Rate cuts need to be bigger to stir housing market

Many speculate that a Fed rate cut on 31 October will not be enough to stir the Nations housing market, and start this sector of the Nations economy. Directly affected are developers such as: D.R. Horton Inc., Lennar Corp. and Pulte Homes Inc as there are fewer buyers. Similarly, housing prices have soared over the last 6 years, and many homeowners took advantage of growing equity in their homes, by means of a cash out refinance. Today's financial environment makes it difficult for these homeowners to refinance as many of the Stated / Stated programs are no longer available. Borrowers now need to document income and verify assets, and homeowners are no longer able to take advantage of growing equity in their homes. Will the Fed continue to cut rates ? ....we'll have to wait and see.

Investment property rental income vs. inflation vs. property values

A widely held theory by many realtors is that rents will increase alongside inflation. This theory maintains that increasing rents will increase the value of the property at rates similar to the rate of inflation. Rents that increase at the same rate of inflation are nothing more than a coincidence. Supply and demand relationships are what change rents. Rents will increase when the supply/demand ratio changes. As an example, given any rate of inflation, if you have excess supply, high vacancy, and jobs declining, rents will not increase. Quite the contrary, they will decrease. Another comparison would be the double digit gains in real estate values from 2001 through 2005, and the subsequent significant softening of real estate values from 2006 through 2007, yet rents remain fairly stable.

Countrywide looks past more than a Billion dollar loss....

Despite more than a billion dollar loss ($1.2 Billion) in the 3^rd quarter, Countrywide Financial Corp, said it expects to be profitable in the 4^th quarter, and into 2008. Chairman and Chief Executive Angelo Mozilo said, "We continue to be bullish about the longterm prospects of both Countrywide and our industry." Countrywide shares jumped $4.23 on this news, to close at $17.30 on Friday after rising as high as $17.51. The stock is down 64 percent from its 52-week high of $45.26.

Considering how many Maui Realtors rely on Countrywide to fund real estate transactions, seeing Countrywide's position and confidence, is very encouraging.

Maui County Council and Transient Vacation Renatls have no agreement "contract"

The Maui Vacation Rental Association's (MVRA) position that they have a "contract" to operate with the Maui County Council based on the county's loose zoning enforcement, was denied by U.S. District Court, Deputy Corporation Counsel (DCC) Jane Lovell, who wrote the MVRA does not have sufficient foundation to sue for an injunction. The MVRA argued that an agreement outlined in a letter from former Planing Director John Min, as a "contract," but the (DCC) countered that all county contracts must be reviewed for form and legality by the corporation counsel and signed by the mayor, and that the agreement Min noted in writing were merely minutes of a meeting, and not a "contract".

The controversy continues .... stay tuned.

Honua'ula needs more water for affordable units.

Honua'ula (formerly known as Wailea 670) needs more water to service a proposal of 250 rental units, which is part of its affordable housing commitment. The affordable rental project is proposed for a 13-acre site off Ohukai Road in an area zoned light industrial. As proposed, it would count against the 700 affordable housing units that the Honua'ula project is committed to provide. The affordable rentals are aimed at providing for lower-income families in an apartment complex.
The Dept. of Water director, Jeff Eng said it could be several years before the department develops a new source of water. Eng explained that a 2-inch would not be enough water to service peak usage times. A 2-inch line would only allow 64 showers out of at least 250 total showers at one time.
The Land Use Committee continues to review the project, and there will be more meetings regarding possibilities in Honua'ula and its affordable housing commitment soon.

COUNTRYWIDE REACHES OUT TO ITS BORROWERS.

Countrywide said Tuesday it will begin calling borrowers to offer refinancing or modifications on $16 billion in loans whose interest rate is set to adjust by the end of 2008.
Countrywide has been under pressure since early July -- it has had difficulties with loan financing, its had to tap its lines of credit, and lay off 1000s of jobs.
Countrywide plans to contact borrowers of some $2.2 billion who are late on their loans and having trouble paying as a result of their Adjustable Rate Mortgage (ARM) adjusting. So far this year, Countrywide has completed about 20,000 loan modifications -- a figure that represents less than 5 percent of the more than 500,000 loans the lender reports were behind in payments as of last month. The figure amounts to about 24 percent of the roughly 82,000 loans the company said were in foreclosure as of September. Still, the company notes that its efforts to help troubled borrowers through refinancing, loan modification, repayment plans and other loan workouts, have kept some 40,000 borrowers from losing their homes.
Under the initiative announced Tuesday, Countrywide plans to offer an estimated 52,000 borrowers with subprime loans refinancing into prime rate loans or federal assistance mortgage loans insured by the Federal Housing Administration.
The company estimates some 10,000 borrowers with subprime loans who are now behind on their payments due to their mortgage interest rate resetting will be offered rate reductions by the end of the year. If your Adjustable Rate Mortgage is getting ready to adjust, contact your local lender, and know your new payment schedule.

Lanai - The Pines and The Palms

I was recently invited to attend a Brokers open on Lanai show casing two developments - The Pines at Koele, and The Palms at Manele.

The Pines at Koele are located "Upcountry", above Lanai City, and very close to the Koele Lodge. The Pines offer twenty separate, fee simple, dwellings that price between $ 1.150 000 and $ 1 559 250. There are several different floor plans ranging from 4 bed 3 bath to 2 bed 3 bath. Settled alongside a lake, and adjacent the 2nd and 7th holes of the golf course, The Pines at Koele offer a fantastic second home opportunity. Residents of The Pines can purchase a membership to the Lodge at Koele, which affords them use of the Lodge and preferd pricing.

