Maui Real Estate Blog

Maui 2012 Bank Owned Property Market Report

This is a quick post looking at the impact of bank owned properties in the 2012 Maui Real Estate Market. Starting in 2009, bank owned properties (REOs) were an important force in Maui. On the negative side, bank owned properties were one of the bigger drivers of price decreases. Sellers had to adjust their prices to compete with the bank owned properties which frequently entered the market below comparable sales. On the positive side, REOs helped to provide some much needed inventory as conventional sellers waited on the sidelines hoping for improved market conditions. They also provided opportunity for buyers looking for values. In 2012, we saw the influence of bank owned properties decline in the Maui Real Estate market.

A Comparison of Maui Real Estate Sales Volumes for Bank Owned or REO Properties During 2011 and 2012

As you can see by the chart above, the volume of Bank Owned homes coming to the market came down significantly in 2012 from what we saw in 2011. There was a 39% drop in the number of REO homes coming on the market. There was a 61% drop in the number of REO condos that came on the market compared to 2011. Land is the only segment of the market where we saw more bank owned properties in 2012 than 2011. There was a modest increase of 8% more REO land listings than there were in 2011.

As you will see in the chart below, the decline in the total number of bank owned homes and condos coming on the market becomes more pronounced when you break 2011 and 2012 down into six month intervals.

This Chart Compares the Total Volume of Bank Owned Properties Coming on the Market at Six Month Intervals in 2011 and 2012

The bank owned condo market has really dried up. The inventory went from 146 REO condos listed in the first half of 2011 to only 33 listed in the last half of 2012. That is a 77% reduction in new listings. The REO inventory for single family homes experienced a less drastic cut, but still decreased significantly through 2012. The 72 REO homes listed in the last half of 2012 is 51% lower than the 146 listed in the last half of 2011.

What should we expect for bank owned inventory in 2013? Early signs suggest that 2013 may see similar trends to 2012 with even fewer REOs. As of today, there have only been eight bank owned homes, four bank owned condos and one bank owned lot listed since January 1. Discussions with agents who list bank owned properties suggest that their pipelines are relatively dry. To be clear, that doesn’t mean that there aren’t any pre-foreclosure properties on Maui. In fact, if you look at sites that track potential foreclosure listings, there appear to be quite a few properties in the process of foreclosure around the island.

If there are lots of properties potentially facing foreclosure, why won’t we see lots of bank owned listings? The answer goes back a few years to when Hawaii passed legislation hoping to aid residents facing foreclosure. ACT 48 was designed to give home owners facing non judicial foreclosure an opportunity to go through mediation with the bank. The goal was to facilitate loan modifications. Unfortunately, well intended legislation can have unintended consequences. Almost all of the banks were wary of the uncertainty of the mediation process. Instead of agreeing to this new process, the majority of the banks opted to start handling their foreclosures judicially. This process is longer and more cumbersome for the lienholders, but it still was more of a known entity than the mediated non-judicial foreclosures. There were relatively few properties in the judicial foreclosure pipeline prior to ACT 48. Even then, it was usually a 14 month process from start to finish. With a much bigger supply of potential judicial foreclosures, the process appears to be taking considerably longer.

The longer process has also led some banks to be more proactive about short sales. Bank of America has a significant number of the delinquent mortgages on the island. They have been proactively encouraging some delinquent owners to participate in a cooperative short sale program that has cash incentives for move outs. More importantly, they are not pursuing the deficiency balance on the loans. That means the bank isn’t trying to recover all or even any of the balance between what is owed and the proceeds of the short sale.

What does this mean for buyers looking for that outstanding bank owned value coming on the market? Well, you may need to be really patient. Perhaps some of these judicial foreclosures will be resolved in the second half of the year. Others think 2014 is looking more likely for the next wave of bank owned properties. We frequently get inquiries about bank owned vacation rentals. They were a small percentage of the bank owned inventory even when the inventory of REOs was significantly larger. The bank owned vacation rental friendly condo is especially elusive in the current market. Buyers may want to readjust their expectations and focus on other types of inventory. While an overall shrinking inventory has meant fewer rock bottom prices, there are still good values to be had among the conventional and short sale properties. If you are a determined REO shopper, be prepared to act quickly and strongly when these properties come on the market. Well priced REOs are frequently drawing multiple offers and sales prices that can exceed asking price. Contact the Maui Real Estate Team if you are considering buying a home, condo pr piece of land on Maui in 2013. We would welcome the opportunity to sit down to discuss your real estate needs.

Pete Jalbert

Maui Real Estate Blog

Unofficial May Maui Real Estate Statistics

June is already upon us. That means we are officially in to festival season on Maui. The Kapalua Wine and Food Festival gets underway today and The Maui Film Festival at Wailea is set to begin next week. It also means it is time to take a gander at the Unofficial Maui Real Estate Statistics. These are the numbers that I found by sorting through our Realtor MLS database. The Realtors Association of Maui should be releasing their own stats in the next few days. In the interim, here is a sneak peak at the numbers followed by a few thoughts on the market.

