Maui home market keeps cool

Maui's residential real estate market continued its downward trend, with both the number of sales and prices dropping in May.

[Von in Aiea]

Only $565,000 now for a new house in Maui.

That is really a good price. Maybe I could buy two at that price?

http://www.youtube.com/watch...

[Steven]

This is only the beginning of the Hawaiian real estate crash that is yet to come. If you want to know how far down prices will drop, try this. Take the price of real estate prior to the crazy price escalation that was caused by those phony low interest rate adjustable loans. Then add five percent per year appreciation. That is the real price of real estate today. If you don't believe me, stay tuned.

[loco moco]

Fabulous! Now if prices keep dropping like that for the next couple of years, maybe I can afford to move back before they bring me back in a flowerpot.

[Enough]

DON'T BUY REAL ESTATE!
Avoid using real estate agents. They suck money out of the deal, hide offers from the sellers, and hide properties from the buyers. Just find a property or buyer on your own, have the property inspected, and get a real estate lawyer to draw up or review the offer.
If you own, sell now so you can actually keep some of that funny money that appeared out of thin air. Otherwise, it will be painful to watch it vaporize back into thin air. Investors in mortgage-backed bonds subsidized the increase in the price of your house. Now they want their money back, and your challenge is to prevent them from getting it. The only way is to sell before your neighbors do. Time is not on your side.

If you can't sell without a loss, it's probably best to just walk away and free yourself from mortgage slavery. It depends on whether your loan was "recourse" or "non-recourse". In the latter case, the deal is simply that you can stop paying the loan and give back the house at any time. It's perfectly legal and moral according to the terms of the mortgage. Now that the Bush administration has temporarily stopped taxing forgiven debt, you can do it without owing anything! But talk to a lawer and accountant first. This service may be useful: http://www.youwalkaway.com/

If you want to buy, look around and see that house prices are falling. Why hurry to buy into a falling market? Time is on your side. Save your cash and buy for much less in the future. The way to win the game is to have cash on hand when others cannot get a loan. You do not want to be bidding your hard-earned savings against people who are bankrupting themselves with debt. It will be time to buy when lenders once again demand a 20% downpayment from everyone and get serious about checking ability to repay. Find a nice cheap rental, invest your savings every month, and enjoy the show till then.
Source: patrick.net

[mookane]

Keep dropping baby, keep dropping !! All you fools who paid crazy prices for your homes, blame your real estate agent !! YOU WILL LOSE YOUR MONEY !! Thats what you get for being so greedy !! Suck it up and drive on !!

[mookane]

Steven wrote:

This is only the beginning of the Hawaiian real estate crash that is yet to come. If you want to know how far down prices will drop, try this. Take the price of real estate prior to the crazy price escalation that was caused by those phony low interest rate adjustable loans. Then add five percent per year appreciation. That is the real price of real estate today. If you don't believe me, stay tuned.

LET IT CRASH !! I'm waiting !!

[Enough]

mookane is pretty desperate to get out of Washington, it seems, but not desperate enough to pay today's ridiculous RE prices...

[edward kelly]

Real estate on Maui is not the
problem. Tourism is the problem--
and destined to fall to 5 million
in 2009. That is right-- down 20%
Now the Hawaii daydream is that homeboy Obama
will take the White House and
lower gas prices so tourism will come back It is like wanting the Monarachy to come back. The
Democrat Congress has not suggested
once to drill for oil in Alaska
and Hillary is on record being against it.
I will be glad to see the tourist
crowds gone when I return as the
Royal Hawaiian reopens and rates
are lower in 6 months.

[CBR]

13.6% home price drop could not be considered "Maui home market keeps cool". Or 88,746 price drop from last year is not cool at all but rather an omen for housing market. Another 88K drop next year and the following year? 50% discount is real like the last Hawaii housing bubble.

Reporter, please match the headline with the article.

[DollarBill]

Yes the RE market is in a contraction after a big run up. Glad I sold on Maui in mid 2005 and went to mainland.
Maui is beautiful but the dark clouds of a faltering economy ,high flight costs and expenses will be a huge challenge for us all especially those 2,300 miles in the middle of the Pacific !Houses will probably fall at least another 25% especially when the foreclosures hit hard within the next year.People are flying to less expensive places like Mexico and Dominican Republic as well as others.

