suggests this data means further declines in inventory unless new construction begins, which is difficult in the current lending environment.

He points out that housing starts have been running at an annual rate of 700,000 since the beginning of the year, which is less than half the average rate over the past 50 years.

Local Big Island Real Estate Trends

Short of another recession, the increased demand for housing combined with continued low inventory is bound to put upward pressure on prices. Here on the Big Island we have seen that begin to take place. Just as a case in point, as of today there are only 36 condos on the market in the entire Waikoloa Beach Resort and we are now seeing multiple offers on some properties at higher prices.

When our clients ask about the market bottom here, our opinion is that it has already happened. We are slowly seeing prices start to tick up as buyers, who want to take advantage of historically low prices, compete for the great deals that are available.

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Todd Barrett, R(S)

August 1, 2012

Thanks for the post Dan & Marion. I’d have to agree with your assessment of calling “the bottom” of the market here on the Kona coast. The rising home prices since May also seem to have us pulling out of the trough.

Todd Barrett, R(S)

August 1, 2012

Thanks for the post Dan & Marion. I’d have to agree with your assessment of calling “the bottom” of the market here on the Kona coast. The rising home prices since May also seem to have us pulling out of the trough.

SHB

August 2, 2012

Yes, thanks Dan and Marion. HF is a daily read . An article in 2007, Paul Brewbaker comes to mind, that I filed away kept me on the sidelines until 2011/2012 as he predicted would be the low in the market cycle. Looks like the bottom has been called in numbers now. I continue to be a contrarian in some of my targets and I am finding the declining inventory is bringing the main-stream into our ballpark. There are unique situations in a few complexes in South Kohala that have tended to turn buyers away. Complexes where virtually all the bad news is history has allowed a upward price movement such as Kolea (disclosure bought in 2011). Review of the an entire complex’s tax records can be enlightening as well as a review of past and present Resort management contracts for example. There are few nuggets out there…. ROI is a number but Hawaii is paradise! Mahalo

SHB

August 2, 2012

Yes, thanks Dan and Marion. HF is a daily read . An article in 2007, Paul Brewbaker comes to mind, that I filed away kept me on the sidelines until 2011/2012 as he predicted would be the low in the market cycle. Looks like the bottom has been called in numbers now. I continue to be a contrarian in some of my targets and I am finding the declining inventory is bringing the main-stream into our ballpark. There are unique situations in a few complexes in South Kohala that have tended to turn buyers away. Complexes where virtually all the bad news is history has allowed a upward price movement such as Kolea (disclosure bought in 2011). Review of the an entire complex’s tax records can be enlightening as well as a review of past and present Resort management contracts for example. There are few nuggets out there…. ROI is a number but Hawaii is paradise! Mahalo

Ron Margolis

August 2, 2012

It’s hard to call a market bottom except in hindsight. But, with inventory numbers statewide, prices may stabilize and eventually move the other way. The difficulty with predicting markets in Hawaii is our foreclosure overhang, what with over 4,000 judicial foreclosures statewide clogging up our courts while allowing our real estate inventory to dwindle. I really don’t suspect the foreclosures will all of sudden flood the market, so the lower inventory may be a trend going forward that ultimately will provide upward price pressure. Same way here on Kauai as BI and volume year on year from 2011 is up about 15% from last year through seven months. Mahalo for your post.

Ron Margolis

August 2, 2012

It’s hard to call a market bottom except in hindsight. But, with inventory numbers statewide, prices may stabilize and eventually move the other way. The difficulty with predicting markets in Hawaii is our foreclosure overhang, what with over 4,000 judicial foreclosures statewide clogging up our courts while allowing our real estate inventory to dwindle. I really don’t suspect the foreclosures will all of sudden flood the market, so the lower inventory may be a trend going forward that ultimately will provide upward price pressure. Same way here on Kauai as BI and volume year on year from 2011 is up about 15% from last year through seven months. Mahalo for your post.

Katie Minkus, R(B)

August 9, 2012

I’m happy to call the bottom of the Big Island market – it was last summer. Foreclosures may trickle out of the judicial process, but the banks aren’t stupid enough to price them at last year’s prices, they’re going to get as much money for them as possible. When Brubaker and Yuen and Griggs and the other analysts getting around to telling us when the bottom of the market was for the Big Island, I bet they’ll say “summer, 2011.” Which should give all the “bottom feeders” their instructions for success: “First, build a time machine…” 😉

Katie Minkus, R(B)

August 9, 2012

I’m happy to call the bottom of the Big Island market – it was last summer. Foreclosures may trickle out of the judicial process, but the banks aren’t stupid enough to price them at last year’s prices, they’re going to get as much money for them as possible. When Brubaker and Yuen and Griggs and the other analysts getting around to telling us when the bottom of the market was for the Big Island, I bet they’ll say “summer, 2011.” Which should give all the “bottom feeders” their instructions for success: “First, build a time machine…” 😉

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