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Strong Land Sales in North Kohala and Waimea – So, Why Isn’t My Lot Selling?

Surprising trend: While sales of vacant land in North Kohala and Waimea (Kamuela) have been strong over the past 12 months, almost all of the action is outside of the gated communities, such as Puakea Bay Ranch and Waikii Ranch.

Prime, ready-to-build, 10-acre lots like these are available at Puakea Bay Ranch near Hawi (MLS# 234304) (left) and Waikii Ranch near Waimea (MLS# 234040) (right)

In the past twelve months, in the Hawi-Kapaau area, there have been twelve sales of vacant land acreage (excluding conservation purchases). Prices ranged from $215,000—the nominal price assigned to a 1.74 acre lot sold as part of the sale of the residence on the adjacent lot—to $1,080,000 for a 42-acre parcel with wide open ocean view, and subdivision potential.

The prior twelve months saw nine sales with prices ranging from $225,000 for a 3-acre lot to $2,675,000 for a stunning oceanfront parcel on the Ranch at Puakea. In 2008, only six parcels of vacant land sold. The trend is clearly up, and hidden within these statistics is an initially surprising shift.

Going back many years, typically two lots per year are sold in the popular Puakea Bay Ranch community. The two that sold in 2009, at prices of $435,000 and $460,000, represented bargains compared with peak prices, and so with four lots currently on the market, the sellers could reasonably have expected a 50/50 chance of theirs selling. But, none have moved. And there is nothing at all wrong with the lots; quite the contrary!

Meanwhile, at Maliu Ridge above Hawi, a subdivision with underground utilities, but light CC&RS, and no architectural review, and where no lots had sold in 2007-2009…three lots sold this year. At Puuepa Ranch below Hawi, with its 20-acre lots, a gate, very modest CC&Rs, and no architectural review, there was a similar three-year gap between the lone sale in 2007 (for $1,150,000), and this year’s sale (at only $525,000).

In other words, current buyer preference seems to be less concerned with the security, architectural, and view protections provided by gated subdivisions, and that many buyers view as protections for their quality-of-life, and the value of their homes.

The picture is similar in the pasture lands around upcountry Waimea, where buyers are gobbling up the 5-acre lots newly-subdivided from the former Hartwell Carter Private Ranch, while the 12 sellers with active listings at Waikii Ranch are wondering why their comparably priced 10-acre and 20-acre lots with great community amenities aren’t moving.

The exception to the rule seems to be at Kohala Ranch and Kohala by-the-Sea. Here, the volume of sales (13 in 12 months) may be price-driven. All but two lots changed hands for less than $400,000, and three were below $200,000.

When my clients who have their lots listed with me ask for a market update, here’s what I have to tell them; the prospective buyers I am working with are saying one of two things:

  • “I am buying for future retirement, which is 5-10 years from now. I want to minimize my holding costs, and eventually my building costs. So, I am not interested in a community where I have monthly dues to pay, and where I will be faced with a minimum building size that may be more than I want, or need in my retirement years.”
  • OR

  • “Why should I buy a lot, and build when there are currently homes for sale in that community for less than replacement cost? I can buy a home and be using it tomorrow instead of waiting 2-3 years, and having to stay someplace else while I supervise the construction.”

I still feel confident that the lots for sale in the Big Island’s prime gated ranch/equestrian communities will find buyers. For buyers with near-term building plans the trick will be to find contractors willing to work with them to drop their construction cost from $500 or more/sq. ft. to $350/sq. ft.

In some communities, like Puakea Bay Ranch and Ranch at Puakea, there are currently no residences for sale (aside from the $13.75 million oceanfront estate), so buyers will be looking harder at lots. And Mother Nature is providing a welcome boost in the form of recent rains that returned the color green to pastures parched by this year’s drought.

A hui hou,

Beth Thoma Robinson, R(B)
Direct: 808.443.4588
Email: beth@hawaiilife.com

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Katie Minkus, R(BIC)

November 24, 2010

This is a great summary, Beth. Did you listen to the Grigg’s Report this past year? Clearly there is a long history and trend to buying and selling Big Island bare parcels. And there is a lot of money to be made when the market “turns” – which it always has done, very consistently, in the past. I’m a huge fan of “land banking” right now and in my view, there are some ridiculously good buys out there for the money. And there are actually some loans available too! Thanks for keeping us up to date!!

