Mike Gallagher s Real Estate Crystal Ball Predictions for Year 211 CAUTION: DO NOT BELIEVE EVERYTHING YOU READ IN THE HONOLULU STAR-BULLETIN REGARDING REAL ESTATE SALES It has been a heck of a year! Many changes took place in the Real Estate Market on Oahu and around the Nation that have significantly impacted many home owner lives in terms of lower equities, negative equity values, Foreclosures, Short Sales, standards of living, all within a suffocating atmosphere of greatly increased State and National Taxes. Due to publication deadlines I am writing this article just prior to the end of December 21 for distribution on January 1 st 211, but I will provide you with an end of year forecast and 211 forecast. 1
Oahu SFH Year End 21 Projected Unit Sales Oahu Condo Year End Projected Unit Sales 45 6 4 35 3 25 2 15 1 5 Jan.7 March7 May7 July7 Sept.7 Nov.7 Jan.8 March8 May8 July8 Sept.8 Nov.8 Jan.9 March 9 May 9 July 9 Sept. 9 Nov. 9 Jan. March May July Sept. Nov. 5 4 3 2 1 Jan.7 March7 May7 July7 Sept.7 Nov.7 Jan.8 March8 May8 July8 Sept.8 Nov.8 Jan.9 March 9 May 9 July 9 Sept. 9 Nov. 9 Jan. March May July Sept. Nov. Condos have been leading the downturn this year after considerable gain over the sales number for year 28. At the end of the year 29, 3,467 sales recorded. I believe we will finish the year 21 at 3,866, a +1% increase for the year over year 29. Remember, the market turned and became a Buyer s market in December of 26. That year recorded 6,38 sales. Single Family Homes (S.F.H.) performed much better than the Condo sector this year which I find surprising due the increase in the cost of a typical Oahu home. At the end of year 29, 2,585 sales were recorded. I believe we will finish year 21 at 2,958 total sales, a +13% increase. In year 26 recorded sales were 4,41. Oahu SFH Unit Sales Oahu Condo Unit Sales 45 7 4 6 35 3 5 25 2 SFH Unit Sales 4 3 Condo Unit Sales 15 1 5 2 1 26 27 28 29 21 Estimate 26 27 28 29 21 Estimate When looking at just unit sales we can expel a sigh of relief that things are looking up. Just looking at the unit sales however does not tell the whole story so we will continue to explore the year 21 and project into what may come in 211. Is Now the Time? Before I begin, I must say, I abhorred when Real Estate Agents say: Now appears to be a great time to buy a Hawaii home. It brings to my mind another piece of advice: "Dont ask the barber whether you need a haircut." Do your own research, ask questions and get the whole picture. 2
Oahu SFH Median Price Oahu Condo Median Price $65, $33, $64, $325, $63, $62, $61, $6, SFH Median Price $32, $315, $31, Condo Median Price $59, $35, $58, $3, $57, $56, 26 27 28 29 21 Estimate $295, 26 27 28 29 21 Estimate Do not get too excited about this news, the rise is directly attributable to higher priced homes, which are flooding the market, selling. Oahu SFH November Year to Date Units by Price Range $-$99,999 $1,-$199,999 $2,-$299,999 $3,- $399,999 $4,-$499,999 $5,-$599,999 $6,-$699,999 $7,-$799,999 $8,-$899,999 $9,-$999,999 $1,,-$1,499,999 $1,5,-$1,999,999 2,,+ Oahu SFH Dec. 9 $2k-$299,999 $3k-$399,999 $4k-$499,999 $5k-$599,999 $6k-$699,999 $7k-$799,999 $8k-$899,999 $9k-$999,999 $1,, to $1,499,999 $1,5, to $1,999,999 $2,, and Up Oahu Condo November Year to Date Unit Sales by Price Range Oahu Condo Sales Year 29 $-$99,999 $1,-$149, $15,-$199,999 $2,-$249,999 $25,-$299,999 $3,-$349,999 $35,-$399,999 $4,-$499,999 $5,-$599,999 $6,-$699,999 $7,-$799,999 $8,+ $1k-$199,999 $2k-$299,999 $3k-$399,999 $4k to $499,999 $5k to $599,999 $6k to $699,999 $7k to $799,999 $8k to $899,999 $9k to $999,999 $1,, and Up In Short: 21 S.F.H. 29 : $2,,+ = 2% $2,,+ =3% $1,5,-$1,999,999 = 2% $1,5,-$1,999,999 = 1% $1,,-$1,499,999 = 7% $1,,-$1,499,999 = 8% $9,-$999,999 = 5% $9,-$999,999 = 4% 3
