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How much prices will drop has a lot to do with location. Here on the Big Island, half the homes on the Kona side are second homes. In the resort areas, many home buyers used a lot of cash to buy. They will just hold. However, plenty of non-resident speculators bought in the resort areas. We are now seeing those "short sales" starting to happen.
On the Hilo side, few properties are second homes. When the recession starts stealing jobs, and small businesses start to fail, things may get uncomfortable in the Hilo area. My crystal ball says Puna will be a good place to look for great buys. But, Puna may not speak to you.
That said, local folks are financially conservative, which may save principle residences from becoming distressed. I would be suprised to see home prices fall lower than 2002. But then we are living in suprising times. My two cents.
How much prices will drop has a lot to do with location. .... I would be suprised to see home prices fall lower than 2002. But then we are living in suprising times. My two cents.
You are right about location. Each location will see its own drop, whether 50% or 20%, depending on the mix of adjustable financing/cash/30-year-fixed's used to buy in that area.
But we are already seeing 2002 prices in some places of the country! We are at August-2002 pricing where I live. I know, because that's when I bought, and my home is now worth what I bought it for, and its still dropping. We just had our first foreclosure on the street, and we're working to keep that yard up, and in speaking with the listing realtor working with that bank, the home will list for a price that will bring mine to 2001 values! Over a 50% drop! And this is a "nice" area! Good schools, new name brand high end shopping, good yards....As Hotzcatz predicted...
We already are at 2001 values in some parts of the country!
Hawaii will not be immune from this. Some areas will see the same drop to 2002 or 2001 pricing. Some will not.
Not to say to pass on a dream home if you can get fixed financing or pay cash -- but I wouldn't buy if I was only going to be someplace a couple of years. Only buy if it's your perfect home and you won't be moving for a long long time, because it will drop in value before it moves back up.
We in Hawaii from 96-2000 when things were bad and there were a lot of forclosures and houses were "cheap"...fast forward and they are now climbed almost 75-100% in prices in the areas we have kept our eyes on (interested in moving back when the time is right). I think that the potential is there for this to be worse on Hawaii's economy than even the late 90's were because that impact on the economy was the Japan bubble burst...and the US Mainland was able to help shore up Hawaii's tourism with its sound financial situation. This time, there is a global issue, and Hawaii can not look in the other direction to focus for tourist...it is impacting Asia at the same time the US Mainland is being hit.
People are much less likely to vacation when times are bad...and Hawaii remains very dependent on the tourist dollar in so many ways.
We are closely watching and hoping that this presents an opportunity for us to buy in Hawaii, because things WILL improve...but you have to be in the position to ride it out for sure.
"....But we are already seeing 2002 prices in some places of the country!"
Alohacat you made good points in your post.
I recently saw a survey of people with discretionary income to whom vacations are very important. Hawaii was the number one destination and the Caribbean was two. I agree Hawaii will be the last place Americans will stop selecting for their vacations, if it comes to that. Hawaiian Airlines recently added significantly more seats.
In the Kona-Kohala area (Big Island), the real estate market recovered from the Japanese collapse around 1999/2000. I bought a couple modest homes here in the $200,000s in 2002. Last week a three year old pre-foreclosure home was put on the market at $299,000. It received 16 offers. I understand the winning bid may be something like $365,000 (don't quote me). If prices get back to the low $200,000s, I will buy as much Hawaii real estate as I can and so will a lot of other people with great credit and little debt.
I realize a lot of the country is already at 2001 prices. But this is Hawaii. This real estate is prized around the world. And China Airlines is now flying into Honolulu.
Today, look for good deals from people who bought in 2005 and later. Builders are offering outstanding incentives. If you are negotiating with a builder on standing inventory, ask for more than the offer that got you in the door.
In the meantime, watch and wait. When the market turns, if you're doing your homework, you'll know it.
Right now we still have the elections in front of us and they are putting massive financial and political duct tape on anything that looks like it is ready to fall. I'm expecting all sorts of chaos once the elections are over. Remember back to all the other election years? How bright and rosy everything seems right before an election and then things get back to grimmer everyday stuff afterwards? Well, we've got a huge volatility in the markets and financial chaos in front of the election. Hard to figure how bad it is gonna get afterwards but I have a feeling it won't be rosy.
We also won't see really good deals until the banks start taking write downs on the existing foreclosed properties. If you go to a foreclosure auction the first bidder there is the bank and they bid what they are owed on it. If they are owed more than it is worth then who else will bid? As far as I know, it then goes to a Realtor to sell and then what?
We also need folks to buy these distressed properties who won't need a job to pay for them since our economy is failing along with the rest of the world. We could use some farmers since food is something that can be sold locally. We don't have a lot of farm folk here and the plantation workers weren't farmers - more like outdoor factory workers - so there is a lot of farming that could be done but the folks don't know how.
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