Maui Million Dollar Home Sales ($1.0M+) – Day 1 of 10 – “Where are the million dollar homes located?”

September 18, 2013 2 Comments

Since January 1, 2012, a total of 231 “million dollar plus” homes have sold in Maui County, generating a total dollar volume in excess of $525 million.

There are many ways that Hawaii real estate appraisers analyze luxury sales statistics.  Because a proper market study for this segment would run many pages, I will be posting one analysis per day for the next ten days.

Day 1 of 10 – Maui Million Dollar ($1.0M+) Single Family Homes By District

Consider the following graph and chart:

Day 1 - Maui $1.0M Sales By District

Maui Million Dollar Home Sales By District

Maui Million Dollar ($1.0M+) Single Family Homes By District
Sold From 1/1/2012 through 9/16/2013
District # of Sales % of Total
Wailea / Makena 42 18.2%
Lahaina 24 10.4%
Kaanapali 23 10.0%
Kula / Ulupalakua / Kanaio 20 8.7%
Maui Meadows 19 8.2%
Kihei 16 6.9%
Haiku 15 6.5%
Kapalua 15 6.5%
Spreckelsville / Paia / Kuau 15 6.5%
Makawao / Olinda / Haliimaile 11 4.8%
Napili / Kahana / Honokowai 11 4.8%
Wailuku 5 2.2%
Lanai 4 1.7%
Pukalani 3 1.3%
Molokai 2 0.9%
Olowalu 2 0.9%
Hana 1 0.4%
Kahakuloa 1 0.4%
Kipahulu 1 0.4%
Maalaea 1 0.4%
Total 231 100.0%

Maui’s three resort districts of Wailea / Makena, Kaanapali, and Kapalua are in bold.  As shown, almost 35 percent of Maui’s million dollar home sales since January 1, 2012 come from these three master planned communities. The second tier visitor areas of Lahaina, Kihei, and Napili/Kahana/Makawao log an additional 22 percent of the “million dollar” single family home sales on the Valley Isle.

Maui Resort and Second Tier Neighborhoods

Maui Resort and Second Tier Neighborhoods

 

Bottom line:  Location matters.

While upcountry locales are showing strong sales figures in the million dollar and above segment, Maui’s master planned resorts of Wailea/Makena, Kaanapali, and Kapalua lead the way.

Questions or comments?  Please leave them in the comment  box below, I would be happy to clarify and/or expand.

Aloha, Chris

Filed under Hawaii Oceanfront Real Estate, Hawaii Real Estate Data and Analysis, Hawaii Resort Real Estate, Statistics Tagged with , , , , , , , , , , ,

Kauai Industrial Properties – Building Age Survey

September 13, 2013

The island of Kauai is home to some 313 industrial buildings on 237 parcels containing more than 2.5 million square feet of gross building area.

A typical industrial warehouse in Puhi, Kauai, Hawaii

A typical industrial warehouse in Puhi, Kauai, Hawaii

As shown in the table and pie chart below, nearly 90 percent of Kauai’s industrial buildings are less than 50 years old, with the oldest surviving structures being in the 70-79 year old age group.

Kauai Industrial Buildings

Zoned Limited Industrial (IL) and General Industrial (IG)

Age in Years

Count

% of Total

0-9

37

12%

10-19

57

18%

20-29

107

34%

30-39

39

12%

40-49

38

12%

50-59

9

3%

60-69

7

2%

70-79

19

6%

Total

313

100%

Kauai Industrial Buildings By Age - Pie Chart

The graph below depicts the extent of construction that took place after Hawaii became a State in 1959 (fifty-four years ago), and the large proportion of industrial buildings that were developed in the period of 1984 through 1993 (buildings aged 20 to 29).

Kauai Industrial Buildings By Age Group - Column Chart

A pdf copy of the County of Kauai Comprehensive Zoning Ordinance (CZO) can be downloaded here.

Of particular interest to Kauai industrial developers are the descriptions of the Garden Isle’s industrial districts:

(a) There are two (2) Industrial Districts:

(1) Limited Industrial (IL)
(2) General Industrial (IG)

(b) Limited Industrial shall include uses which are generally in support of
but not necessarily compatible with permissible uses in the Commercial District.

These Districts shall normally be established within reasonable accessibility and
convenience to General Commercial Districts and where there is adequate access to
a major thoroughfare.

(c) General Industrial shall include all business, industrial processing, or
storage uses that are generally considered offensive to the senses or pose some
potential threat or hazard to health, safety and welfare.

This District shall not be located adjacent to residential or resort districts unless there is physical or geographical protection from those characteristics of the uses considered to be offensive or hazardous.

