Articles
July 2005 Newsletter
by Bill Jardine Jul 30, 2005
July sunshine pours down on the north Pacific, warming the arctic air over the Bering Sea and driving one of the greatest weather engines on the globe. As the sun warms the arctic north, vast ocean currents of warm water push north, bringing equatorial fish into our coastal waters and forcing unsettled weather far up into the Aleutian Islands. The result in Waimea is a steady march of fresh trade winds sweeping the sky clean and shepherding beautiful flocks of puffy white clouds across the brilliant slopes of the ancient Kohala Mountains. Offshore the sapphire blue sea is festooned with bright fishing boats and colorful sails as folks take a deep breath and enjoy the languid days of summer. Business slows, school is out and only the Realtors are scurrying about looking for opportunities to stock up for the winter months J. These days they are scurrying about in a fleet of shiny new cars, reflecting the successes of the past year of sales. What a year for Sellers!
The Housing Bubble What’s Real and What’s Not for Waimea?
As you are all well apprised, it has been a very, very strong seller’s market all over the country. In fact, it has been the continuation of an international seller’s market with the exception of Japan and Germany. The United States was slow to get going but has enjoyed very high price run-ups over the past few years as the other English-speaking countries have slowed and are now showing declines.
Credit for the increase in the prices for housing is generally given to exceptionally low interest rates as well as the poor performance of the stock market. Although stocks are regaining favor as the economy surges, so many people were hurt by the run-up in stock prices during the tech bubble that they are loath to reinvest and have seen housing as a viable alternative. Many economists expect that the American price curve is now stalling and headed for declines as well. What does this mean for Hawaii? What does this mean for Waimea?
The “Housing Bubble” is not in housing as we tend to know it. It is in financing and speculation. That is to say that there are an increasing number of people “gaming” residential purchases in the hopes of making a quick capital gain. These are not the same people who are buying real estate to use it.
A growing percentage of real estate buyers now are speculators who have no use for the property they buy, and lots and lots of buyers now are getting mortgages for the full purchase price. In fact, last year interest-rate-only mortgages and even negative-interest mortgages have become popular as more and more people buy properties to “flip” them for quick capital gains. In Miami a new study shows as many as half of the new condo buyers are “flippers”. These signs of speculative fever are very dangerous, of course.
In Hawaii we are blessed and cursed with scarcity. In other words, we suffer high prices when we can’t produce new inventory to compete with the existing stuff, but we enjoy our capital gains for the same reason. Additionally, we have a special attraction to those wanting to retire, and God knows there are a lot of those folks! If you took the top 10% of the families in California alone and assumed just 1% of them would like to retire to Hawaii, we’d have to produce 40,000 new units! Hawaii just can’t do that and doesn’t want to try.
We will be affected by the national housing price slump that is inevitable at some point in the next year or two as speculators are punished, but we aren’t likely to see big declines in Hawaii properties due to the increasing demand by retiring Baby Boomers. Our current “high” prices are still the lowest in the State, and the Big Island is the most attractive place for a retirement lifestyle.
We have the largest stretch of leeward coast and the highest concentration of recreational facilities available to those with leisure on their minds, so look for prices to remain steady or improve for property that may be attractive to retirees.
We may well see declines in entry-level housing as well as acreage offerings far from services, however.
We urge our readers to think about the big picture. The Big Island will grow, and prices will grow with the population. As much as you might want to think that better deals may come with a flattening of prices nationally, your best deals may be staring you in the face right now.
Imua!
William N. Jardine
William N. Jardine
