- The Third Edition of
Affordable Paradise will be shipping in a few weeks and it already
needs updating! Real Estate prices in some areas have gone way
up since the data for the book was collected. A good example
is Leilani Estates (East Hawai'i, Puna District), where six months
ago you could buy a decent lot for $30,000. Today, you're lucky
to find one at $60,000, and most are higher than that.
Where will it stop? Who knows? Most of the Realtors we speak
with feel there is no end in sight. Others say the reason for
the recent spike is that interest rates are climbing now and
hoards of people want to get in while they still can. This pushes
the demand up, and since the supply hasn't been keeping up with
the demand anyway, higher prices are the obvious result.
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- This appears to be
the case in the nicer parts of Hilo, too. There is precious little
inventory available, and what there is goes fast.
What appears to fly in the face of this reporting is that there
are also quite a few properties all over the Island that have
been on the market for a long while and are not selling. If the
market is all that hot, why is this? Well, it's mostly about
greed. There are sellers out there who are "fishing."
They have no real need or interest in selling their property,
but they list it for sale at an astronomical price hoping that
some over-enthusiastic and under-informed person with a pile
of cash will come along and buy it. There really are buyers like
that, too, so evidently it pays off for those who have the patience
to wait and a sufficient lack of integrity. We see it frequently:
Folks come over here from the mainland with a huge pile of money
they made from the sale of their mainland homes. Compared to
those prices, Hawai'i still appears reasonable, so they don't
even check comparables here. Perhaps the overpriced property
is the first one they looked at and it seemed reasonable to them
- compared to what they are used to.
It's sad, really, because these isolated purchases just help
drive the frenzy and raise all the rest of the prices. What's
really sad is that the folks who have lived on these Islands
all their lives are now priced out of their own home.
It wouldn't be so bad if those who will be living there were
actually doing the purchasing. We track the market on a regular
basis and we see way too many properties, especially vacant land,
reappear on the market shortly after they were sold. We've seen
them reappear for double what they sold for and they quickly
sell again.
OK, remember, please, that this is all about "affordable
paradise." So if you're in the market for a home or the
land on which to build one, do your homework and you can still
find your dream. I'm assuming that since you are reading this,
you aren't one of the wealthy who can come over here and buy
anything you choose, regardless of price. If you are serious
about living in Hawaii and you're on a budget, shop around, check
out areas beyond those that are the most popular, and do some
of your own research. Relying on a Realtor alone to find your
piece of paradise is not realistic. Most of the Realtors have
lists of people who are all looking for the same thing. Get on
the Internet and spend some time searching so you'll get a feel
for the comparable prices in your areas of interest. When you
are actually here, get on again and check "new listings"
every day. And when you do find something you like, act on it
NOW. You really do not have time to "think about it."
That's why you need to be informed about the market. You don't
have time to check comparables after you find something you like.
You need to know, right then, if it's a good deal.
Having a substantial down payment is also a must. Most sellers
are sufficiently savvy now to reject offers in which 90% financing
will be required. Too many of these deals fall apart after the
property is tied up in escrow for many weeks, and there are too
many other buyers out there with real money. Given the choice,
most sellers will actively seek a buyer who is well qualified.
This means a down payment of at least 25% and a credit score
of 7 or above.
Keep in mind that what seems to be a great deal today was "way
overpriced" only a few short months ago. This thinking is
how many people justify paying way too much for a property. They
think, hey, it doesn't matter what I pay for it now, because
in a short while it will be worth way more anyway. That works
as long as the market continues its upward spiral, but it is
not a sound method of determining the value of a property. Prices
will stabilize at some time; possibly even take a down turn.
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- Try not to get caught
in the frenzy!
And that's the update for today. Let's hope prices begin to stabilize
very soon.
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- A hui hou!
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- Skip Thomsen
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