[Pug Man]

Those who blame agents for driving up prices, hiding offers from sellers and hiding homes from buyers are not only clueless but obviously bitter about something, probably still stuck in a rental someplace.

Prices will not "tank" as many of you are hoping and think. As a matter of fact, there are always these people who are going to "get in the market when prices drop," but always find themselves missing the boat as they continue to pay their landlords mortgage.

Look at all the naysayers way back in early 2000 who kept claiming the prices will erode...

People use a variety of professionals, such as lawyer, plumber, doctor, realtor etc. but bottom line is does that professional perform? Is that person recommended by a friend?

[punter]

Puggy, you may be a 'professional real estate agent ' today but you'll be asking ' you want fries with that' before this is over. The one thing that commission sales people all do try to sway opinion is lie through thier teeth. Don't think for a second that fewer sub primes won't foreclose in HI than anywhere else. In fact I speculate that HI stats will be amongst the worst due to generally low wages.

[punter]

addendum: Back when I bought a house in 1973/74, the new home I wanted was going for $43,950. My income was carefully inspected because the requirement back then was that the home could not exceed 2.5 times my annual income. Because I was making about $28,000 a year at the time, it was no problem.



Back to the point, Swain did some work in 2000, as he explained in this email I've been given permission to share parts of...

"...that showed how housing purchase prices as a ratio of people's income dramatically took off after the tech meltdown in 2000. If you will recall at the time I said at the time that the "Bubble" mindset would move to Real Estate and become a MUCH bigger bubble ... and voila it did. The Ratio of housing prices to income skyrocketed way above trend line to the 4.5x area from about 3.0x in 2000.

My old experience with that ratio (which I looked at all the way back when I did my original work in 78/79) was that the typical long term ratio of about 2.5 seemed to match up well to people's ability (in mass) to be able to service their mortgages over the long term.

At least here in the Mid West where we got regular recessions individual markets would run into problems during the next recession if the ratio had somehow been able to climb up to the 2.8x level.(at the 2.5 level people seemed to mostly be able to scrape enough together to survive even most job loss situations without loosing their houses in mass).

Even 3.0x then was on the riskier side of the proper safe leverage ratio and meant that most buyers would be thinly capitalized if hard times hit. 4.5x was/is an unbelievable amount of leverage ... particularly if one is on any sort of ARM where the payments can up UP in ANY WAY (including the loss of builder buy downs)(as I recall ONLY Hawaii was up in that stratospheric realm back then ... and they had a very high foreclosure problem, though of course they always had new people from the mainland coming out who brought funds to buy with).

Another thought to keep in mind is that at 4.5x vs. 2.5x one's real estate tax burden is in most states going to add another huge additional monthly charge ... equivalent to a large additional interest rate kicker on the loan compared to a house bought with a 2.5x ratio.

I made a post yesterday that included that chart as I made some other points, principally about the Dollar and US Govt debt issuing.

The chart indicated that IF housing prices held steady here it would take 9 years for the trend line to come up far enough so that the ratio would drop back to the 3x income level (which is still high imo). I of course do NOT expect housing prices to hold steady for that long ... but for an actual decline to occur.

IF that decline occurs during the length of time that my study of traditional bubble collapses indicate taken place then one should expect OVERALL about a 30%-35% decline in housing prices from my 1/1/06 top date to my projected 1/1/10 bottom date JUST TO GET BACK TO THE TREND LINE of 3x income levels."

What does all this mean? Simply that if you had a household income of $100,000 in 2000 and bought a home for $450,000, the bottom of this periodic housing decline won't likely be over until we revert to historical norms which would be an income to house ratio of 2.5 to 2.8 times.



In other words, when your house (or the national average) gets down to that $250,000 top $280,000 level, then the bottom will likely be in -- assuming we have no overshoot to the downside, which is quite likely.

[Virtue]

Sold my Kihei home in 2008....for $550,000.....which I bought for $260,000 in 2002.

When the dust settles from this downturn....a few more years.....I should be able to easily re-buy my old house for about $325,000 or less.

Many Maui residents who bought a home in the past 6 years (prior to the peak) are in for a "hard lesson" that the "quick rise" in prices was really a "fraud"....and not reflecting true value....not "real appreciation" based on fundamentals.