Thursday, March 6, 2003

Neighbor isle
sales strong

But signs point to a
weakening real estate market

By Lyn Dannninger

Home sales on the Big Island and Kauai continued to show strength in February, but there are indications that the number of sales could slow soon.

Condominium sales on the Big Island almost tripled last month, rising to 65 compared to 23 in February 2002. However, their median sales price plunged to $127,000 from $220,000 last year. The reason for the price drop may be multifaceted, but it would certainly account for the high number of sales, said Gary Davis, broker-in-charge at Clark Realty in Waimea.

"I think it's a combination of two things. Last year around this time there were a couple of higher end projects, such as the Villages at Maunalani and some at Hualalai, that closed. Recently it was a lower-end conversion of and old apartment building to condominiums that were priced in the $120,000 to $180,000 range. So if you sell a bunch like that, it will affect the median," he said.


With inventory drying up in many areas and agents having to go further afield to find properties to show, Davis predicts the number of sales will drop.

"You'll start to see the number of sales decelerate a bit simply because inventory keeps getting lower," he said.

Lack of inventory continues to be the story on Kauai. With demand greater than supply, prices continue to rise for both single family homes and condominiums.

Median sales prices for condominiums hit $229,000 last month compared to last February's median of $190,000. There were 27 sales of condominiums -- no change from the number of sales in February 2000.

The median price for a single family home in February was $315,000, a 30.2 percent increase over last February's median of $242,000. The number of sales during February stood at 33, down from 38 during the same period last year. Given fewer housing choices and rising prices on the Garden Isle, the fact that sales held up that well was remarkable, said Lee Morey, broker-in-charge at Century 21 All Islands' Koloa office.

"I am actually surprised that there are as many transactions taking place as there are," she said.

Morey said business was slowing across the board on Kauai. There seem to both fewer visitors and a general softening in retail spending, she said.

"Our traffic does not appear to be as intense as it was last year, there are fewer people coming in the door," she said.

Morey notes the number of people seeking vacation rentals is also lower, mostly due to nervousness about impending war.

"We've had people say as of March 1, 'we think we'll wait and see what happens.' There's definitely a fear of flying long distances and being away from family during a time that is precarious," she said.

Most real estate sales in her area have been tax-driven transactions that have to take place, Morey said.

"It's generally 1031 exchanges, where they have a certain time frame to complete the transactions. It's not people following their dream or retirees. We are still less expensive than places like San Francisco and San Diego, even with the dot-com crisis, so therefore we are getting exchanges from West Coast people who are divesting their 1031 exchanges," she said.

In terms of future housing development and adequate inventory on Kauai, lack of water infrastructure will continue to hamper the island.

"We have a water distribution problem that will impede sales. So what is happening is that existing housing prices are forced up. With current interest rates, we should have much more activity. There are zoned parcels in Poipu and Princeville that can't be developed because water infrastructure has not caught up with demand," she said.

Clark Realty Waimea
Century 21 All Islands

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