Tracy S Stice

I just finished 3 days in San Jose Ca. at the California Association of REALTORS meetings and had quite a learning experience. It is quite apparant that the REO market is dominating most of the California market and that liquidity in the over Jumbo Loan market ( over $729,000) has almost totally wiped out this part of the market. Since no seconday market really exists to buy these jumbo loans any longer, most lenders, except a few banks and private lenders that hold the loans as portfolio loans are no longer lending in this segment of the market.

Why this is important to Hawaii and more specifically Maui, is that in recent years both the median and average sales prices of homes and condos have hovered near $1,000,000. Statistics this year for both segments of the market have shown between and 20 and 30% price declines for both medians and average prices. Look out for this to continue. With about 80 to 90% of the volume of sales now driven to the areas of saleable loans ( under $729,000 ), this will continue to shift the averages lower.

The net result is that suddenly , sellers who have to liquidate their high end second and third homes on Maui are now faced with a very tough situation. If you paid over $1,000,000 for a high end home or condoin the past couple of years, buyers for your unit really have very few options. It is cash or ????

Interestingly, there have been very few high end foreclosures yet on Maui. The next year will begin to tell a different story as ARM resets start to show up, and some cash strapped owners will choose to loose their 2nd or 3rd home on Maui instead of their first home elsewhere.

Look for some bargains on beautiful high end homes on Maui in the next 6 to 12 months.

Wow, what an incredible week we had at my office this past week. Jeremy and I landed a huge oceanfront Haiku escrow that is all cash and could actually close in 3 weeks. Our buddy Dave Futch was writing up a massive oceanfront offer on another oceanfront Haiku house as I left the office tonight. Oceanfront bargains abound on Maui. We just got antoher $50,000 price reduction on our oceanfront listing in Paia down to $2,295,000.

Where is the money coming from? The West coast. They want to get to the Wester coast in Hawaii. Cash is starting to roll in out of the land of Hollywood for successful, retiring professionals who don't want to live an Avatar life in California, they want the real thing on Maui.

So it looks like west coast money is setting sail out of California and retiring for the fine life of warm water, low properrty taxes, clean warm of Maui.

We say , Bring it on !!

Today was a tough day for my sellers. The reality of the new appraisal rules are starting to hit home. We have had offer-counteroffer and recycled once again. We hit what appeared to be a firm wall with tight parameters based on emotion and finally I brought it all home. The appraisal value now controls the deal !

My explanation to the seller was " put the offer out and let the appraisal decide". Right now , with tight cash, reluctant Maui buyers and a declining market, it puts the weight of the decision on the appraiser. What buyer is going to pay more for the property than the appraisal value?

We have had several deals this year be re-negotiated by this method. As Realtors, we can take them only so far and then let the market decide.

Buyers, Sellers, and above all Realtors, don't let emotion decide your future. We didn't make the market, we live in it !

Having just returned from a 2,000 mile tour of the West Coast and the California Association of Realtors (CAR) mid-year meetings in Sacramento, I have to say that as tough as the market seems in Hawaii, California and Oregon have it much worse.

The central valley in California from Bakersfield up past Sacramento to Chico is seriously depressed with some areas such as Stockton having up to 90% of their closings either REO and short sale closings. The good news is that it appears that they are reaching a bottom as investors are now scooping up properties.

On Maui, we are about at the 50% rate of closings being short sales and REO properties, up from around 20% at the beginning of the year. With the amendment of Act 137 by Act 66 at the legislature this year, REALTORS are once again allowed to talk with lenders without breaking Hawaii state law. This has started to expedite the flow of short sale closings finally. Also, as a result of no dialog with lenders over the past year and lenders hoping that President Obama would deliver them with a silver bullet, there has been an incredible backlog of pending foreclosures. These are now being delivered in to our Hawaii real estate inventory at a rate 400% higher than last year. In other words, we are seeing what California saw 18 months ago and Las Vegas saw 24 months ago.

Maui prices are dropping at about an 18% annualized rate right now. Lots of bargains are popping up across all parts of the market with primarily newer homes and condos that were financed with ARMs , 100% financing, Pay Option ARM being the bulk of the REOs. Over the past 2 months, my son Jeremy and I have sold 4 condos in the $50,000 range on Maui that actually cash flow at about a 7% positive rate. We are working with an Entrust group that has investors bringing in cash from their IRA, HSA, Roth IRA and 401K programs and buying condos at Harbor Lights in Kahului Maui. This is hard work sales with commission checks that often don't have a comma in them, but it is nuts and bolts survival in this market.

The recent rise in interest rates is moving buyers off the fence. Last week, the SticeTeam opened 5 escrows, with two of the buyers being clients that we have worked with over the past 18 months, waiting for the market bottom and the interest bottom. Obviously the sting of rates jumping from 4.5% to 5.5% in a couple of months brought them to a reality check. They both quit haggling with counter offers and finally accepted the deals.

The high end has all but disappeared on Maui. Sales over $1,000,000 are few and far between. What is happening is a huge accumulation of inventory in this price range. The lack of motivation for these high end sellers is keeping their asking prices out of touch with the entire market. The majority of these owners paid cash for their properties or they can actually afford the mortgages.

Tracy Steven Stice, Broker ABR CRB CRS e-Pro GRI RSPS Tracy@SticeTeam.com

Licensed in Hawaii since 1979

My buddy Dave DeLeon and I are headed off to DC on Sunday for some lobbying efforts representing the Hawaii Association of Realtors. Before we go to work though, we plan a bicycle ride ( certainly PC in our present administration), up the Potomac to Frederick Maryland, up to Gettysburg, to York, into Amish country and a return to the nation's Capitol via Baltimore. This trip will not be as challenging as last years' trip up in to the Shenandoah National Park.

This should be my most interesting trip ever to Washington DC. The risks in the real estate business have never been larger, the potential downside never this large, and the banks finally have their tails between their legs and are running for cover. Realtors have a huge chance to gain ground and credibility this year.

Are we going to support President Obama's green platform wholeheartedly? Probably not if they drive up the immediate cost of real estate. Is this wrong? In the short term, probably not, but in the long run it may. We need to keep our focus on cleaning up the inventory that is owned by the banks and putting new owners in to the homes. Banks don't want the homes and buyers do, so we need to work on loosening up money to enable buyers to buy.

Hawaii's contingent is 40 strong and we intend to be heard by our legislators. Neil Abercrombie is headed out of Congress after over 20 years and is rolling the dice on the upcoming Governor's race. Maize Hirono looks pretty solid in her seat for congress. In the Senate, Dan Inouye is very formidable and Dan Akaka will probably not have any serious challengers except father time. We look forward to gaining their ears on Hawaii's housing issues, rising foreclosures brought on by under and unemployed hotel, construction, and every business that supports them.

I'll be back on May 17, hopefully refreshed, and ready to sell some more foreclosures.