Katie Minkus, R(BIC)

November 24, 2010

This is a great summary, Beth. Did you listen to the Grigg’s Report this past year? Clearly there is a long history and trend to buying and selling Big Island bare parcels. And there is a lot of money to be made when the market “turns” – which it always has done, very consistently, in the past. I’m a huge fan of “land banking” right now and in my view, there are some ridiculously good buys out there for the money. And there are actually some loans available too! Thanks for keeping us up to date!!

Beth Robinson R(B)

November 24, 2010

Katie, it’s funny, we just don’t see many people land banking. I see some contractors speculating on parcels for their next project, but as my quotations indicate, mostly I’m seeing buyers who plan to use the land themselves.

Beth Robinson R(B)

November 24, 2010

Katie, it’s funny, we just don’t see many people land banking. I see some contractors speculating on parcels for their next project, but as my quotations indicate, mostly I’m seeing buyers who plan to use the land themselves.

Flats in Noida

November 24, 2010

This is a great article, Sure there is a long history and trend to buying and selling Big Island bare parcels. And there is a lot of money to be made when the market turn! 🙂

Flats in Noida

November 24, 2010

This is a great article, Sure there is a long history and trend to buying and selling Big Island bare parcels. And there is a lot of money to be made when the market turn! 🙂

Katie Minkus, R(BIC)

November 25, 2010

@Flats in Noida… if past market behavior is any indication of the future, yes!!

@Beth – I completely agree with you – seems to me a good time for land banking and/or contractors picking up good parcels at great prices for future development. I’m getting a real giggle right now from buyers who want to buy something “brand new.” New? Where?? The New “new” is at least three years old! lol. As the market turns… Thanks again for sharing your expertise!!

Katie Minkus, R(BIC)

November 25, 2010

@Flats in Noida… if past market behavior is any indication of the future, yes!!

@Beth – I completely agree with you – seems to me a good time for land banking and/or contractors picking up good parcels at great prices for future development. I’m getting a real giggle right now from buyers who want to buy something “brand new.” New? Where?? The New “new” is at least three years old! lol. As the market turns… Thanks again for sharing your expertise!!

rich graybill

November 25, 2010

Beth
Please check with the local licensed General Building Contractors in North and South kohala on what they charge per sq. foot to build…claifying what that price includes and excludes…i am told your numbers are way “off”… thus potentially discourging buyers to buy land and build.
rich graybill

rich graybill

November 25, 2010

Beth
Please check with the local licensed General Building Contractors in North and South kohala on what they charge per sq. foot to build…claifying what that price includes and excludes…i am told your numbers are way “off”… thus potentially discourging buyers to buy land and build.
rich graybill

Beth Thoma Robinson R(B)

November 26, 2010

@ Flats in Noida @ Katie – one of the things that makes real estate prices so cyclical is that unlike “widgets” it is not easy to vary supply quickly as demand changes. Very few will be farsighted enough to be developing now, with the view to that future day when supply will be short compared with the demand long-term demographics suggest we will continue to see.

@Rich – Good to hear from you. Perhaps some of your contractor friends would be willing to comment or even “guest blog”? The numbers I cite came from conversations with three clients who are either currently breaking ground or discouraged about doing so, and reflect the actual bids they received on their projects. This is a question we get asked all the time, so it seems it would be very valuable to have better rules of thumb with what is included and excluded in the pricing.

Beth Thoma Robinson R(B)

November 26, 2010

@ Flats in Noida @ Katie – one of the things that makes real estate prices so cyclical is that unlike “widgets” it is not easy to vary supply quickly as demand changes. Very few will be farsighted enough to be developing now, with the view to that future day when supply will be short compared with the demand long-term demographics suggest we will continue to see.

@Rich – Good to hear from you. Perhaps some of your contractor friends would be willing to comment or even “guest blog”? The numbers I cite came from conversations with three clients who are either currently breaking ground or discouraged about doing so, and reflect the actual bids they received on their projects. This is a question we get asked all the time, so it seems it would be very valuable to have better rules of thumb with what is included and excluded in the pricing.

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