In Short: 21 Condo 29 : $8,+ = 3% $8,+ = 1% $7,-$799,999 = 2% $7,-$799,999 = 3% $6,-$699,999 = 4% $6,-$699,999 = 3% $5,-$599,999 = 6% $5,-$599,999 = 8% Oahu SFH November Units For Sale Year to Date By Price Range Oahu SFH Dec. 9 For Sale $-$99,999 $1,-$199,999 $2,-$299,999 $3,- $399,999 $4,-$499,999 $5,-$599,999 $6,-$699,999 $7,-$799,999 $8,-$899,999 $9,-$999,999 $1,,-$1,499,999 $1,5,-$1,999,999 2,,+ $2k-$299,999 $3k-$399,999 $4k-$499,999 $5k-$599,999 $6k-$699,999 $7k-$799,999 $8k-$899,999 $9k-$999,999 $1,, to $1,499,999 $1,5, to $1,999,999 $2,, and Up Oahu Condo November Units For Sale Year to Date By Price Range Oahu Condo Dec. 9 For Sale $-$99,999 $1,-$149, $15,-$199,999 $2,-$249,999 $25,-$299,999 $3,-$349,999 $35,-$399,999 $4,-$499,999 $5,-$599,999 $6,-$699,999 $7,-$799,999 $8,+ $1k-$199,999 $2k-$299,999 $3k-$399,999 $4k to $499,999 $5k to $599,999 $6k to $699,999 $7k to $799,999 $8k to $899,999 $9k to $999,999 $1,, and Up In Short: 21 S.F.H. 29 For Sale: $2,,+ = 15% $2,,+ =15% $1,5,-$1,999,999 = 5% $1,5,-$1,999,999 = 6% $1,,-$1,499,999 = 11% $1,,-$1,499,999 = 1% $9,-$999,999 = 6% $9,-$999,999 = 2% In Short: 21 Condo 29 For Sale: $8,+ = 14% $8,+ = 2% $7,-$799,999 = 3% $7,-$799,999 = 3% $6,-$699,999 = 4% $6,-$699,999 = 6% $5,-$599,999 = 5% $5,-$599,999 = 6% During the course of last year one most realize that only so many listings come onto the market in 12 months and only so many sell. What is surprising is the amount that sold is so low. 4
Oahu SFH December Year to Date Odds of Selling ALL PRICE RANGES Oahu Condo December Year to Date Odds of Selling ALL PRICE RANGES 16 25 14 12 2 1 8 6 For Sale 15 1 For Sale 4 5 2 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. More along the lines of Should I ask my Barber if I need a Haircut is the Honolulu Board of Realtors President was quoted by the Honolulu Star Advertiser that prices were looking up and the market is getting much better due to the rise in percentage list to sell ratios. Really? Oahu SFH December Year to Date % At Full Price Or More Oahu Condo December Year to Date % At Full Price Or More ALL PRICE RANGES 8% 7% 45% 4% 6% 5% % AT Full List Price Or More 35% 3% % AT Full List Price Or More 4% 3% 2% 1% % % AT Full List Price Or More WITHOUT RE- LISTING OR PRICE REDUCTION 25% 2% 15% 1% 5% % % AT Full List Price Or More WITHOUT RE- LISTING OR PRICE REDUCTION Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. There is so much mis-information out there concerning the Real Estate Market it is no wonder no one knows what is going on. Realtors, Agents all receive a sales report each month from the Honolulu Board of Realtors so in my opinion they are slightly in tune, but when you cannot rely upon the numbers the Board is putting out, what do you do? My advice is you do your own research and of course call me. I will tell what is going on. I will not tell you it is Great Time to Buy or that You Need a Haircut. I do this because I want your trust and your business. You also deserve to have the straight story from someone who will give you the whole picture. When it comes to Sellers, it seems they do not really want to hear what their home is worth from a Realtor and will list with the first Realtor who promises the moon on sales price. Then when the home does not sell, no problem, the Realtor 5
