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The Bottom. Are we there yet?

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I’ve come to the conclusion that I may very well miss the bottom of the market.  Most Realtors and prognosticators on Maui are saying it has already come and gone.

Volume of activity would certainly indicate that this is possible since YTD transaction volumes are up over 33% for single family homes, condo sales 49% and land sales 32%.  Median YTD prices however,  are down 8% for single family homes, down 21% for condos and down 19% for vacant land. The monthly median sales prices were about even for September year over year, up slightly in condos and way off in land sales, due to the low volume / high volatility.  In reviewing the price comparisons on a monthly basis there is no detectable, sustained pattern. The median sales price was higher in some months of 2009 than 2010, and sometimes the median sales price was lower in 2009 versus 2010.  This inconsistency highlights the importance of using the year to date numbers and looking at trends versus one time snapshots.  A positive trend month over month for several months will convince me that we are off the bottom.

We’ll be releasing our unofficial real estate statistics for the month of October in the next day or two, in the meantime, here is a look at a few leading indicators aside from volume and my thoughts regarding those indicators.

The first leading indicator is Days on Market.

Medium Chart

As you can see, in Maui County, the Days on Market for three of the four quartiles are going up.  An increase in Days on Market typically means that market conditions are worsening.  I believe that the increase in Days on Market that we are seeing is mostly a function of the large numbers of Short Sales on the market that take such a long time to process versus indicating worsening market conditions.  The increasing volume of transactions over the course of 2010 seems to support this hypothesis.

The second leading indicator is the total inventory of single family homes on Maui.

Medium Chart

This chart / trend would normally seem to indicate a market with dramatically improving conditions for sellers.  We’ll have to watch this chart carefully to see if it is just the normal seasonal inventory adjustment, which should start to climb again in the next 6 to 8 weeks, or a sign the prices will soon begin to stabilize and possibly even increase.

The third leading indicator represents the list or asking prices of Maui County Single Family homes by quartile.

Medium Chart

This chart tells me that asking prices are still coming down and that perhaps the increase in transaction volume represents the intersection of more realistic sellers and buyers taking advantage of the opportunities that these sellers present.

Where does that leave me with respect to the question of have we hit bottom?  Much like the indicators, my feelings are mixed.  My conclusion is that I am only smart enough to know that I just don’t know.  I know that I have witnessed some great opportunistic buys over the course of this year, but I am not convinced that there isn’t still more pain to follow. I believe that The Great Recession was a structural recession as opposed to a cyclical recession.  These types of events take substantially longer to recover from.  De-leveraging is a painful and time consuming process and we don’t seem to be near the end game, so I don’t expect any major recovery in Maui Real Estate prices for quite some time.

In the long run, I remain a Maui bull.  Maui is an extraordinary place to live, to visit and to own property.

I still live by the adage if you buy for love on Maui, you won’t be disappointed. That being said the Maui Real Estate Team will continue to report what we see, hear and experience and analyze it so that we can help you can make the most informed real estate decisions possible. Contact us today if we can be of further assistance!

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11/2/2010

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