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Forecasting condo values

By Staff | Sep 13, 2012

In determining value, many refer to location, square footage, views and interior dcor. But there are several other factors that need to be considered before buying or selling property:

A) Supply and demand trends – There have been only four new developments from Lahaina to Kapalua in the past 20-plus years, and there is only one future development on the books: Pulelehua. Direct oceanfront property is naturally limited and thus will always be sought-after. The available inventory in West Maui has shrunk so dramatically in the past year that we are starting to see prices going up in certain neighborhoods

B) Distressed inventory – The number of current and future short sales and disclosures. Although it is hard to know exactly how many properties will become distressed, the delinquency in maintenance fees or special assessments may indicate what units may be available for sale in the near future. According to the Mortgage Bankers Association, the mortgage delinquency rate in Hawaii fell to 4.8 percent in the first quarter of 2012. As a reminder, the national rate for mortgage delinquency was in the 2 percent range before 2007.

C) Property maintenance – Special assessments imposed to update or modernize a property may determine owners to sell, increasing the available inventory. Buyers are encouraged to read all the condominium documents provided in escrow to learn about significant upcoming maintenance issues and the association’s ability to finance such projects.

D) Demographics like Baby Boomers and aging ownership – In many areas, ownership did not change in many years. At Kapalua Golf Villas, a property of 186 units, there have been 229 sales since 1996 until today (there is no data available in the Multiple Listing System prior to 1996). More than half of these transactions occurred in the past ten years. According to the National Association of Realtors, we trade up or down every six years.

E) Loan availability – In the past few years, banks have shied away or increased minimum down payment requirements on condotels (properties where vacation rentals are allowed), properties with maintenance fee delinquency above 15 percent and properties with low owner occupant ratio.

Work with a Realtor that has access to the above-mentioned information and can help you do all your homework before you buy or sell real estate. Timing is crucial in real estate, and although the market is recovering, we will see some oscillations.

The chart shows price evolution for one-bedroom units at Kapalua Golf Villas between 2002 and 2010. Views and interior appointments were not factored in.

Although distressed inventory took a very small share of the market, the current special assessment and the aging ownership have led to a dramatic reduction in prices, presenting opportunities for savvy buyers.

Current listing prices for large one-bedroom units are between $390,000 and $435,000, while two-bedroom units are priced between $525,000 and $945,000.

To learn more about these listings, please call Mihaela Stoops, Realtor Broker with Maui Estates International, at (808) 357-4000.