If you have any questions of comments, please leave them in the comment box below.

Aloha, Chris

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Hawaii Four Seasons Hotels – A resort real estate appraiser’s friend when data is tough.

August 13, 2013 1 Comment

Imagine you’re an appraiser in Hawaii, and you’re given the enviable task of appraising an oceanfront homesite in the Manele Resort on Larry Ellison’s island of Lanai.

There are only eleven oceanfront lots currently developed in the resort (as shown roughly in the aerial below) and only one lot has sold in the last decade (Lot 130, for $3,612,500 in May 2011):

Lanai Oceanfront with Parcel Shapes

Manele Resort – Eleven Oceanfront Homesites
Photo Source: Bing Maps

The sale of Lot 130 is a godsend, but other than that, what is an appraiser to do for comps?

We can’t very well do a one comparable appraisal: We’ve got to go off island.

Two resort areas of the State of Hawaii that are similar to Manele Bay in terms of climate and resort appeal are Wailea (Maui) and Hualalai (Big Island).  All three neighborhoods have oceanfront homesites that could potentially provide sale comparables, and all three master planned communities are home to a prestigious Four Seasons resort!

Four Seasons Manele Bay

Four Seasons Manele Bay

Four Seasons Hualalai

Four Seasons Hualalai

Four Seasons Wailea

Four Seasons Wailea

What gives? Being (arguably I’m sure) the most prestigious hotel operator (“flag”) in the State of Hawaii, Four Seasons resort properties must meet certain strict criteria in order to qualify as a potential member of the brand.  Each of the three resorts on Lanai (Manele), Maui (Wailea), and the Big Island (Hualalai) are world class hotels that were constructed between 1989 and 1996, and have been well maintained in the interim.   As such, the physical plant of each resort should have reasonably similar cost/value attributes. (The Hualalai resort is a newer “bungalow-style” design that likely has more market appeal)

Under the assumption that each of the three properties benefit from first class or better improvements, differences in room rates likely capture a good portion of the market’s preference for a specific location/resort.  For an appraiser starved for data in a highly-unique sub-market like Manele Bay/Lanai, hotel room rates can provide much needed market support for potential location adjustments.

Consider the following:

FOUR SEASONS – HAWAII OCEANFRONT RESORTS 
Best Available Room Rate – August 19, 2013
Island Resort Hotel Name Year Built Room Rate
Big Island Hualalai Four Seasons Resort
Hualalai at Historic Kaupulehu		 1996 $920
Maui Wailea Four Seasons Resort
Maui at Wailea		 1989 $595
Lanai Manele Four Seasons Resort
Lana’i at Manele Bay		 1989 $459

That’s right, the best available room rate at the Four Seasons Hualalai is DOUBLE the same at Manele Bay!

The following chart shows the relationship of each hotel to its Manele cousin, and the indicated adjustment to equate each room rate to Manele:

Downward appraisal adjustments of 23 percent (Wailea) are serious business, never mind 50 percent allowances (Hualalai).  But for the appraiser who is digging deep for market support for a location adjustment, comparative hotel room rates are an interesting value indicator to consider.  In a future article I’ll examine the three neighbor island resorts in greater detail and see if these price relationships hold.

Questions, comments?  Please leave them in the comment box, I would be honored to clarify and/or expand.

Aloha, Chris

Filed under Appraisal Theory, Hawaii Real Estate Data and Analysis, Hawaii Resort Real Estate Tagged with , , , , , , , , , , , , ,

Interest Rates and Hawaii Residential Prices–Are They Really Connected?

August 2, 2013 3 Comments

I posted an article a few days ago that examined the theoretical relationship between interest rates and purchasing power.  The calculations beg the question “are interest rates and Hawaii home prices actually connected?”

Logic says “of course!”, the data suggests “not so much!”

Let’s assume a 20 percent down payment, market loan fees (points), and monthly payments of 35 percent of a household’s gross income.

The following chart shows State of Hawaii median income, condominium median prices, single family median prices, and national average interest rates for 30-year mortgages from 1987 through 2011 (the latest year for which all data points are available).

Sources: U.S. Census Bureau, Freddie Mac, Hawaii State Data Book, and Chris Ponsar, MAI

Based upon the income and interest rates shown, the median Hawaii family could afford a monthly payment of $1,021 in 1987, and $1,722 in 2011.  These payments equate to affordable home prices of $114,370 in 1987, and $341,898 in 2011. (A pretty hefty increase in purchasing power, driven largely by lower interest rates)

Lets see how the figures track with historic price fluctuations in the Hawaii residential real estate market.