simply asks and typically receives permission to continually lower the asking price until the home is sold. If that does not work, the Realtor will keep successively re-listing the property and dropping the price until the home sells, all the while the market is heading down and ultimately the Seller looses a ton of money in the ultimate sales price. Kalaheo Hillside in Kailua for example: 19 sales, Total Market Time for all listings, combined: 135 months or 7.1 months / listing. Total combined listing price: $14,646,8. Final combined Price: $13,662,9. Between the initial asking prices and the final sold price the difference is -$983,9 in Price Reductions and loss of Equity for an average loss of -$51,784.21 per listing sold. How many times were 19 homes sold in Kalaheo Hillside Re-Listed by the same agent? The answer is 32% of the time. If you are going to sell your property this year, do it correctly. Just do not listen to what you want to hear. December 29 Note: Average Prices are within the Area s Boxes. Not Medians. 6
Inventory Much has been said about inventory this year. It IS the single widely used Buzz Word in the industry and rightfully so. Inventory is tight. There is not enough inventory. Better buy as soon as you see something with these interest rates. Inventory is so low, prices are going up. We have all heard this over the course of year 21 and for the most part it is true, but it is not the Whole Picture. Months of Supply Months of Supply = Total Sales, Year to Date divided by the number of months and dividing the current For Sale inventory by the answer. 7
Yes, the inventory situation is great for Oahu home sales and prices. Anything under 6 months of supply is considered by the industry as a Seller s Market. Yes, prices are stabilizing and in some areas on Oahu prices are rising. You still have to look at the whole picture to know what is going on. Back in November and December 21 For Sale inventory started to rise in certain areas on Oahu. In large part the areas that are affected are the more expensive areas of the Island as in 21 we witnessed a significant rise in high priced homes coming onto the market. I do not believe this will be much different in year 211, in fact, I believe this trend will increase as more and more expensive homes come onto the market in larger numbers in 211. One scenario suggests that would be sellers are looking at the opportunity they have with low inventory and stabile and sometimes rising prices. 8
The other scenario, more in line for the high priced would be Seller is that they are going to get out while the getting out is good. For instance: Oahu SFH November Year to Date Odds of Selling $2,,+ Oahu SFH November Year to Date Odds of Selling $1,,-$1,499,999 25 2 18 2 16 15 2,,+ For Sale 14 12 $1,,-$1,499,999 For Sale 1 2,,+ 1 8 $1,,-$1,499,999 6 5 4 2 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Oahu SFH November Year to Date Odds of Selling $6,-$699,999 Oahu Condo November Year to Date Odds of Selling $8,+ 18 25 16 14 12 $6,-$699,999 For Sale 2 15 $8,+ For Sale 1 8 6 $6,-$699,999 1 $8,+ 4 5 2 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Oahu Condo November Year to Date Odds of Selling $3,-$349,999 2 18 16 14 $3,-$349,999 For Sale 12 1 8 6 $3,-$349,999 4 2 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. 9
Ja n. ar 7 ch M 7 ay Ju 7 ly Se 7 pt. No 7 v. Ja 7 n M. ar 8 ch M 8 ay Ju 8 ly Se 8 pt. No 8 v. Ja 8 M n. ar ch 9 M 9 ay J u 9 ly Se 9 pt. No 9 v. Ja 9 n M. 1 ar ch M 1 ay J u 1 ly Se 1 pt. No 1 v. 1 M Ja n. ar 7 ch M 7 ay Ju 7 ly Se 7 pt. No 7 v. Ja 7 n M. ar 8 ch M 8 ay Ju 8 ly Se 8 pt. No 8 v. Ja 8 M n. ar ch 9 M 9 ay Ju 9 ly Se 9 pt. No 9 v. Ja 9 n M. 1 ar ch M 1 ay 1 Ju ly Se 1 pt. No 1 v. 1 M Oahu SFH December Inventory Oahu Condo December Inventory 25 3 2 25 15 2 1 15 5 1 5 Distressed Property Distressed Property: Foreclosures, Bankruptcy, Short Sales, Probate, Lender Sale. Another Buzz Word we heard a lot of in 21: Foreclosures. Distressed Property 1
