LIHU‘E — Losing a home is difficult, not just financially, but emotionally, said Julie Black, principal broker and owner of Kaua‘i Dreams Realty. The economy has taken a toll on island homeowners, with the number of foreclosures skyrocketing over the
LIHU‘E — Losing a home is difficult, not just financially, but emotionally, said Julie Black, principal broker and owner of Kaua‘i Dreams Realty.
The economy has taken a toll on island homeowners, with the number of foreclosures skyrocketing over the past year. As of Friday, there were 425 properties listed as foreclosures, on RealtyTrac’s Web site. August 2008 saw the sharpest uptick in the number of filings at almost 140; that figure dropped to about 70 last month.
“Lately banks are taking notice of their inventory,” Black said, noting Hawai‘i wasn’t a “priority” for lenders until about a year ago, when institutions previously concentrating on states like California and Florida started turning their attention toward the Pacific.
“Because of the economy, with job losses and market values going down, people just quit and let go,” said Phil Fudge, principal broker of Kaua‘i Landmark Realty.
When individuals unable to make payments on their home default on their mortgages, they are forced into pre-foreclosure. After they are contacted by their lender, they might have options, including selling their home at a loss to the bank in a transaction called a short sale, or the bank might place the home in a public auction and ask the tenants to vacate, brokers explained.
If these options, including the public auction, do not pan out, the bank will list the property for sale — properties at that point are known as bank-owned, real-estate-owned, or REO.
There are currently 112 pre-foreclosures across the island as well as 196 bank-owned, three government-owned, and 114 soon-to-be-auctioned properties on Kaua‘i. Of those homes in flux, more than 200 are located in Lihu‘e, more than 100 in the Kapa‘a/Wailua area, about 60 on the North Shore, some 30 on the South Shore and more than 10 on the Westside, according to RealtyTrac.
Out of the 222 recorded sales so far this year — already a low number, Fudge said — 10.8 percent were “distressed sales,” meaning they were REOs or short sales, according to Multiple Listing Service.
Out of the total number of residential homes and condos currently for sale, about 10 percent are noted to be in a distressed situation.
“The short sale process is a long and extended process,” Fudge said. He predicted the number of short sales will rise by the end of the year.
Gail Paris of Vision Realty, who sells REO properties, said she also expects the number of REO sales to keep climbing before the year is over. She also said a “majority” of foreclosures she has witnessed have been centered around homes which had a Bank of America mortgage (formally known as Countrywide) attached to them, a company now largely known for selling sub-prime loans like hotcakes.
On the other hand, with year-to-date median home values dipping from $650,000 to about $470,000 this year, prices are becoming more affordable for those who used to be “priced out of the market,” Black said, but added that acquiring a loan is no longer an easy feat.
More affordable home values is the only positive side of the foreclosure story, Fudge said.
“It’s really an unfortunate situation for people losing their homes … but the market just went way out control,” he said. He also said Hawai‘i may not have been as affected by sub-prime lending as other parts of America.
If homeowners do find themselves in a financial bind, they have other options aside from foreclosure, he added.
It’s not really in the banks favor to take the property away from the homeowner, but the problem won’t get solved by burying your head in the sand either, he said.
The ripple effect of foreclosures sweeping the nation is also wrecking havoc upon the island’s economy, sending shock waves in many directions, including the visitor industry, Fudge said.
When visitors don’t arrive, vacation rentals go unoccupied and money that was once used to pay for mortgages dries up. Plus, the lack of tourism hurts full-time residents and homeowners, because their income is generally reliant upon the industry, and when it slows down, jobs are harder to come by, he said.
“I think foreclosures are really more of a product of unemployment and the economy on the Mainland, with people not traveling as much,” Fudge said. “Since we’re such a tourist-based economy, anything having to do with the visitor industry impacts us tremendously.”
For more information on how to prevent going into foreclosure, visit www.kauaiforeclosureseminar.com
• Coco Zickos, business and environmental writer, can be reached at 245-3681 (ext. 251) or czickos@kauaipubco.com.