Hawaii Home Affordability vs Median Prices

The red and green trendlines track single family and condominium prices in the study period–as shown, condos and single family home prices track pretty well.

How about affordability (the purple trendline) based on interest rates ?

The long term trend is clearly positive for all variables, with affordable price, condo price, and single family price all being about 3x higher in 2011 than they were in 1987.

But that’s not the question most folks are asking.  The market participants I talk to are generally trying to answer the question “If interest rates go up (this year, or next year), will prices go down (this year, or next year)?”  Is it a causal relationship?

What do you think?  Personally, beyond long term growth, I don’t see a strong relationship in the data, and neither is a solid correlation revealed in geeky statistical analyses.

Why isn’t the correlation better?

Higher interest rates do equate to lower affordability for a particular household, but why doesn’t that relationship translate well into median prices?

A few suggestions:

  1. Median prices are not the best way to measure market trends–overall dollar volume and the raw number of sales may provide more insight (and material for a future article)
  2. Hawaii’s population continues to grow faster than new housing units are developed–fundamental demand grows incrementally in both good times and bad. (Which explains the overall upward trend in prices, but not the ups and downs in particular years)
  3. When monthly payments go up, families still need shelter.  For those families contemplating a home purchase, spending on discretionary items will likely suffer first (say vacations or luxury items)–these spending habit adjustments allow families to absorb a certain amount of extra monthly payment caused by increased interest rates.
  4. When prices start to decline, sellers may opt not to put their home on the market.  Financially stable homeowners can afford to “hold out” for their desired price, which restricts supply, and in turn has a stabilizing effect on prices.

Frankly, when I began researching the data for this article, I expected to see a pretty reasonable relationship between affordability and median prices–instead, we see that from the perspective of a current homeowner, prices appear not to fluctuate on a “dollar for dollar” basis with interest rates. From an appraiser/appraisal perspective, it is imperative to observe how the market reacts to the rising rates that are currently anticipated, not just automatically assume lower prices if interest rates rise.

Comments and/or Questions?  Please leave them in the comments section below–I’d be happy to clarify or expand.

Aloha, Chris

Filed under Hawaii Real Estate Data and Analysis, Macroeconomics Tagged with , , , , , , , , , ,

Kapahulu – Diamond Head: Unscathed by the Great Recession?

July 27, 2013

I was at lunch with a friend this week, and he suggested the idea that home prices in his neighborhood (near Diamond Head) may have escaped the Great Recession altogether and, in fact, appreciated a bit along the way.

While it is common knowledge that the worldwide financial crisis did great damage to real estate prices in much of the United States, Hawaii was impacted less, and it is certainly possible that a desirable sub-market (like the Diamond Head area) could have emerged unscathed.

I decided to check it out.

MLS Local Market Statistics – Kapahulu – Diamond Head

The graph and data table below shows MLS sales statistics for the Kapahulu – Diamond Head area from 2002 through June 2013:

Source: Honolulu Board of REALTORS® and Chris Ponsar, MAI

Source: Honolulu Board of REALTORS® and Chris Ponsar, MAI

The graph clearly shows the amazing run up in prices experienced in the subprime era (pre-2008), with median price peaking at over $800,000 in 2007 (number of sales topped out at 319 in 2004).

A closer look reveals the supply/demand relationship: As the median price continued to climb after 2004, fewer and fewer buyers were pulling the trigger.  Conversely, when median prices bottomed out in 2009, demand began to increase.

The following table analyzes the data a little differently:

Kapahulu - Diamond Head - Year over Year

From the peak of the market in 2007, the Kapahulu – Diamond Head submarket declined four and nine percent in 2008 and 2009, respectively, and about 13 percent overall, before recovering a bit in 2010.

Considering these figures, it looks like my friend’s neighborhood took a moderate price hit after the collapse of Lehman Brothers….but our work isn’t done.

Wait a minute.  Kapahulu – Diamond Head, that’s kind of a mixed bag, isn’t it?

It is.  And as it turns out, much more mixed than I originally thought.

The Honolulu Board of REALTORS®  defines the Kapahulu – Diamond Head Local Market Area as including sections (1) 3-1 through (1) 3-4.  The map below approximates the boundaries of this area.

Sources: Bing Maps, City and County of Honolulu DPP, and Chris Ponsar, MAI

Sources: Bing Maps, City and County of Honolulu DPP, and Chris Ponsar, MAI

As you can see, the following neighborhoods are included in this statistical area:

  • Kapahulu
  • Diamond Head
  • Kaimuki
  • Wilhelmina Rise
  • St. Louis Heights
  • Palolo

If you’re familiar with Honolulu, you’ll quickly realize that is quite a diverse spread of neighborhoods!  Great aloha to be had everywhere, but buyers looking to purchase around Diamond Head might not consider the other areas to be substitutable options.

