Housing tide turns


POSTED: Sunday, April 05, 2009

There was a time just a few years ago when going to an open house on Sunday was too late to make an offer. The market was so hot in 2005 that highly desirable properties would get snapped up before the first open house even took place.

But that was then and this is now.

The Honolulu real estate market has shifted, and today it's a buyer's market, particularly for a first-time homebuyer.

“;Everything's aligned for the first-time homebuyer,”; said Bill Chee, president and chief executive of Prudential Locations. “;I've never seen this happen before.”;

Chee said there's an unusual confluence of three factors — record-low interest rates (at about 4.5 percent as of this past week for 15-year and 30-year mortgages), lower prices, and a first-time homebuyer's tax credit of up to $8,000.

Prudential last month announced publicly that it would be offering eligible first-time homebuyers the $8,000 in advance, so that they don't have to wait a year to get the tax credit.

Chee said the money can be used to pay off car loans, credit cards or other debt, or to purchase new furniture.

“;From our standpoint, we wanted to help the process along,”; said Chee. “;Otherwise, you'd have to wait for a year.”;

Prudential Locations will be offering several seminars this month for the first-time homebuyer, which will include information on who qualifies.



Other property owners are adding incentives to the mix to gain a competitive edge in this buyer's market.

Some are offering furnishings as part of the sale; others are willing to negotiate closing credits and provide several months of maintenance fees.

Dan Madden, broker-in-charge at East Oahu Realty, has a listing for a three-bedroom, two-and-a-half bath condo at Kalele Kai in Hawaii Kai, in which the owner is including all the furnishings as part of the sale.

The list price for the approximately 2,000-square-foot condo is $775,000, which was reduced by $25,000 earlier last week. The furnishings are probably worth a couple thousand dollars, he said.

Another three-bedroom, waterfront townhome listed by Madden for $1.4 million at Kalele Kai includes a deal on a yacht if the buyer decides to purchase both, since a 70-foot mooring space is included with the unit.

Madden also has clients who say they're willing to put six months of maintenance fees on the table as part of the sale.

Margaret Murchie, a Realtor specializing in luxury properties at Coldwell Banker Pacific Properties, has a listing in Punchbowl where the owners are willing to include all their designer furnishings as well as a year of homeowner's association fees.

The well-appointed, four-bedroom home offers ocean and Diamond Head views, along with an attached garage and more than 3,000 square feet of living space.

It was previously listed at more than $1 million, but is now at $998,000.

Murchie also offers a one-year home shield warranty, which covers the repairs for appliances and is worth about $400 as an extra incentive for her buyers.

Even at the luxury level, there are deals on the table that would have been unheard of just a few years ago.

A total of 121 two- and-three bedroom homes at the Beach Villas at Ko Olina will be available at 25 to 35 percent less than their current list prices at a final sales event on June 6 and 7.

When Centex Destination Properties first announced the luxury project in the fall of 2005, starting prices were at $1.8 million.

The Beach Villas offer a total of 247 units, and come with a host of amenities and custom-designed kitchens by chef Roy Yamaguchi.

Centex is offering the homes fully furnished, along with one year of homeowners' association fees, according to Paul Chicoine, director of sales and marketing.

Buyers must put down a refundable $50,000 reservation to participate in the June sales event.



Despite all the extra incentives, Honolulu real estate agents say price and location are still the top two determining factors for whether a property moves or not.

Because the market has changed, Murchie said homeowners today must list their properties at or below the last sale. During an up market, it was standard to list a property at slightly more than the last sale.

Whether a home will sell also depends on the property and location.

Some neighborhoods — like Manoa — are still fetching multiple offers.

Murchie said homes close to town for under $1 million are still in demand because many buyers don't want to deal with traffic or a commute.

Madden, who specializes in Hawaii Kai, said the reality is that the sales volume for homes has dropped by about 50 percent in the last three years.

“;There are half the number of sales there were three years ago,”; he said. “;If you're a seller, and you want to get your home sold, there aren't as many people buying.”;

Prices for Hawaii Kai homes have dropped between 15 to 20 percent in the last three years, and may drop even more, said Madden, who does his own analysis of the market.

Sellers have to be realistic about pricing, he said, and it can't be at the same level as it was a year or two ago. Also, they have to go the extra mile to make their homes stand out.

That means decluttering their homes, fixing them up for maximum curb appeal, and staging them to compete with other properties on the market.

These days, Abe Lee of Abe Lee Realty says he's getting more lowball offers from bold investors — at one-third or one-half of the list price.

In good times, those kinds of offers would have been an insult, and to some extent they still are, but the investors are looking for that one seller who is desperate.

Hawaii does not yet have the rock-bottom prices for homes that can be found in places like Las Vegas, Florida or Michigan, he said.

But reasonably priced homes will still sell, he said.

“;It's not like five years ago,”; he said. “;If they're reasonable and well-priced, and it's a good unit in good condition, it moves.”;

Lee just closed on a four-bedroom home in Kapolei for $655,000. It was immaculate, he said, and it received multiple offers.



Every real estate professional has a different opinion on when the market shifted to the buyer's advantage. For some, it was as early as three years ago, and for others it was last year.

For the entire year of 2008, the median price for a home on Oahu only dropped 3 percent, according to the Honolulu Board of Realtors, but it was the first time that the median dropped since 1999.

The median sales price for Oahu homes fell 6.6 percent in the fourth quarter of last year to $610,000, and 8.1 percent in the first quarter of this year to $570,000.

The University of Hawaii Economic Research Organization forecasts a median price drop to $536,160 next year.

Many neighborhoods in Hawaii have experienced price declines, but not as dramatically as many neighborhoods on the mainland.

The lowest prices recorded here are on the Leeward side, which also has been hit with the highest number of foreclosures and short sales. Homes on the Leeward side are priced somewhere in the ballpark of $336,000 to $500,000.

Lee said that short sales — homes sold for less than the mortgage owed — are potentially good deals, and are popping up more these days.

But short sales can be difficult because they're dependent on a bank's approval, which can take four to six months or more.

Even then, there's no guarantee that the bank will approve the sale.



First-time homebuyer tax credit at a glance

» The tax credit is available for first-time homebuyers only, defined as someone who has not owned a principal residence during the three-year period prior to the purchase.

» The credit is available for homes purchased on or after Jan. 1 and before Dec. 1, 2009.

» The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

» Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

Source: federalhousingtaxcredit.com/2009/glance.php