In looking at the real estate market in the district of North Kohala on the Big Island, the knowledgeable analyst will take the time to separate out what locals refer to as “Kohala” (the tip of the thumb around the towns of Hawi and Kapaau) from the gated communities just above Kawaihae and the Kohala Coast resorts.
I am a little late this year in looking at statistics for the first half, mainly because I was so busy with transactions in July! In fact, the first six months of the year saw only nine properties close escrow in Kohala, compared with 19 for the first half of 2008 and 17 for the first half of 2007. Whether it is a fluke or the market is suddenly picking up, there were another three properties sold in the month of July (and Hawaii Life represented the buyers of all three!).
Of the nine properties sold in Kohala during the first half of 2009, five sales were raw land, and four sales were residences. Although I have heard for the past couple of years the conventional wisdom that “land in Kohala is not selling,” the data shows a different picture. Consistently about half the sales reported in the MLS are land, and half homes. (July sales included another two parcels of land and one home).
Is Median Price Meaningful for Big Island Properties?
One of my pet peeves with the general press reporting on real estate sales in Hawaii is that they draw conclusions like “prices rose” or “prices fell” based upon the median reported price. The public then concludes that the price of a given property must be similarly rising or falling, when in fact it is more likely that there was a shift in the mix of properties sold.
Let me explain. Median price means taking the sale at which half the properties were more expensive and half were less expensive. When a real estate website like Zillow or Trulia reports on trends in, say “Kamuela,” remember that the condos for sale in that zip code range from a cute 1-bedroom in Waimea town at $165,000 to a luxury villa at the Mauna Kea resort offered for $3.5 million! Depending on what sells, that average price could look pretty skewed from one time period to the next.
That’s why it is important not to compare papayas with mangoes! Looking at our first half sales in Kohala, the land parcels ranged from $225,000 for 3.3 acres (which closed in April and the buyers have already built their house) to a $2,675,000 oceanfront parcel in the Ranches at Puakea.
Overall, land parcels sold at a higher discount to asking price than did residences (as much as 30%). Year on year, we have good comparables for Puakea Bay Ranch, a gated community where 10-acre parcels that sold at up to $640,000 in 2008 have sold this year for well under $500,000. On the other hand, there is only so much oceanfront. That special 25.7 acre parcel sold less than 9% below asking price.
Dispersed Big Island Home Sales
Home sales were also dispersed. At the low end, a property on Kynnersley road that had been badly damaged in the 2006 earthquake sold as a REO (bank-owned foreclosure) for only $155,900. Another REO that outside of Kohala would probably be considered a “tear-down” sold in July and is well on its way to being completely rehabbed. This is encouraging news in a market that had completely lost the affordable housing end of the spectrum.
At the upper end, a lovely home in Maliu Ridge sold for $990,000. This home would have sold for well over $1 million in 2007, based upon the comparable sales of the time, meaning upscale housing prices have probably fallen 20-25% from the peak. The scarcity of homes for sale and the desirability of the location cushions neighborhoods like Maliu Ridge relative to other markets, to the dismay of bargain hunters who have seen much bigger price drops in Kailua Kona or Waikoloa Village.
Don’t Forget About Unreported Real Estate Transactions
But use of median price is not only my only complaint with the press reports, as in a tight-knit community like Kohala, there are always real estate transactions that don’t get reported in the MLS. Checking the tax records, I found an additional seven properties that changed hands in the first six months of the year: three of them raw land, one large acreage with only a minimal dwelling,and three homes. The prices in these transactions ranged from $200,000 to $725,000. There was also another home at Maliu Ridge that had been listed in the MLS prior to being taken off the market, but sold in a private transaction for $600,000 in July.
There is little to indicate that these private transaction were “bargains” compared to listed properties. In fact, the comps would actually indicate that some buyers may have overpaid!
No one has a crystal ball, but as August begins there is acreage (listed at $585,000) and three homes (listed under $300,000) currently in escrow. There is terrific inventory on the market, the deadline to use the first-time buyer credit nearing, and Mainland buyers say they feel more confident that the market may be at or near the bottom. All those factors suggest to me we may have a strong second half in Kohala.
A hui hou,
Beth Thoma Robinson, R(S)