Could my friend be right?  Is it possible that his neighborhood (Diamond Head) is a micro-market that survived the Great Recession better than the other areas in his MLS Local Market?  It makes logical sense that a desireable location like Diamond Head could have bucked the trend–let’s dig deeper.

Time to bring out the big guns – Paired Sales Analysis

My friend lives in Section (1) 3-1, which is shown on the maps below:

City and County of Honolulu, Department of Planning & Permitting

City and County of Honolulu, Department of Planning & Permitting

City and County of Honolulu Tax Map - First Division, Zone 3, Section 1

City and County of Honolulu Tax Map – First Division, Zone 3, Section 1

Commonly referred to as “Paired Sales” in Hawaii appraisal circles, “Paired Data Analysis” is defined as:

paired data analysis

A quantitative technique used to identify and measure adjustments to the sale prices or rents of comparable properties; to apply this technique, sales or rental data on nearly identical properties is analyzed to isolate and estimate a single characteristic’s effect on value or rent. Often referred to as paired sales analysis.

Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010).

In order to accomplish this, I researched sales activity in Section (1) 3-1 (my friend’s general neighborhood) from 2004 through 2010, focusing on sales of single family homes that were listed by the selling agent as being in “average” or better condition.

My research found 22 “pairings”, single family homes in (1) 3-1 that sold in late 2004, 2005, 2006, or 2007 (the peak of the market), and later resold from September 15, 2008 (Lehman Brothers)  through the end of 2010.  Of these 22 pairings, 10 were substantially remodeled in the interim, and thus not considered.

(1) 3-1 Paired Sales Pie Chart

After the 10 remodeled pairings were removed, 12 “pure” pairings remained–resales of homes that were substantially similar in the time frame being studied.  These 12 sales are analyzed in the chart below:

Diamond Head Paired Sales

Click To Enlarge

As you can see, 10 of the 12 paired sales show price declines in the study period, ranging from negative 0.6 percent to negative 25.6 percent.  The two positive indicators showed upward figures of 1.4 and 0.6 percent.  The overall average price change for the 12 “pure” pairings (not remodeled) in Section (1) 3-1 was negative 8.3 percent.

Conclusion: Still looks like a price drop after Lehman Brothers, but not a huge one.

In the end, even though the Kapahulu-Diamond Head MLS statistical zone includes a diverse range of neighborhoods, it appears that the immediate Diamond Head area, like much of the United States, did indeed suffer a setback (negative 8.3 percent according to this analysis) in the early portion of the worldwide financial crisis.

Filed under Appraisal Theory, Hawaii Real Estate Data and Analysis Tagged with , , , , , , , ,

Hawaiki Tower Analysis – An alternative to traditional comps and adjustments.

July 22, 2013

For many appraisers in Hawaii, a common but challenging assignment is to value a single unit in a high-rise luxury condominium project.

There are dozens of luxury high-rises in Honolulu.  This article takes a look at Hawaiki Tower, a 46-story condominium with 417 residential units. It is situated immediately across the street from Ala Moana Shopping Center and benefits from highly desirable ocean views.

Hawaiki Tower HeroPhoto Credit: Mathew Ngo – REALTOR®

At first, it might seem straightforward to value a unit in this building.  For example, in the past 12 months, 14 residential units at Hawaiki Tower have sold, as shown in the chart below:

Hawaiki Sales - Past 12 MonthsSources:  HiCentral MLS, and Chris Ponsar, MAI

From an appraiser’s point of view, what’s not to love?  We’ve got a bunch of seemingly clean data to work with. This is largely true, but a closer look reveals the following:

  • 10 sales of two-bedroom units in the past year, and 4 sales of one bedroom units.
  • Floor levels range from 8 to 43
  • Unit sizes range from 842 to 1,618 square feet of living area.
  • Sale prices range from $575,000 to $1,616,000
  • Prices per square foot range from $642 to $1,187

In other words, sale prices and unit characteristics fall in a wider range than one might expect, and an appraiser looking at any particular unit will be challenged to provide solid market support for adjustments.  Not impossible, but definitely difficult.

Let’s look at an alternative: The Multiplier Method

The following chart tracks resales at Hawaiki Tower since construction completion in 1999.

