Lets take a look at this situation in California and then compare it to Hawaii.  In this article you have banks holding open houses before the foreclosure auctions, getting home inspections ordered, Seller’s Disclosure statements filled out, title reports pulled, and taking discounted prices for properties etc. etc.  They do the necessary work to get the Buyer as much information on the property as possible so they feel comfortable purchasing the property at the auction.

These banks and builders want the properties off the books.  We call this blood in the water.  The sharks begin to appear shortly afterwards.   This is when good deals are to be had in the foreclosure market. 

Compare that to what is currently going on in Hawaii’s market.  I went to DR Horton’s new project in Makakilo the other day and they have sold out their current enitre inventory that is being offered.  Castle & Cooke’s Mililani Mauka, has 5 homes left in the entire development.  There are 5 homes available in their Makakilo project that is ready for move-in.  I asked the DR Horton representative if they expected their next phase sales prices to remain the same, decrease or increase, and he said, “they have sold all of their current inventory and prices may be a little higher on the next phase due to the way the current sales are going.”

Read also, Are Foreclosures Really A Good Buy?  In this article you see Lenders of foreclosure property are not very cooperative right now.  They don’t hold open houses prior to the flag-pole auction, no documentation, etc.  In fact, most lenders set a minimum bid price for the property, and if no one is willing to bid above that price then the bank takes the property and puts it on the market for sale with a Realtor (REO).  Most instances, no one ever gets to bid because the bank set the price higher than anyone was willing to go.  The market has been good enough for them to get more for the property this way. This isn’t exactly a sign of desperation by lenders.

So what am I saying?  Hawaii foreclosures aren’t a great deal at this time, our foreclosure numbers aren’t bad and our real estate market has been doing pretty well in comparison..and this contrasts the comment made by KimoMakano Username at the bottom of the article written about Hawaii foreclosures which says:

I have been following the housing market for a few years since we sold our condo and find it interesting to read the “economists” projections and reports and the articles by the “journalists”. It seems like they are quite slanted towards a rosy picture rather that a realistic view of what is going on.  For the first couple of years they predicted continued gains in the housing market (because Hawaii is different): the market actually stalled.
Then they predicted a flat to small increase in the market: the market continued to stall and began a decline.  Then they predicted a possible small decline but few foreclosures: the decline continued and foreclosures doubled. It almost makes you wonder who these guys are writing for?

I enjoy good comedy and the comments made at the bottom of this article had me chuckling.  Uninformed has the classic one-liner! See if you can find it in his comment. The Honolulu Advertiser article about foreclosures in Hawaii finally reported the foreclosure numbers correctly and the following was a comment to the article:

Stop putting a spin that Hawaii is up in national rankings….the fact is Hawaii’s foreclosure rate is ulp 85% or 120 vs. 66 filings from a year ago…who the hell cares if Hawaii is up nationally…what concerns the local economy is the number of foreclosure filing this year and that’s all that matters so stop putting a spin by trying to deflate the issue…..what a poor piece of business writing…just tell it like it is that Hawaii is heading towards a housing problem that could escalate before year’s end.

I have knocked the writers for “spinning the outlook” in the negative direction when it hasn’t been.  Clearly this guy has a different opinion.

Here are my thoughts:

An 85% increase sounds like a lot, but when you look at the actual numbers it isn’t that much.  If we had 2 filings this year vs. 1 last year, that is a 100% increase. (Oh boy, the sky would be falling)

There were 120 Hawai’i foreclosure-related filings in March, up 85 percent from 65 filings in the same month last year.

The real numbers are here:

The filings amounted to one for every 4,167 households, which gave Hawai’i the sixth-lowest foreclosure rate by state.  Nationally, there was one foreclosure action per 538 households, or a total of 234,685 that represented a 57 percent increase over March 2007.

Hawaii’s foreclosures would have to increase by 775% to reach that of the national average.  If there were 1,000,000 homeowners in Hawaii, with our current foreclosure ratio of 1 per every 4,167 households, that would mean we would have 239 foreclosures or .024% of the entire housing market in Hawaii would be in foreclosure.

Compare that to the national average of lets say 1,000,000 households and there would be 1,858 foreclosures or .186% of the entire housing market.

You don’t look at these numbers for the indication that Hawaii’s housing market is going to have problems.

FHA, a formerly obscure federal agency, is now at center of many plans to fix the housing market.  (This was a really good article on what the government is looking to do to help out the struggles of the housing market.)

FHA (Federal Housing Agency) loans in this market will definitely increase. I have already seen several offers from buyers looking to obtain and FHA loan.  So first…what is an FHA Loan?

The FHA is a New Deal-era agency that helped create the modern mortgage market. The FHA program is intended for mortgage borrowers with weak credit or little or no cash, who may not be able to otherwise get an affordable mortgage.

Borrowers get FHA loans from private lenders, just as they would any other mortgage. FHA offers insurance to cover lenders if those borrowers, who pay a small insurance premium to the FHA every month, default on the loan. The FHA uses those premiums to cover the lender in the event of foreclosure. 

Basically, the loans are guaranteed by the Fed government.

About 150,000 borrowers have refinanced under a new program called FHASecure in the past six months. Launched in September, this program is aimed at subprime borrowers facing steep mortgage rate resets that they couldn’t afford. That volume compares to the total of 425,000 loans the FHA backed in its previous fiscal year.

I will have more on FHA loans shortly….

Leroy Laney spoke recently at the Kapolei Chamber of Commerce and helped shed some light on the future potential of Kapolei.  Those of you looking to live in the Kapolei, Ewa, Makakilo areas, can gain some insight from this article.

