Resort real estate market might have hit bottom, analyst reports
By Harry Eagar
The Maui News
March 10, 2010
The state's resort real estate market is not out of the woods yet, but Honolulu analyst Ricky Cassiday said he believes he has detected signs that it finally touched bottom in the last quarter of 2009.
The woods were dark and deep. Resort residential real estate - both condominiums and single-family houses - did a gross business of better than $2.5 billion in 2005, 2006 and 2007. The slump brought the total down to less than $1.7 billion in 2008 and to $1.3 billion last year.
Cassiday, whose consultancy, Data@Work, sees signs of a turnaround in the price slump. Average prices fell 20 percent in 2009. Despite the crash in the number of transactions, which dropped by more than half, Hawaii resort real estate prices kept going up.
But that was a false signal. Developers rushed to build on all islands, selling units up front for high prices. But it took typically two years to build, and a project begun in the flush times of 2006 looked much different to buyers in 2008.
Some sued or negotiated to get out of or adjust contracts, others faced the prospect of finding loans to close on properties at old prices.
Thus, even in 2008 average prices rose a little, just 1.1 percent.
Now, however, reality has set in. "You bought it three years ago. Now you have to close," said Cassiday in a telephone interview Monday. Or, if the buyer cannot manage it (because mortgages are not so easy to obtain), the developer takes it back, "and it comes on the market as a resale," even if it is brand new.
As a result, the average closed price in 2009 was $1,240,831, down from $1,552,536 in 2008, which was the record year for prices.
That is why Cassiday breaks out the resale market, which "is unaffected by developer closings," separately.
That tells a much different tale. Prices peaked in the second quarter of 2007 at $1.5 million and fell steeply to $1 million by the middle of 2009. Since then, they have stabilized.
And as prices have stabilized, transactions have soared, from about 125 per quarter to about 200 in the last quarter of last year.
Another sign that the market may be getting ready to turn is the appearance of bargain hunters. Whether you characterize them as thrifty shoppers, bottom feeders or vultures, Cassiday said he sees people with money looking around for deals.
Taking the 30-year view, there have been only four periods when average resort retail prices did not rise: a slight but short dip in 1985, a slight but prolonged dip from 1991 to 1996, a short, sharp dip after Sept. 11, 2001, and now the steepest, sharpest drop ever.
That is for the market as a whole. As the resale figures show, the real fall in the perception of values began as early as 2007 and has now lasted three years - about half the length of the mid-'90s downturn.
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