The Palms at Manele are 16 condominiums located near the ocean, and offer stunning views of Hulopo'e Bay. The Palms are connected by roof line. There are no common walls, which means less transferred noise from your neighbors. The Palms prices range from $2.3 to $ 2.595 million for the single story units, and $2.8 million for a two story unit. Residents can purchase a membership to the prestigious Four Seasons Resort and enjoy the hotel, its amenities and prefered pricing.

In addition to The Palms and The Pines, there are 3 absolutely gorgeous, ocean front lots available which overlook Hulopo'e Bay.

For more information regarding Lanai property, please contact me directly: 808 276 4017, or visit my website: http://www.peterslate.com/

Thank you.

Peter Slate R(S)
Haiku Properties

Haiku Properties Newsletter - September

Aloha,

Thank you for your positive response to our first newsletter. As per your requests, I will expand on Haiku, as well as foreclosures.

Sales figures for Maui as a whole from the end of Aug 07 through the end of Sept 07 show a 12 % decrease in Single Family Residence (SFR) on 72 units sold, 82 units sold in August. A 29 % decrease in Condo sales on 78 units sold, 110 units sold in August. A 40 % increase in land sales on 14 parcels sold, 10 parcels sold in August. I was looking at these sales figures, and decided to break them up into more localized areas for closer analysis.

For example 36 (50%) of the 72 SFR homes sold on Maui in September 07 were in Central, which include new developments, that have been in escrow for several years, and finally close in September. Central includes Kahului, Wailuku and Kahakaloa. At 36 units, Central is down 4 units, having sold 40 units in August. SFR sales in Kihei were down in Sept, reporting 5 sales compared to 14 sales in August. Upcountry and Haiku held fairly steady with 5 SFR being sold in Haiku in Sept. and 7 in August. Similarly Kula sold 5 units in Sept, and 5 in August. Makawao sold 2 in Sept. and 2 in August. Pukaklani sold 4 in Sept and 6 in August.
Continuing a local month to month sales comparison: of the 78 Condo units sold on Maui in Sept, 34 Kihei Condos sold in Sept. compared with 47 units in August. 12 Napili / Kahana / Honokawai units sold in Sept. with 18 units sold in August. Wailea / Makena held steady with 17 sales in Sept and 18 sales in August.
Land Sales picked up in the month of Sept with 14 parcels sold. This is a 4 parcel gain over the 10 parcels sold in August, although I must mention that 6 of the 14 units were sold on Molokai for $ 15 000 each. Other than that, in the month of September, there was one land sale in Haiku, 1 in Hana, 2 in Kaanapali, 1 in Kapalua, 1 in Lahaina, and 2 in Kihei, total 14 parcels.

Albeit “slow”, property is still moving on Maui. There are some incredible buying opportunities. For example: 4415 Une Place is, very private, located on 2 acres property in Haiku. This 2638 sqft 3 bed / 3 bath house has spectacular, unobstructed North Shore views, and was newly remodeled in 2005. Click on the link for pictures and a short video clip of the view: www.nsviews.blogspot.com
Another opportunity is located at 18 Kapalulu Place in the Kulamanu sub-division. This brand new 2550 sqft 4 bed room 3.5 bath home is beautifully finished, and offers stunning bi-coastal views. Some pictures and a short video clip of the view can be viewed at: www.bicoastalviews.blogspot.com
Lot 6 in Kula Meadows is currently priced $ 200 000 below the last sale in that gated community. Pictures and a short video clip can be seen at www.viewsviewsviews.blogspot.com
We feel these three buying opportunities offer exceptional value.

Attending the realtor caravans, I regularly hear a realtor introduce their listing with: “ I have an extremely motivated seller …….” . There is a growing sentiment among buyers to wait and see. The theory being that we have not yet reached bottom.

“ Having experienced two severe down cycles over the past 27 years, 1982- 1986 and 1991-1995, I believe that we are close to a bottom, if not at a bottom, based on the fact that the market peaked in the summer of 05. I also believe that this down cycle is more psychological than fundamental. The 82-86 down cycle was directly related to extra ordinarily high, double digit, mortgage rates. The 91-95 down cycle was directly related to an overall recession in the U.S. economy. Neither of which exist today. Timing the bottom is often very difficult because Maui is a thin market, and a catalyst can very quickly change buyer sentiment. I am finding that since the ½ point Fed rate cut, smart, savvy buyers are starting to look seriously for the first time in months for properties that are significantly below market value.” John Papazian R(B).

This brings us to foreclosures ….. Buyers want the most for the least. There are several websites where you can see a list of available foreclosures, but before you go there, it would be wise for you to understand how the foreclosure procedure works. After three months of missed payments the bank will foreclose on the delinquent property. The Foreclosed property will be advertised in the local newspaper for at least 3 weeks, detailing when they will have the house open for inspection. At the time of inspection, potential buyers need to do all their due diligence. There are no second chances. Foreclosures offer a limited warranty, and are bought “AS IS”. There is no survey, no home inspection nor termite report provided by the courts nor by the bank. Judicial foreclosures happen through the courts, and typically take a non-refundable,10% deposit with 30 days to arrange financing. A non-judicial foreclosure happens on the court house steps, where 10% or more down payment is due on the spot with the winning bid. Foreclosures offer the allure of quick money, but buyer beware, especially for the relatively inexperienced. Foreclosures are often poorly maintained properties, and require large additional funds and time to restore them. Our advice is for you to do your due diligence now. Take advantage of our knowledge, and let us provide you with the factual information necessary for you to make informed real estate decisions. Contact either John (808 878 6800) or Peter (808 276 4017), and we will be happy to share our knowledge of under-valued homes and preferred foreclosures.

Thank you for reading our Newsletter. To see our previous newsletter, or make a comment, click here: www.mauirealestatenews.blogspot.com

Regards,


John Papazian R(B) Peter Slate R(S)
Haiku Properties Haiku Properties