Maui Real Estate Sales Volumes
Chart Comparing Maui Real Estate Sales Volumes

By my calculations, there were 61 homes sold in May 2012 at a median price of $382,500. Last May, Maui Realtors reported 71 homes sold at a median price of $418,000. That is a 14% drop in volume and approximately a 9% drop in median price.

Thus far, Maui Realtors have reported 112 condos sold at a median price of $334,500 for May 2012. The May 2011 numbers were 114 condos sold at a median price of $349,500. That’s less than a 2 percent drop in sales volume and around a 4% drop in median price.

The Maui land market saw 17 sales in May 2012 at a median price of $330,000. By comparison, there were 15 sales reported at a median price of $275,000 in May of 2011. That is a 13% increase in volume and a 20% increase in median price when comparing this May to last May.

The Maui Real Estate market is still seeing significant influence from bank owned sales (REO) and short sales. There were a total of 49 bank owned and short sale transactions last month. Of the 61 homes sold, 22 were REOs and shorts. That is approximately 36% of the volume. Of the 112 condos sold, 24 were REOs or shorts. That is 21% of the transaction volume. Of the 17 land transactions, three were bank owned.

While there has been a lot of discussion of a hot market on the street, this is another month where sales volume under performed compared to last year. That is now four out of five months this year where home sales have been lower than last year. This is the second month this year where condo volume has been lower.

There are two things that I think are worth addressing from the paragraph above. The first is the perception that the market is on fire vs. the reality of the numbers. I also think it is worth exploring why the market is seeing lower transaction volumes compared to last year. Is it a reflection of decreased market demand or is market supply starting to have an impact?

Why do people think the Maui Real Estate market is performing better than the numbers would indicate? I am sure there may be a few Realtors who might be guilty of hyping the market as a means to inflate buyer interest. That comes with the territory when you are working with sales professionals. People want you to know that their product is hot to heighten consumer interest. In this case, the product of Maui Realtors is the real estate market. That being said, I don’t think all of those hyping the market are doing it as a ploy to increase their sales activity. I do think there are more Realtors keeping busy this year vs. last year. How are more Realtors keeping busy when there is lower sales volume? The answer to that may lie in the distribution of sales. The one area where we have seen a healthy drop in transaction volume is among bank owned properties. There were 39% fewer bank owned transactions this May vs. last May. Bank owned listings tend to be concentrated in the hands of a smaller pool of agents. While this pool of agents has seen fewer transactions. We have seen more activity outside the REO market. That activity has been spread across a much broader pool of agents.

The question of why activity is lower is a little tougher to answer. I am not sure that I am going to provide definitive answers or much more than anecdotal evidence. With that caveat, I surmise that the decreased inventory is playing an important part in the decrease in sales volume. Inventory is as low as it has been in the last few years. Some buyers have been frustrated by the limited number of properties on the market. Last year, there was an abundant and well priced REO inventory that was drawing buyers into the market and increasing transaction volume. Due to national and local foreclosure moratoria, we have seen fewer bank owned listings through the first half of this year. While there were high volumes of lower end condo deals last year, the limited bank owned inventory has meant a healthy reduction in transaction volume. There has been a 24% decrease in volume for condo sales under $200,000 between this year and last year. Many of the properties that are on the market in this segment are attracting bidding wars as buyers vie over the limited inventory. We have even seen some price increases among the low end condo complexes as demand exceeds the current supply.

The luxury condo market is an area where we have seen an even bigger reduction in sales volume. Sales volume is off 56% when you compare the number of condos sold over $1,500,000 through the first five months of this year with the first five months of 2011. This segment has not been impacted by reduced REO inventory. In fact, this segment has been mostly devoid of bank owned properties. We have seen a small reduction in new development inventory. The successful Hoolei complex is mostly sold out. Also, most of the premier units at Honua Kai have sold. The reduction of inventory as a result may be a factor in some of the reduction in volume. It certainly doesn’t account for all of the dip in sales activity. The odd thing is that we aren’t seeing a similar reduction in the luxury home market. Sales volume this year is within a few percentage points of last year. It will be interesting to see if we see any upticks in the luxury condo market as the year progresses evening out some of the discrepancy we have seen thus far.

What does this all mean for buyers and sellers? The song remains the same from the Maui Real Estate Team. Buyers will continue to see opportunities in this market. That being said, most of the good opportunities are attracting multiple buyers. Buyers should be prepared to act quickly when good deals become available. Buyers that require financing should make sure to be pre-approved prior to looking. Having a pre-approval letter at your disposal will bolster the strength of your offer. Most Sellers will find that market conditions remain challenging. While bank owned inventory is down some, they continue to have a negative impact on home values. Sellers will need to closely monitor recent comparable sales when going to market. Overpriced homes aren’t getting a lot of love from home buyers. If a seller has the capital, efforts should be made to prepare your property for sale. Having a home inspection prior to listing is an excellent way to identify and address potential maintenance issues that could cost you money, or worse, become deal breakers while your home is under contract. In this market, you need intelligent, experienced and ethical representation when you are buying or selling. Contact The Maui Real Estate Team with questions on the statistics or for assistance buying or selling Maui properties.

Pete Jalbert