I have created the above Map to show the current Months of Supply of homes For Sale that are Distressed Properties. The GREEN Arrows are Condos and the RED Arrows are Single Family Homes (S.F.H.) The direction of the Arrow, Up or Down indicates whether or not the stats for any particular neighborhood is below or above the Oahu Averages. According to the common explanation for Months of Supply, anything less than six Months of Supply is considered a Seller s Market. The overall Oahu Months of Supply for Distressed Property is 6.27. This indicates it is still a Buyer s Market. Not all areas of Oahu are Buyer s markets. Ewa S.F.H. s and Condos, Kapolei S.F.H. s, Hawaii Kai S.F.H. s and Condos and many more areas are Seller s Markets. The largest areas on the Island with the most amount Distressed Property Months of Supply are Waikiki and North Shore Area Condos, both exceeding 14 Months of Supply. Oahu SFH December Year to Date Distressed Property Odds of Selling ALL PRICE RANGES Oahu Condo December Year to Date Distressed Property Odds of Selling ALL PRICE RANGES 3 35 25 3 2 Oahu SFH For Sale 25 2 Oahu Condo For Sale 15 1 Oahu SFH 15 1 Oahu Condo 5 5 Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. 25% Oahu % of Inventory Distressed Properties to Total Available Inventory 1% Ewa % of For Sale Distressed Properties to Total Available Inventory Ewa 9% 2% 8% 15% Oahu SFH % of For Sale Inventory Distressed Property 7% 6% Ewa SFH % of For Sale Inventory Distressed Property 5% 1% Oahu Condo % of For Sale Inventory Distressed Property 4% 3% Ewa Condo % of For Sale Inventory Distressed Property 5% 2% 1% % June December % June December 11
Leeward SFH % of For Sale Inventory Distressed Property to Total Available Inventory Waipahu Area % of Inventory Distressed Property to Total Available Waipahu Area Inventory 42% 7% 41% 6% 41% 4% 4% 39% Leeward SFH % of For Sale Inventory Distressed Property 5% 4% Waipahu Area SFH % of For Sale Inventory Distressed Property 39% 38% 3% 2% Waipahu Area Condo % of For Sale Inventory Distressed Property 38% 1% 37% 37% % June December June December Oahu SFH December Year to Date Distressed Property Units For Sale Oahu SFH December Year to Date Distressed Property Units Diamond Head 131-138 Metro 111-129 Kailua Hawaii Kai Kaneohe SFH Ewa Makakilo Mililani Area Mililani Mauka Leeward 181-189 Waipahu 194-194 Central 172-177 Pearl City 196-199 Diamond Head 131-138 Metro 111-129 Kailua Hawaii Kai Kaneohe SFH Ewa Makakilo Mililani Area Mililani Mauka Leeward 181-189 Waipahu 194-194 Central 172-177 Pearl City 196-199 Oahu Condo December Year to Date Distressed Property Units For Sale Oahu Condo December Year to Date Distressed Property Units Diamond Head 131-138 Metro 111-129 Kailua Hawaii Kai Kaneohe SFH Ewa Makakilo Mililani Area Mililani Mauka Leeward 181-189 Waipahu 194-194 Central 172-177 Pearl City 196-199 Diamond Head 131-138 Metro 111-129 Kailua Hawaii Kai Kaneohe SFH Ewa Makakilo Mililani Area Mililani Mauka Leeward 181-189 Waipahu 194-194 Central 172-177 Pearl City 196-199 Even More Important than For Sale and is Where we are headed? Oahu SFH December Distressed Property Units In Escrow (A.C.S.) Oahu Condo December Distressed Property Units In Escrow (A.C.S.) Diamond Head 131-138 Metro 111-129 Kailua Hawaii Kai Kaneohe SFH Ewa Makakilo Mililani Area Mililani Mauka Leeward 181-189 Waipahu 194-194 Aliamanu Central 172-177 Pearl City 196-199 Diamond Head 131-138 Metro 111-129 Kailua Hawaii Kai Kaneohe SFH Ewa Makakilo Mililani Area Mililani Mauka Leeward 181-189 Waipahu 194-194 Central 172-177 Pearl City 196-199 12
