‘Wheels came off’ real estate market

Hawaii Island has more than 500 foreclosures pending in the 3rd Circuit Court, appraisers say.

Compare that figure with the 1,289 active real estate listings the county has, appraiser Larry Baird said.

“It’s almost 50 percent of the inventory,” Baird said. “That would be a tremendous amount to absorb.”

Realtor Gretchen Lambeth, who tracks real estate listings and sales statistics for West Hawaii, disagreed, saying 500 foreclosures in court islandwide is not a big enough number to cause concern.

“Five hundred islandwide is a drop in our bucket,” she said, noting Kona can have more than 800 sales annually, and South Kohala can record almost 500.

Baird, who has several decades of experience in appraising West Hawaii real estate, said the concern among appraisers and some real estate agents focuses on what happens if a large number of those foreclosures exit the courts and enter the market at once.

“If we have a flood of the market, that’s disastrous,” Baird said. “You have a good chance the market’s going to come down.”

Abacus Real Estate Appraisal’s Rick Taylor was also concerned about those foreclosures, which people in the industry refer to as shadow inventory.

He said one number he focuses on when writing appraisal reports is the discount between asking and selling prices.

“Things are better, but I don’t think they’re turned around,” Taylor said.

Baird said if the shadow inventory were not in place, he might be ready to say the market was near, or even at, bottom.

Lambeth said 77 foreclosure or short sale properties are in escrow in West Hawaii right now, and another 37 are listed as short sales, she said.

Those same properties are likely included in the ones in court, she said, so that takes 114 out of the 500 foreclosures being processed.

“We don’t have floods of them,” she said. “It behooves the market to get rid of the inventory.”

Banks aren’t listing the homes at “last year’s prices,” either, she said, although some buyers may occasionally snag an exceptionally good deal.

Real estate agent Dave Lucas, of Koa Realty, said he sees another issue, on top of the foreclosures, facing the West Hawaii market.

“There is a spattering of first-time buyers,” Lucas said. “It’s very difficult to get into the market.”

Lenders, especially for foreclosures and short sales, are requiring documents quickly, and first-time buyers, many of whom do not have 10 percent to 20 percent of the purchase price to put down on the house, are competing against cash buyers, Lucas said.

He said he’s still seeing some properties listing at price levels he hasn’t seen in 20 years.

“Hopefully we can hang on,” he said.

He was critical of comments that Hawaii’s real estate market is anywhere near being in a usual cycle.

Right now, he’s seeing limited inventory, but also prices that don’t seem to be rising.

“That’s not a cycle,” he said. “That means the wheels came off.”

Lambeth’s experiences have been different. She said she has areas where she’s selling in which each new listing goes on the market for $5,000 to $10,000 more than the last one that sold, and those new listings are selling, too.

“People aren’t catching the market has changed,” she said. “It is moving at low prices.”