LIHU‘E — Residential home sales have been on the decline since 2005, but low interest rates, sliding values and one very enticing tax credit propelled buyers to scoop up more properties during the final months of 2009 than they did
LIHU‘E — Residential home sales have been on the decline since 2005, but low interest rates, sliding values and one very enticing tax credit propelled buyers to scoop up more properties during the final months of 2009 than they did a year earlier.
Record low lending rates, along with a first-time home buyer tax credit set to the tune of $8,000 “played an important role in stimulating the housing market,” said new Kaua‘i Board of Realtors President Kelly Liberatore, who took over the reins at the start of 2010.
When the credit was extended from Nov. 30, 2009 to April 30, 2010, it “helped keep the sales momentum going through December for those buyers that missed the first deadline but still wanted to take advantage of the tax credit.”
In addition, the “downward trend” of median home values from $615,000 in 2008 to $470,500 in 2009, may also be inspiring individuals to jump on the homeowner bandwagon, she said.
Overall sales for the year, however, had a “big decline” even though “some classes of property in certain areas did see a spike in sales in the last quarter,” Kaua‘i County Deputy Director of Finance Belma Baris said in an e-mail.
“This may be due to a more drastic reduction in prices made by property owners who simply wanted to dispose of their properties before the end of the year and buyers taking advantage of low interest rates,” she said.
It is unclear at this time how this will affect county revenue.
“We’ll know for sure in May when real property values are certified,” Baris said. “In the meantime, we are preparing our budget for the next fiscal year based on a decline in revenue.”
Around 80 percent of the county’s general funds are generated from real property taxes, she said.
In October, Finance Director Wally Rezentes Jr. projected that real property assessments could decrease in “certain tax categories” by some 20 percent, which means revenues could decline by about $12 million to $17 million in the upcoming fiscal year.
But declining median sales prices have not correlated to the cost of real property taxes yet because property values were “offset by an increase in the number of assessed parcels and by correctly resetting condo values between the land and building which should have been done in past years,” Baris said.
Sales activity between Jan. 1, 2009 and Dec. 31, 2009 will be used in the 2010 assessment, she said.
A slowdown in construction may also impact the county’s budget, as building permit revenue could drop.
“The booming economy of 2005-2007 stimulated a great amount of development but it was generally accepted by economists that the level could not be sustained over an extended period of time,” a spokesperson for Mayor Bernard Carvalho Jr. said in an e-mail last year when asked if Kaua‘i is currently experiencing its development boundaries.
“Development is necessary for the economy to grow, however Mayor Carvalho has always said that there needs to be a balance.”
In general, last year was unique for those in the real estate industry, as “practitioners of all kinds from Realtors and escrow officers to lending professionals, had to learn new rules, laws and regulations affected their respective businesses at a rapid-fire pace,” Liberatore said. “2009 was a challenge, but it was also a year of valuable educational opportunities.”
Number of residential home sales on Kaua‘i since 2004
Jan. Feb. Mar April May June July Aug. Sept. Oct. Nov. Dec.
2004 58 45 55 69 61 78 64 58 50 62 51 55
2005 57 50 52 63 60 68 49 55 70 54 39 45
2006 36 38 50 42 39 42 32 36 39 43 33 45
2007 30 30 46 41 39 46 33 21 34 19 24 30
2008 22 26 30 21 21 28 31 27 21 23 15 19
2009 10 10 21 23 15 21 27 21 14 32 23 36
Residential sales since 2004
2004 – 695
2005 – 669
2006 – 475
2007 – 409
2008 – 284
2009 – 260
Median home values since 2004
2004 – $499,000
2005 – $640,500
2006 – $675,000
2007 – $650,000
2008 – $615,000
2009 – $470,500
