Real Estate Links

Buying Local Real Estate

When you live on an island with 11 of 13 climates of the Earth, and properties that range from dense rainforest to pristine ocean front, it’s not surprising that real estate prices can go from one extreme to another. There is something for everyone here on the Big Island. Property prices are affected by elevation, views, utilities, road condition, rain fall and of course proximity to the lava flow. While some are very inexpensive, other prices are stratospheric.

The differences between one property and another can be so extreme, in fact, that there’s no other place on earth that better illustrates of the concept that “all real estate is local.” Unfortunately, over the past few years, the real estate markets from Florida to California to Kauai to Puna have somehow have been lumped together in an amoebic glob of real estate generalizations. Sadly, such generalizations continue to be based on the hardest hit areas of the country.

T hey completely ignore the reality that, in fact, all real estate really is local. Reports of healthy or improving markets are completely buried.(Among markets experiencing improvement this last year were Florida, California and Nevada; the states most affected by the market down turn.)

Prices have decreased, but remember, as inventory decreases, prices will stabilize and start to go up. Interestingly, through the downturn, some mainland markets have consistently shown increases of 7.2% to 8.9%, but negativity breeds insecurity and when buyers are insecure, sales suffer. Fortunately, we live in Paradise and while lava maybe flowing faster than investor dollars at the moment, there’s still plenty of demand for our “product.” It’s difficult to imagine anything that could stifle that demand very long.

Most real estate agents realize that now is not the time to be courting high-end inventory and while there have been 70 sales over $1M through December of last year, 48% of the buyers have spent less than $350,000 for their home. Over the past 20 years, I’ve never seen a better time for buyers. Interest rates are hovering around 5%. Inventory is still excellent. There are several screamingly good deal bank-owned properties on the market. Sellers are routinely willing to assist with closing costs AND Uncle Sam is providing up to $8,000 buyer tax credit to new owners who have not owned a home in the past three years.

Of course, there’s not enough room here to discuss the details of every neighborhood, but inventory levels are declining in many Big Island areas and again, when inventory goes down prices always go up.

I Told You So 1!

I got lots of “heat” after my last newsletter was published, lots of heat from mostly the not-so-ethical real estate agents, angry at me for exposing them and the dark side of our profession. However, I believe I did the right thing by warning the unsuspecting public. To further confirm my right decision, here is a follow up to that article: I recently visited Bali and looked at real estate there. It’s a very third-world country with small real estate offices and no centralized MLS system. The exact same property was shown to me by two different real estate agents. One quoted a $162,000 price with a remark of “the Seller is firm on the price,” while the other quoted a $122,000 price with a remark of “the Seller is open for negotiations.” A very good example of the ethics of the real estate agents. Assuming the first agent took a “net listing,” had I bought the property he would have walked away with at least $40,000 profit, probably more than the profit of the seller!

I Told You So 2!

As I always said, it wasn’t a question of “if” but “when” somebody will buy and upgrade the Discovery Harbour Golf Course. Yes, it was sold, escrow closed last month, and vast improvements are planned there within a year. (The plans are at http://SouthPointCountryClub.com.) The lowest priced golf course lot is $60,000 there now and I expect that price probably to double once the project is finished. (The developer’s estimation is $150,000 per lot, and they bought 45 lots.) Mine is already there, prime golf course lots always will be in high demand!

Pacific Business News

As a businessman, I subscribe to the Pacific Business News to get the “pulse” of what’s going on in our little business world in the middle of the Pacific.

In addition to the business news, PBN lists the foreclosures for every island every week, and hardly a week goes by without me seeing a familiar name (i.e. real estate agent) listed there. I can’t help but to think that these agents have been “helping” buyers with advice in making the biggest decision in their lives and buying properties that most likely have been the biggest financial commitment in their lives, while those agents couldn’t even manage their own finances! It’s a pretty scary thought.

I think the current financial meltdown certainly will open the eyes of many people and they will do much more research before making a decision to engage the services of any professional in any field affecting their finances. It is unfortunate that it’s too late for many people whose lives and financials have been ruined by some self-proclaimed “professionals” who had only one interest all along: lining their own pockets.

While some of these people mentioned have been caught and some others went out of business, don’t be fooled, many are still around and those certainly have not changed their business ethics!