Oahu had had its fair share of Foreclosures and like Distressed Properties this year. Overall, we are not like the Mainland, thank goodness. Our current inventory in Distressed Properties is manageable and much lower than the Mainland. The question is: Is what is happening on the Mainland going to affect us here? From the Wall Street Journal: "Number of the Week: 13 Months to Clear Housing Inventory" 13: The number of months it would take to sell off all the foreclosed homes in banks possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales. How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there s ample reason for concern. Another 4.8 million mortgage holders were at least 6 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That shadow inventory was up 3% from a year earlier. From Corelogic: December 13, 21, Santa Ana, Calif. CoreLogic (NYSE: CLGX), a leading provider of information, analytics and business services, today released negative equity data indicating a third consecutive quarterly decline 13
in negative equity for residential properties. CoreLogic reports that 1.8 million, or 22.5 percent, of all residential properties with mortgages were in negative equity at the end of the third quarter of 21, down from 11. million and 23 percent in the second quarter. This is due primarily to foreclosures of severely negative equity properties rather than an increase in home values. During this year the number of borrowers in negative equity has declined by over 5, borrowers. An additional 2.4 million borrowers were near negative equity with less than five percent equity in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5 percent of all residential properties with a mortgage nationwide. Negative equity, often referred to as underwater or upside down, means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both. "Negative equity is a primary factor holding back the housing market and broader economy. The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement in negative equity," said Mark Fleming, chief economist with CoreLogic Oahu Median Price $7, $6, $5, $4, Oahu SFH Median Price $3, $2, Oahu Condo Median Price $1, $ 26 27 28 29 21 Estimate 14
Mike Gallagher s Predictions for 211 Based upon what we have learned from year 21, we can honestly say We are not the Mainland. I also conclude that if we are not the Mainland, we will still be affected by transpires on the Mainland in 211. What will transpire on the Mainland? Increased Delinquencies, Foreclosures, Short Sales and Equity Loss resulting in reduced Sales Prices. Continued high Unemployment, higher personal Taxes and ineffective Congress. What will transpire on Oahu? Increased Delinquencies, Foreclosures, Short Sales and Equity Loss resulting in reduced Sales Prices. Continued high Unemployment, higher personal Taxes and a Hawaii Government that will continue to add to the State and City & County Employee rolls and Social Program funding. We will see a higher State G.E. Tax, a State Income Tax increase and a Property Tax increase. This will be done in an effort to create jobs through increased Taxation and Public works projects, which is exactly what we are seeing now on the Horizon in The Rail, Sewers, Water infrastructure work. 15
Oahu Median Price Predictons $7, $6, $5, $4, $3, $2, $1, Oahu SFH Median Price Oahu Condo Median Price $ 26 27 28 29 21 Estimate Dec. 211 It is my hope that you have enjoyed reading this report and that you have gained some market knowledge that will prove valuable to you during the coming year. I encourage you to ask questions, do your own research and give me a call to help you buy or sell your next home. Happy New Year! Mike Gallagher Broker in Charge, Abe Lee Realty Ethics Complaints Review Committee Member, Honolulu Board of Realtors www.hawaiirealestatestatistics.com www.aroundhawaii.com 16