LIHUE — Condominium and single-family home sales continue to rise since 2011, but experts caution that low supply and slow development could cause long-term problems. According to MLS statistics from Kauai Board of Realtors compiled by Old Republic Title and
LIHUE — Condominium and single-family home sales continue to rise since 2011, but experts caution that low supply and slow development could cause long-term problems.
According to MLS statistics from Kauai Board of Realtors compiled by Old Republic Title and Escrow, the 35 condo sales islandwide in July resulted in a $98,778,424 volume — a 53.8 percent increase over July 2012. The average price islandwide price is $323,750, with Hanalei the highest at $509,000, and Lihue the lowest at $163,000.
Lihue had the most condo sales in July with 17. There were seven each in Koloa and Hanalei, three in Kawaihau, and one in Waimea. From January through July there were 212 condo sales islandwide — with 180 for the same period in 2012.
Ron Margolis of the Kauai Board of Realtors said a contextual understanding, taking into account several seasonal and cyclical indicators, is needed when talking about condo sales. The market and total sales are factors, he said, but so is location, availability, type, cost, the range of buyers and number of offers.
Market distress from underwater mortgages, undervalued properties and going through a down cycle mean fewer deals, Margolis said.
The adjusted numbers show that condo prices have gone up, but more importantly he said there is less good inventory.
The Kauai market has different drivers that effect supply and demand, Margolis said.
The Kauai condo market is driven by mature or retired people, while relatively high unemployment has slowed on-island buyers of low-end condos while off-island buyers are fueling the high-end market.
“If you go above $500,000 that is a whole different dynamic and is an energetic marketplace,” he said.
Paul Brewbaker, Ph.D., an economist with TZ Economics in Kailua, addressed the July KBR members meeting and expressed concern that new housing growth has slowed to 0.5 percent on Kauai, while at the same time the population is growing at nearly 1 percent.
He said the 2008 county charter amendment effectively limits new transient housing, and has reduced existing inventory to an unsustainable level.
There were 40 single-family home closings in July compared to 37 last year on Kauai, according to MLS. The 266 sales through July produced a $180,116,305 volume which is 4.5 percent higher than the 240 last year.
The reduction of new growth is understandable in a slow market with adequate inventory, Brewbaker said to the Realtors. But in this situation, the sales volume of condo and single-family homes is in a moderate upward trajectory and experiencing demand.
The decrease of affordable low-end units and rising mortgage rates is creating a climate of consumer non-affordability, he said. Kauai’s “regulatory impediments” only increases the amplitude of this economic cycle.
“There are issues that hinder overall housing development on the neighbor islands as compared to a more urban Oahu, which Brewbaker has previously pointed out,” said County Planning Director Mike Dahilig. “Oahu has a more stable housing market relative to Kauai, with stronger job growth and generally lower unemployment rates than the neighbor islands.”
Kauai’s residential population growth rate is in decline with an approximate one-percent average annual growth rate between 2010 and 2040, Dahilig said. This is consistent with residential population projections developed by the state Department of Economic Development and Tourism.
This is in contrast to the relatively high population growth rate of more than 3 percent in some years between 1970 and 1990, he said. Since 1990, it has fallen below 2 percent and projections indicate this will continue for two decades.
The overall county population is still increasing and on a small island this is still requires significant planning, he said.
“The Planning Department is currently preparing a socio-economic analysis and forecast report that will serve as a foundation for the General Plan Update,” Dahilig said. “The report will examine population growth and develop projection ranges for households, housing units, jobs and employment.”
Housing Director Kamuela Cobb-Adams said affordable housing policy requires any development with a density exceeding 10 units to build, at most, 30 percent of those units to sell from below 80 percent to 140 percent of the Kauai median income.
“It also requires a hotel developer to do an assessment study to determine the number and price range of affordable housing units his project must provide,” Cobb-Adams said. “Time share units are treated as a housing project.”
Deputy County Engineer Lyle Tabata said the building permit process is transitioning to an electronic system called ePlan Review. This speeds up the permitting process by allowing for simultaneous review by the various state and county agencies and around the clock online access by the applicant.
“Like anything new, we do encounter some bumps along the way as we move toward full implementation,” Tabata said.
Jack P. Suyderhoud, Ph.D, professor of business economics at UH Manoa Shidler College of Business, said that building housing as an investor is always a gamble with high up-front costs and uncertain returns that may or may not be attractive depending on the market.
This is compounded when the development involves multiple units, he said. The risk-return equation is affected by macroeconomic factors of interest rates, personal income, unemployment, financing standards, and microeconomic factors of input costs, zoning, environmental regulations and taxes.
Low interest rates can create a bad situation with high regulatory barriers.
“Given this, policy makers have to be careful to balance the housing needs, wants, and aspirations of people with their other concerns of urban sprawl and protecting ag land,” he said.
Then the well-intentioned policies can have unintended consequences, he said. Protecting ag land can raise the cost of urban land to the point of making housing very expensive. The conflicting goals and disparate outcomes of housing policies confuses voters.
“Those who already own, like it when the value of their property increases and may support policies that cause such increases,” he said. “Those who don’t yet own would like to see greater supply and choice.”
• Tom LaVenture, staff writer, can be reached at 245-0424 or by emailing tlaventure@thegardenisland.com.
