Kapaa, HI

June 22, 2009 Kauai REO Foreclosure Update

Ken Stokes reports on his SuSHI  sustainability blog about the ag forum that happened on Kauai this weekend. Read all about  Kauai Ag Forum and Sustainability

Be sure to check all of the links in Ken's posts. They are each little pearls of wisdom unto themselves. I saw Ken for coffee last week and he mentioned a community in Toronto where a group of people are growing food in people's back yards. In other words, the property owners let this group manage their garden because they know how to, and perhaps the owners are too busy. Then, this food is distributed amongst the 500 folks who are participating in this system. And that's in Toronto.

Imagine what would be possible on an island like Kauai, where everything grows whether you want it to or not!

Well, March is looking to be the best month yet this year as there are more buyers and more deals on the island of Kauai. Kauai REO foreclosures continue to grow and these seem to be becoming the best values in our market.

With one week left in the month of March, 42 properties are in either contingent escrow or "under contract", meaning that the contingencies have been removed, or, in the cash of something like an all cash sale, there are no contingencies.

It's also intersting to note WHERE in the marketplace the sales are occurring. Of the 42 properties currently in escrow, only FIVE of them are for properties listed for over $1 million dollars. In fact, the most prestigious condo address in the Princeville real estate market, PUU POA, has couple of units in escrow, and unit was listed at $1,099,000.

You can see from the graph below the trend of our median prices over the last seventeen years. Already our median price through March of 2009 is down to $414,000, quite a bit lower than at the end of December 2008. When you look at a graph over this long period of time, it's easy to identify the market correction that is occurring.

Here are a couple of examples of properties with good value that are in escrow:

This private home in Kalaheo was listed for $290k. It is bank-owned and now in escrow.

This Anini Beach home, just across the street from the beach, listed for $1.25 million and
went into escrow in two weeks.

Five of the homes or roughly 12% of March's current sales are REOs, foreclosures on Kauai that are now owned by the bank. Banks want to sell. Banks list at good prices usually, and drop their prices regularly until the property sells.

Would you like to see what is in escrow? Click here to download the Kauai properties currently under contract

The Hawaii state Supreme Court on Monday rejected a state law that allowed the Hawaii Superferry to operate while an environmental study is being conducted.Ruling the law was unconstitutional, the court sent the case back to Circuit Court, leaving the fate of the Superferry’s service between Honolulu and Maui in question.

Superferry officials, when contacted, had no immediate comment on the decision.

In light of the high court’s decision throwing out the law, the Superferry must stop operation until the study is completed, said Isaac Hall, an attorney representing three groups that challenged the Superferry in court.If the ferry service continues to operate, Hall said, the Sierra Club, Maui Tomorrow and the Kahului Harbor Coalition would seek a court order to stop it.

Gov. Linda Lingle said it would be “devastating for the Superferry to stop its operation.”

Attorney General Mark Bennett said the administration is not considering an appeal to the U.S. Supreme Court because there is no federal issue, but the court could be asked to reconsider its decision. The state had exempted the Superferry from environmental review in 2005.

But the Supreme Court later ruled that an environmental study was needed before the vessel could operate. That prompted the Legislature to convened in special session in 2007 and pass a law, known as “Act 2,” enabling the Superferry to run while an environmental assessment was drafted.

“Obviously we are hugely disappointed with the Supreme Court’s decision that Act 2 is unconstitutional," Hawaii Superferry said in a statement released this evening.

"We have operated on a regular, reliable and responsible basis for the past 11 months. During this time over 250,000 people have booked travel on Alakai and it has provided new economic opportunities for Hawaii’s businesses," the statement continued.

I'm sure those who have been enjoying the Superferry are disappointed but I'm glad the court found the Governor's ramrod policies to force the Superferry through as unconstitutional. Perhaps this is the end or perhaps another delay while environmental assessment is completed.

H.R. 1, the “American Recovery and Reinvestment Act of 2009,” passed the House on February 13, 2009, by a vote of 246 - 184. Later that day, the Senate also passed the bill by a vote of 60 - 38. The President signed the bill on February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.

