Housing market holding strong

LIHUE —The real estate market on Kauai remained relatively strong through the first half of 2019, but overall sales figures across the island are down from this time last year, and the market could be in for a substantial downturn, Realtors said.

“The market is still really strong,” Broker CJ Halladay said during an interview. Halladay has been a licensed real estate agent on Kauai for 18 years, and keeps a close eye on the trends affecting his profession. He talked with TGI late last week about how property sales are faring so far this year and what home buyers and sellers can expect in the near future.

Halladay expects more of the slow downward trend in prices and the number of homes sold that he and other Realtors started noticing in the second half of 2018.

“We’ve been flat-lining for at least nine months, if not a year,” he said.

Halladay didn’t want to speculate about when the market will begin to take a more distinct downturn but said it will likely continue steadily for “a little longer before we see a dip.”

That dip, Halladay explained, is part of a regular cycle in the real estate market, with property values dropping or appreciating more slowly for five to seven years, followed by six to seven years of growth.

“We are at the top of the market,” he said.“Right now it’s still a sellers’ market, but we should eventually see a transition.”

Some good news is homes and condos on Kauai are still selling pretty well, and some neighborhoods and price points are continuing to attract an exceptional number of buyers willing to pay very competitive prices, according to Halladay.

For one recent home-buyer, Porscha Delafuente, who closed on a three-bedroom home in Waimea last month, price was a major obstacle to overcome. She started negotiating with the former owners of the 900-square-foot plantation home she now owns almost as soon as she saw it in February.

“It was the best thing I had seen,” said Delafuente, a teacher from Oahu who has been thinking about owning a quiet vacation home for a long time. “I’ve been dreaming for about two years but actively looking for a year.”

Delafuente said she and her Realtor, Kelly Liberatore, spent about six months checking out a dozen houses before they found the right one, and when the price wasn’t right, Delafuente got stubborn.

“I knew what it was worth,” she said. “So I had a pretty clear line in the sand.”

Eventually, Delafuente said she was able to talk the sellers down by about $50,000, and after a month or two dealing with what she described as “the lovely mortgage and appraisal process,” Delafuente closed on her first home.

“This is my escape hatch,” she said.

According to statistics compiled by Hawaii Information Service, which maintains a database commonly used by Realtors in Hawaii, the median sale price of single-family homes in Kapaa and Lihue is down slightly for the first half of the year, compared to the same period in 2018.

But the change is almost negligible, especially considering the more-severe drops elsewhere on the island. According to Halladay, the lower prices are attracting competition.

“Anything under $600,000 is moving really quick,” he said, while homes listed in the $600,000-to-$900,000 range are “sitting on the market a little longer,” and anything between $900,000 and $1.5 million has been “kinda hard to sell.”

Beyond that is the luxury market, which is rarely affected by the economic swings that influence the vast majority of American consumers.

From January to the end of June 2018, the median price of a home in Lihue was $609,000, compared with $579,000 in the first two quarters of this year, about a 5% decrease.

In the Kawaihau district, which includes Kapaa, Wailua and Anahola, the median sale price barely dropped at all, slipping less than a percent from $625,000 in the first half of 2018 to $620,000 to date in 2019.

Despite the fact that buyers are willing to pay a little less this year, single-family homes in centrally-located neighborhoods are still a valuable commodity, especially considering how markets elsewhere on the island are faring.

Median prices islandwide are down over 12% so far this year compared to 2018, from $732,000 to about $643,000.

The North Shore and Koloa single-family home markets have been hit the hardest so far, with homes selling for about 17 % to 18% less than what they did a year before.

Meanwhile, condo prices are on the rise. In every district on Kauai, the median sale price of condominiums has gone up substantially.

Islandwide statistics show that condos are going for nearly 40% more than they were by this point in 2018.

In Koloa, where the single-family home market is struggling, condo prices are way up, rising dramatically from the mid-$500,000 range in the first half of 2018 to a median sale price of $815,000 so far this year. It is the only area on the island where it costs more for a condo than a house.

On the Eastside, median sale prices for condos are up nearly 36% from last year, $268,000 in 2018 to $364,000 through the end of June.

The Lihue and Hanalei condominium markets are also doing well.

Fewer units were sold in both areas than compared to the first half of 2018, but the median condo price is 10% higher in Hanalei and almost 18% higher in Lihue.

“We’re seeing marked changes in the market,” said John Friedman, principal broker and co-owner of Kauai Aloha Real Estate.

Friedman discussed some of the recent developments in Kauai’s real estate market in an interview last week, drawing upon his nearly two decades of experience as a Realtor on the island, where he has lived for over 35 years.

“Single-family homes have taken the hardest hit,” Friedman said, discussing a downward trend in property sales volume that has affected real estate markets “pretty much across the board.”

But there is good news, according to Friedman.

“We still have very good interest rates,” he said.

Friedman believes President Donald Trump has been pressuring Federal Reserve officials to keep interest rates low in order to stimulate the economy.

At some point those rates will go back up, making potential buyers less eager to take out home loans.

But even though attractive rates have delayed a decline in real estate prices, Friedman said a downswing is inevitable.

“Prices are kind of at the top of the cycle,” he said. “Over the next year or two, I think we’ll see a 10 to 15% correction.”

That doesn’t mean people should abandon the thought of buying a home, Friedman said, but they should plan to be in the mortgage for the long haul.

“House-flippers beware. Long-term investors are still on fairly solid ground,” he said. “Historically, market prices have doubled every 10 years.”

Friedman explained that socio-economic factors also have to be taken into consideration when attempting to understand the real estate market.

For instance, he feels the behavior of Trump, who he described as “unpredictable,” could have a negative effect on consumer confidence, possibly making potential home buyers wary of entering a decades-long financial agreement in the face of instability.

Another Realtor, Catherine Pennell, who opened a Keller Williams Realty franchise on Kauai five years ago, shared many of the same opinions about the state of the real estate market expressed by Friedman and Halladay.

“I think we’re going to stay flat for a while,” she said.

But Pennell is optimistic about the long-term viability of real estate value on Kauai, and she is sure that buying property on the island will almost certainly turn out to be a good financial decision if the owner has the patience to wait out short-term fluctuations in appreciation rates.

“Twenty years ago, you could get a home for $200,000,” she pointed out. “I don’t think we’ll see those days again.”

Pennell also listed Kapaa and Lihue as the areas where houses are selling well, especially if the price is right.

“I think property in Lihue is getting snatched up,” she said. “In that lower price point — under $700,000 — it’s really moving fast, if it’s priced right”

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Caleb Loehrer, staff writer, can be reached at 245-0441 or cloehrer@thegardenisland.com.