The region’s population will grow from 85,000 now to about 172,000 in 2025, which Laney said would be more than the current populations of Maui or Hawai’i counties. Jobs are expected to nearly triple over the same time to nearly 70,000, he said.

Laney said economic activity generated by new development in Kapolei will be about $93 billion.

Thanks to activity in Kapolei, we’re likely to see less volatile swings in statewide employment, personal income growth and tax revenues,” Laney said. “As Kapolei transforms into an urban center, it will be a source of jobs for people who live in the area and a provider of a full range of private and public goods and services for local residents, visitors and businesses in Kapolei and beyond.

There are several articles out regarding the recent job figures released for March by the U.S. Labor Department.  You can watch Mike Mandels Video and accompanying article and the NPR’s article titled U.S. Economy Lost 80,000 Jobs In March.

The three consecutive declines in employment make it difficult to deny the economy is in recession, says S&P chief economist David Wyss, and suggest the Federal Reserve will cut its benchmark interest rate by 50 basis points at its Apr. 30 policy meeting, rather than by 25 basis points as S&P had assumed. …..the jobs report could make it more likely that the Federal Reserve will continue to cut interest rates in an effort to stimulate the economy into more growth.

The report prompted Action Economics to revise downward its gross domestic product forecasts for the second and third quarters. But Action points out that the upside surprise in the average workweek and associated hours-worked actually boosts some of its other economic forecasts for March, “leaving further evidence that the economy likely continued to post positive growth through the first quarter.”

The latest issue of Keri Shepherd’s Mortgage Market News is out. 

A national record was broken on the job front last Friday as the Labor Department reported a much worse than expected loss of 80,000 jobs in March - the greatest jobs loss reported in five years. In addition, revisions to both January and February’s Jobs Report delivered an additional loss of 67,000 jobs - that’s on top of the previously reported loss of 85,000 jobs for that two-month period.

The Federal Reserve may respond to this increasing trend in job losses with additional interest rate cuts when they next meet to determine monetary policy on April 30 and June 25. As we’ve seen in the past though, such rate cuts do not translate into lower long-term rates for mortgages, so there is no better time than right now to refinance an existing mortgage or to structure a new one. Let’s work together to make sure your current financing is a home run!

Keri Shepherd, CMPS
Certified Mortgage Planning Specialist
4211 Waialae Ave. #107
Honolulu, HI 96816
Direct: 808-223-4118
Direct Fax: 866-437-2721
E-Mail: keri.shepherd@imb.com
Website: kshepherd@imbhomelending.com

“NO GREAT DISCOVERY WAS EVER MADE WITHOUT A BOLD GUESS.” Isaac Newton But even the great mind of Isaac Newton might not have guessed that Bonds and home loan rates would continue on such a volatile course. But let’s get bold, and discover what caused the latest rock and roll action in the financial markets, and take a look at what the coming week might have in store.

The stats are out for March.  We have slowed down but prices are still holding steady.  These are interesting times.  These times give you more properties to choose from and more negotiating ability than ever before. The good news for sellers is, from an overall island wide price standpoint, prices haven’t gone down, but there are less homes selling.  Read Oahu Home Prices Dip, Sales Down 14.5% (sales are actually flat when looking at year to date numbers of 2007 and 2008) and Harvey Shapiro’s March Housing Statistics article.

View this months stats by going to March 2008 Stats.  You can view all previous stats in the Resource Center of my website.

On page 3 of 20 we see the year-to-date numbers.  The number of sales for SFH’s are down 22.2% year-to-date, however median SFH prices are the exact same at $620,000.  For condos the number of sales are down 23.8%, however the median condo price is up 3.1% to $330,000.

On page 4 of 20 the number of SFH sales were more this month than the previous 6 months.  there were 282 sales of SFH’s. Condo sales were up from 321 sales last month to 392 sales.

On page 6 of 20 the median sales price this month for a SFH on Oahu was $628,000 and for condos was $329,300.

On page 7 of 20 the median number of Days-On-Market (DOM) was down for SFH’s and Condos.  SFH’s have a median DOM of 47 days, down from 59 days last month.  COndos have a median DOM of 39 days, down from 50 last month.

On page 14 of 20 shows the Inventory of Active Listings.  For SFH’s there were 1,919 SFH’s for sale, roughly the same as last month.  For condos the inventory built by about about 100 condos to 2,581.

On page 18 of 20 we see the Months of Inventory Remaining, meaning, if we didn’t bring anymore homes on the market, how long would it take to sell all of those homes. A balanced market is 6-7 months of inventory.  For SFH’s on Oahu the months of inventory remaing is 11.8.  For condos the months of inventory remaining is 8.0 months.  Lets see if this stays the same next month.  I bet it goes down.

On page 19 of 20 we see the Months of Inventory Remaining broken down by type of property, price range and location on the island.  The numbers here have definitely gone up for SFH’s.  More than $1.0 million homes have 28.6 months of inventory.  For homes in the $700-1.0 million homes we have 12.6 months of inventory.  For homes in East Oahu we have 14 months of inventory.  For condos the $1.0 million plus condos have 11 months of inventory. North Shore condos still top the list at 19 months on inventory.

Let me know your thoughts!

Here was an article that shows that Hawaii’s income growth rate ranked 10th in the country.  The bad news is inflation in the islands is about double what the national average is.

Here is an article about proposals from the government that could help give relief to a nation that has been hit hard by foreclosures.  I mention it because relief to areas that are hard hit by foreclosures could benefit Hawaii down the road.