Hawaiki Resale as pctSources:  HiCentral MLS, Hawaii Information Service, and Chris Ponsar, MAI

At first, this might appear to be a summary of run-of-the-mill sale prices, but it isn’t.  This chart tracks each sale price at Hawaiki Tower as a percent of its original developer’s sale price.   As shown, the 150 percent threshold was crossed sometime around 2004, with the march past 200 percent taking shape in 2012. (We’re definitely getting into appraiser geek stuff here)

The benefits of this approach are rooted in the idea that when Hawaiki Tower was first completed and sold out in 1999-2001 (a time of relatively stable pricing where almost 75 percent of the project closed in the first 12 months after completion), the developer and more than 400 buyers came to individual agreements on price.  Buyer preferences for items such as ocean view, unit size, floor level, floor plan, etc are “baked in” to the original developer closing prices.

If we take another look at the Hawaiki Tower sales from the previous 12 months, a tighter trend reveals itself in the “% of original price” and “multiplier” columns:

Hawaiki Multiplier Chart

In the prior 12 months, on average, the 10 two-bedroom sales at Hawaiki Tower traded for 2.2x their original sale prices.  One-bedroom units are trailing a bit, selling for about 1.9x the original developer’s price–a possible indication that one-bedroom units are less desirable, in comparison to two-bedroom units, than they were in 1999, a market preference that many real estate agents and appraisers have observed.

What does it all mean?

Based on the sales activity at Hawaiki Tower over the past 12 months, units have closed in the range of 1.6-2.8x original prices, with most activity happening in the 1.9-2.3x range.  As a property owner, real estate agent, or other professional interested in market value, it would seem reasonable to set value expectations in these ranges.

If you’re interested to know what your unit sold for originally in the 1999-2001 sell out period, send me a note and I’ll zip it over to you (the whole 400-unit list seems a bit overwhelming for this article).  Alternatively, you can look up the public record sales activity for any property on Oahu at http://www.honolulupropertytax.com.  Go to the property search tab and enter your address or tax map key if you know it (again, drop me a line if I can help).

Comments and/or Questions?  Please leave them in the comments section below–I’d be happy to clarify or expand.

Aloha, Chris

Filed under Appraisal Theory, Hawaii Real Estate Data and Analysis, Honolulu Luxury Condos Tagged with , , , , , , , , , , ,

Resort Homesites – Front Row vs. Second Row – A Big Island Paired Sales Analysis

July 18, 2013 2 Comments

Hawaii real estate appraisers are often asked to value residential properties that have spectacular ocean views.

Not a bad gig, I admit.

I recently did some appraisal work in Maniniowali, a luxury subdivision in the Kukio membership community on the Big Island of Hawaii.

I was valuing a front row lot, and this time, fortunately, there were several recent sales of similar properties to analyze.  But this is not always the case.  In high-end resort subdivisions, sales occur relatively infrequently–as such, quality comparables are sometimes hard to come by.

When appraising oceanfront or front-row properties, it is common to have no recent front-row sales in the subject subdivision.  But often times, there are timely sales of second row lots that can give an appraiser a better sense of values in the front row market.

Consider these two properties at Maniniowali:

Manini Paired Sale AerialImage Source: Bing Maps  (Click to Enlarge)
Manini Paired Sales Tax MapHawaii County Tax Map  (Click to Enlarge)

The aerial photo and tax map show a front row homesite, Lot 14, and a second row homesite, Lot 6.

For persons interested in real estate analysis, especially appraisers, these transactions are a stroke of analytical luck because they:

  • Closed just six days apart, in early May 2013
  • Both have ocean views
  • Are similar in size
  • Have the ability to purchase a membership in the same exclusive club (Kukio)

In short, a perfect opportunity for a pure paired sales analysis! (An appraiser geek term that speaks to the ability to test the value impact of a single, isolated variable)

The chart below shows a paired sales analysis for this set of comparables:

Manini paired saleSource: Chris Ponsar. MAI  (Click to Enlarge)

As shown, the second row lot at Maniniowali sold for approximately 27 cents on the dollar compared to its front row counterpart.  Said differently, Lot 14 sold for 3.6 times the price of Lot 6.

As an appraiser, I use relationships like this to help me in situations where I am challenged for data.  Obviously, this is only one pairing, and I’ll post similar paired sales of front row and second row lots as I come across them, but to the extent this relationship becomes a consistent trend, an appraiser may be able to check the reasonableness of their value conclusions for a front row lot against sale prices of second row lots, and vice-versa.

Comments and/or Questions?  Please leave them in the comments section below–I’d be happy to clarify or expand.

Aloha, Chris

Filed under Appraisal Theory, Hawaii Real Estate Data and Analysis, Hawaii Resort Real Estate Tagged with , , , , , , , , , , ,

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