According to the article, analysts claim that this slump will not end until inventory (amount of homes for sale) declines.  Unfortunately for many mainlanders, foreclosures are pushing more homes onto already flooded markets, keeping inventories high and extending the market’s recovery time.

If this is a good synopsis of our Real Estate problems, Hawaii has two reasons to be optimistic:

First, Hawaii’s conservative construction practices have spared us the inventory disasters that trounced Mainland cities like Las Vegas, where overdevelopment of new homes flooded the market, driving prices down.  We didn’t overdevelop to that extent, so our inventory problem is not nearly as bad.

Second, conservative lending practices in Hawaii has spared us a dramatic foreclosure crisis.  Hawaii lenders were more careful with “exotic” subprime mortgages than many of their mainland counterparts.  The result- Only 1 out of 3676 homes in Hawaii are in foreclosure while 1 out of 501 US homes are in foreclosure.  We aren’t experiencing a devistating surge in foreclosures that threatens to flood the market with inventory.

Post from: Hawaii Real Estate Reporter

NAR Reports Dropping National Sales Figures. What does this mean to the Hawaii Market?

It helps when you have great sources like Mike Sklarz. In the article, he makes an excellent point using a key indicator of overall market health:Months of Remaining Inventory (the number of months it would take to sell all the current homes on the market at the current market pace).

Months of Remaining Inventory (MRI) takes two important things into account:1) The number of homes on the market and 2) how quickly homes are being sold. Therefore MRI incorporates both supply and demand into one number, and this should (according to my high-school economics teacher) predict prices.

In the article, Sklarz says that when MRI is between 6-10 months, home prices do not fluctuate much. According to the article, we are well within that range at 8.5 MRI. This suggests that we should not expect a dramatic price drop.

At least in this one article, sanity prevails.

Post from: Hawaii Real Estate Reporter

Good News: Oahu Median Home Prices Strong – And Some Reasons Why They Should Stay That Way.

Oh no, plunging and tumbling again – well, at least it’s not plummeting, that is really scary. So what are we taking about here and does it affect Hawaii? Let’s start with the second part of that question – ‘No”. So, what are they talking about – new home sales.

New home sales figures easily confuse people because we don’t have that much new home construction in Hawaii. In Hawaii, our real estate market is mostly the resale of existing homes. New homes are very different.

• ‘New homes’ are houses built by developers in anticipation of buyer demand, not because of it.
• Sales prices are set by the developer based on conditions other than just market value.
• Changes to sales prices are reductions in listed prices, controlled by the developer.

So what is this article really saying? 1. Sales are falling. Nothing new here, sales have been falling since 2005, but developers kept building new homes anyway. 2. Prices are falling, OK, why?

As the article laments:

median prices kept plunging, underscoring the depth of the nation’s housing woes.

Source AP news June 25,2008, written by Martin Crutsinger

Doubt it! I think we have to hit the ‘hysteria’ button here. What this does mean is that the developers, who set the prices in the first place, are now lowering them because they built too many houses for a demand that wasn’t there – and then set the prices too high to boot. Now that the developers are lowering the price, this is somehow supposed to be a really bad thing. Remember, a drop in listing prices does not indicate falling prices. It means that prices set artificially high are being adjusted downward – by the people who set them too high in the first place.

All the doom and gloom that is being projected in this article is really developers adjusting prices for homes they shouldn’t have built in the first place.

And they even try to introduce ‘recession’ again. Sorry, that is old news that never happened – much to the dismay of the media. By they way, there are only ‘recessions’ if they happen – there is no such thing as a full-blown or a partially-blown recession. The media keeps trying though.

Post from: Hawaii Real Estate Reporter

Plunging and Tumbling – Not as Bad as Plummeting