There’s every indication that we will continue to see many foreclosures coming into the West Hawaii real estate market during the remainder of this year.  Note, however, that foreclosures here in Hawaii may dry up faster than on the mainland, because we traditionally have not had as many foreclosures as other harder-hit states.

Interest rates will be going up eventually, but for now these two important factors–foreclosure inventory and interest rates–are favorable for buyers.

A Market Nuance

Another subtle trend during this difficult economic period seems to be that buyers are showing different tendencies in the type of real estate listings they search for.

Many buyers seem to be more interested in, for example, the 15,000 sq ft lot in closer proximity to population centers than in larger properties farther out.

I’ve observed this in the past–in a difficult economy, buyers feel more secure with smaller properties, closer in.  I think the trend will reverse, as it has in the past, when the general emotional outlook shifts back to the more positive perspective of better times.

My current observation is that this provides an opportunity for aggressive buyers, as there are a number of 1 acre + properties near Kailua-Kona and properties further out from the population centers all along the Kona-Kohala coast that can be bought at good prices because of this supply and demand nuance.

Decreased demand has pushed the value of these properties in a downward direction, but buyers must stay vigilant so as not to miss an opportunity to get into the West Hawaii market before demand begins to push prices back up.

Banks and the Distressed Property Market

A continuing national trend that is obviously effecting us here in the Hawaii foreclosure and short sale market is that the national banks and mortgage lenders are still in turmoil with their substandard mortgage loan portfolios and are managing them very poorly.

In many cases, they are hampered by inefficient systems and are staffed by overworked and largely inexperienced hourly employees, resulting in unrecognized opportunities, bad timing and, often, less-than-quality consideration for their customers.  They will continue to leave a lot of money on the table with their approach to the situation, as they did in the outset of the problem, when they acquired the assets. One wonders, were any lessons really learned?

However, I am pleased to report that, in contrast, two of Hawaii’s local banks, Bank of Hawaii and First Hawaiian Bank, are weathering the financial storm well–more like our Canadian friends with their conservative banking practices.

To illustrate, Bank of Hawaii was named America’s Best Bank by Forbes earlier this year.  Click here to read why BOH’s executive director Allan Landon says that, sometimes, “boring is good.”

We are getting solid signals that the market is finding a foundation and starting to rebound.

Our Clark Realty in-house escrows have picked up noticeably in the last two months. Condo sales have turned around and are now showing increased sales activity. Further, interest rates, at least for now, remain near their lows of the last 40 years.

In my opinion, this is modest confirmation that we’ve hit bottom and are stabilizing.  There are still some very good buying opportunities–with very favorable financing terms–for the astute, savvy buyer.

West Hawaii Listings

The available listings are still very stratified:  about half are over-priced from the informed buyers perspective.  30% are priced reasonably in light of the current market but are average in their features.  That leaves the remaining 10 to 20%–exceptional properties that are very well priced, either by motivated sellers or due to foreclosure situations.

Appraisal Warning

A current concern that some may not be aware of is that appraisals have become very tough. Value wise, they are based, in part, on very recent sales and foreclosures–aggressively priced properties that have been selling well, even in this difficult economy. To obtain an appraisal acceptable to a lender, serious sellers should be priced correctly based on the comparable homes that have sold in the last 3-6 months.

Granted, there are cash buyers in the market place; however, most purchases are not paid for in this way (see below).  Sellers must be aware of the real risk of a deal falling apart at the eleventh hour because of the appraisal if the property is priced too high from the outset and the comps don’t support the Purchase Contract price.

First Quarter 2010 Residential Sales

North Kona: Total Residential Sales: 79  Cash Sales:  25

South Kona: Total Residential Sales:  9  Cash Sales:  3

This is a only brief snapshot of what is happening in the West Hawaii market.  I’ll do a more detailed post in the next few weeks with a statistical view, so if you’re interested in this information about Big Island real estate and want to see that update, check back here soon or view my newsletter at LivinAloha.com.

List Price: $427,000
Year Built: 1990
Living Area: 1,736 sq ft
Land Area: 7,720 sq ft
Bedrooms: 3  Baths: 2

Other Amenities: High open beam ceilings.  Lots of windows for natural lighting.   Good ventilation through out the entire home.   Big kitchen and pantry.   Floor tile for easy cleaning.   Newer appliances, solar hot water.  Two Lanai’s with ocean views.  2 car carport.   Masonite siding, newer composition roof.   Landscaped with flowers for easy gardening.

Click here to see all photos for MLS 232101, 82-6090 Kana Place

To schedule a showing, please call Greg at 808 987-7720.

95 vendors will be participating in this free monthly event.

For a few hours, the village becomes a pedestrian-only market, a gathering place for friends, neighbors and visitors alike.  Events include restaurant gift certificate drawings and a free concert at 4 p.m. on the lawn at Hulihee Palace.

April’s Kokua Kailua Village Stroll will be held Sunday, April 18.