Distressed Market Impact on Property Condition
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Distressed Market Impact on Property Condition

The question often asked, how is the housing bubble effecting prices? Buyers from the mainland are looking for investment or a second home, this is their lead in question. They are quite surprised to find out the real estate problem being experienced on the mainland has not had such a great impact in Hawaii.

Since 2010 the active inventory in the condo market for Metropolitan Honolulu has been trending down. It has not been drastically significant as one would think but noticeable none the less.  For example in February of 2010 the active inventory for the condo market in Honolulu was 1322. In February of 2011 it was 1311. While this month the active inventory is 1176. Of particular interest is while inventory has been dropping, the housing bubble has been correcting itself. The question often asked, how is the housing bubble effecting prices? Buyers from the mainland are looking for investment or a second home, this is their lead in question. They are quite surprised to find out the real estate problem being experienced on the mainland has not had such a great impact here. For example, in February of 2010 the median sales price for a condo in Honolulu was $315,000. In 2011 and 2012 respectively it was $360,000 and $305,000. This is not the big deal they are looking for.

One thing of particular interest besides the sticker shock of the higher cost of real estate here on the island is what some refer to as square footage shock. For example during the same period of February 2010, 2011 and 2012 the price per square foot of condos in Honolulu tells even a more dramatic picture. The cost per square foot respectively was $386, $437 and $385. This tells a little different picture essential the cost in 2010 and 2012 are the same where from the median sales price the conclusion could have been different.

On top of looking for a good deal, comparing how the market is trending there is still this question of inventory and the impact the condition of the property given the current real estate climate. Intuition would lead one to think the reason why inventory has been trending down may be because sellers are holding onto property waiting for the market to move in their favor. This would make sense if you did not have to sell. On the other hand for those who have to sell what is the likelihood quality may be an issue.

The above table gives the impression the quality of what is on the market does not have as much of an impact as one might think. Out of 1059 condos on the market in the month of February 2012 almost half were categorized as in excellent condition. Now before going any further, there is a caveat. The listing agent generally makes this determination. Although they may be a little bias it is in their best interest to be reasonable. Interesting enough, when sampling those properties classification as in fair condition before looking individually at the distressed categories 2.36% or 25 condos out 1059 were identified. Keep in mind most banks will not give a conventional loan on a property with this label. Then a direct search of distressed properties, (Bankruptcy, Foreclosed, short sales or lender sales). Compare the 25 to 3 classified as fair among those properties identified as being in distress. Another category worth noting properties labeled as average. There were 208 noted before looking at distressed properties. 13 properties as average when focusing on distress units only. The other labels identifying property condition seem to follow similar patterns. What does all this mean? Well it would least appear that agents representing listings appear to be doing a fair job identifying the conditions of properties. On the other hand there does not seem to be any overwhelming evidence that property condition of those in a distressed situation here on Oahu are impacting the quality of inventory.

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Comments (1)

Thanks for all this information. Out of votes today so Tweeted. Have a good day! : )

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