Congress and the President have announced that a finance and housing package (including tax provisions) will be the next “big” initiative, so Congress has by no means finished its work as it affects the housing industry.

The bill includes the following provisions:

Homebuyer Tax Credit

FHA, Fannie Mae and Freddie Mac Loan Limits

Neighborhood Stabilization

Commercial Real Estate

Rural Housing Service

Low Income-Housing Grants

Tax Exempt Housing Bonds

Energy Efficient Housing Tax Credits & Grants

Transportation Investments

Broadband Deployment


Homebuyer Tax Credit – The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.


FHA, Fannie Mae and Freddie Mac Loan Limits -The bill reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans. These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750. For the few areas where the 2009 limits were higher, the higher limits will apply. In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any “sub-area”, i.e.an area smaller than a county. The Secretary's discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.

The inclusion of these loan limit provisions in the final bill is a victory for homeowners and buyers.

Neighborhood Stabilization – Division A, Title XII of the bill provides $2,000,000,000 in additional funding for the Neighborhood Stabilization Program (NSP). The NSP was created by the Housing and Economic Recovery Act of 2008 (Public Law 110–289) to provide grants through the Community Development Block Grant program (CDBG) to states and localities to address the problems that can be created when whole neighborhoods are decimated by foreclosures. The funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. In addition, the funds can also be used by states and localities to establish financing methods for the purchase and redevelopment of foreclosed properties. After purchase the homes must be used to assist individuals and families with incomes at or below 120% of area median income. Twenty-five percent of funds must be used for households with incomes at or below 50% of area median income.

Commercial Real Estate - Commercial real estate is impacted primarily through those provisions of the bill focused on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for state energy programs, which could be used to support commerical property owners' investment in energy efficiency upgrades while commercial property owners seeking to invest in alternative energy systems for onsite power generation would benefit from the Department of Energy Renewable Energy Loan Guarantees Program. Of particular benefit to small businesses would be certain provisions of the bill that provide tax relief in the area of bonus depreciation and capital expenditures, as well as the 5-Year carryback of net operating losses for small businesses



Rural Housing Service – The bill provides an additional $500 million to existing USDA Rural Housing programs. The RHS provides both a guaranteed loan program and a direct housing loan program for those meeting the program’s eligibility criteria. The direct loan program will receive $270 million while $230 million will be allocated for unsubsidized guaranteed loans. It has been reported that this level of funding would provide for an additional 192,000 homeowners

Low Income Housing Grants - Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.


Energy Efficient Housing Tax Credits & Grants - To promote green jobs and energy independence, ARRA invests significantly in efforts to make homes and buildings more energy efficient. The bill provides state and local governments with $6 billion in energy efficiency and conservation grants for energy audits, retrofits and financial incentives. Through 2010, homeowners will be able to claim a 30% tax credit (up from 10%) for purchases of new furnaces, windows and insulation. Another $5 billion will be available to modernize the nation’s electricity grid and install smart meters on homes that help to save consumers money. There is also $5 billion for weatherization assistance for low income households and $2 billion for federally assisted housing (section 8) efficiency efforts

Transportation Investments - The bill provides $46.7 billion to states and localities for capital investment for surface transportation projects including highways, bridges, transit, and rail projects. These investments will tend to moderate traffic congestion and support a variety of transportation alternatives which will improve the quality of life of American communities and bolster the value of real estate

Broadband Deployment - The bill creates $7.2 billion in grants to promote broadband deployment in unserved and underserved areas and for mapping the availability of broadband service in the U.S. Any entity is eligible to apply for a grant including municipalities, public/private partnerships and private companies as long as they comply with the grant conditions. The grants are subject to “network neutrality” requirements to ensure that broadband networks be free of restrictions on content, sites, or platforms, on the kinds of equipment that may be attached, and on the modes of communication allowed.

The bill also charges the FCC is with developing a national broadband plan that shall seek to ensure that all Americans have access to broadband capability and shall establish benchmarks for meeting that goal.

So now you know... in case you didn't already. Mahalo and aloha from Kauai