Hawaii Real Estate Daily

Steep housing price declines have largely wiped out widespread extreme overvaluation of residential real estate, according to a new study released Thursday morning. Global Insight, an economic forecasting and financial analysis firm, said its Q2 update of housing valuation analysis found that home prices continue to fall across the country but at a slower rate than observed previously.

Nationwide, house prices are down 4.8 percent from a year ago, this housing cycle’s peak high point according to Global Insight’s data. Prices fell in the second quarter in 152 of the 330 metro areas covered in the study, representing 46 percent of all single-family housing units in the U.S.

The second quarter decline of an annualized 5.3 percent compares with a 6.6 percent annualized decline in the first quarter, which represented 81 percent of metro areas covered. In comparison, 295 metro areas posted declines in the fourth quarter of 2007.

California, Florida and Michigan continue to account for the most severe losses, representing 43 of the 50 worst performing metropolitan areas. California and Florida had been among the most overvalued states for the past several years. Michigan continues to struggle with the impact of a slumping economy. Other housing markets in the bottom 50 include Las Vegas, Nevada; Phoenix, Arizona; and Washington, D.C.

Six housing markets, down from a peak of 51 in 2005, and virtually unchanged from the first quarter of 2008, were judged extremely overvalued in the second quarter, amounting to 1 percent of the nation’s single family housing stock. Extreme overvaluation is limited to Hawaii, Washington, Oregon and Utah. Pockets of overvaluation remain where they have been - along the East and West Coasts - while the middle of the country remains either fairly valued or undervalued, though some previously overvalued areas of the Northeast and Coastal California and Florida are now rated as fairly valued.

While think-tank said its data suggested that many home prices in a growing number of local markets now “reflect a healthy balance in relation to long-term fundamentals,” the group also asserted that real estate markets are not ready to recover.

“The building and financing excesses of the boom years have yet to be worked off,” according to the report. “There remains a huge inventory of unsold homes on the market with foreclosures adding more daily.”

James Diffley, group managing director of Global Insight’s regional services group, said that “though the fundamental overvaluation has largely been removed, downward pressures on home prices remain strong.”

Credits: Housing Wire

The Kapolei Ewa region is dubbed as the up and coming second city, but population-wise, there’s actually another development boom that could be just as large, if not larger.

Question is, can roads in the area handle it all?

Thousands of new homes slated for Central Oahu has Mililani, Waipio and Waikele residents alarmed, especially since the already congested H-2 freeway, is the only main artery in and out of Central Oahu.

In three years, the first of 1500 homes will appear in Waiawa. By 2012, 3500 more will sprout on this farmland.

It’s all part of Castle and Cooke’s Koa Ridge development, slated for Central Oahu.

As shown from Chopper 8, the project site is near Mililani and Waipio. Waiawa Gentry also calls for an additional 5,000 homes in this area as well.

And residents fear, headaches created by the addition of 10,000 plus new homes will make H-2 traffic unbearable.

“And being the fact that the rail is not going to come out to Mililani and being that our growth is going to be so large that it’s not in the making and it really concerns us because we’re all going to driving on that one way in one way out to Central Oahu,” said Melissa Vomvoris, a Mililani resident.

Residents say they’re for growth, as long as its smart growth.

“Where the homes go in the roads go in at the same time, the schools go in at the same time so it all meshes together and the impact is a lot less yes there will also be a impacts but we can minimize them with proper planning,” said Vomvoris.

Castle and Cooke says it plans to spend more than $50,000 for interchange and roadway improvements.

It’s also working with the Department of Transportation to address traffic concerns. The developer says it is willing to fork out the money to address those concerns, it’s just a matter of figuring out what’s the best solution.

Castle and Cooke also plans to reduce traffic by building a major employment center at Koa Ridge. That way, people who live there, can work there rather than commuting.

Groundbreaking for Koa Ridge and Castle & Cooke Waiawa is set for 2009.

Credits: KHNL

Kapolei’s urban core is taking shape as a second city, with tens of thousands of square feet of new office and retail space to be built in the next 10 years.

Just eight parcels of land, less than 35 acres, are unspoken for in the City of Kapolei, according to officials with the James Campbell Co., which as The Estate of James Campbell began master-planning Oahu’s second city some two decades ago.

Several large projects are under construction, including Kapolei Commons, the Kapolei Judiciary Complex and Costco. More are due to start within the next year, including two office-retail buildings and a retail shopping village. A Wal-Mart store also is planned for a 25-acre parcel near the H-1 freeway entrance at the corner of Farrington Highway and Fort Barrett Road.

Creating jobs

“At the core of all of it is really job creation,” said Brad Myers, president of Kapolei Property Development Co., one of the former estate’s real estate arms. “For every job we create, that’s a car off the freeway.”

Of the projects on the boards, the first phase of the Kapolei Pacific Center, Avalon Development Co.’s office and retail project, likely will be the first to break ground this fall.

The project was recently redesigned for value engineering to mitigate cost increases, said Christine Camp, president and CEO of Avalon Development Co. The first building will be 40,000 square feet, with retail on the first floor, retail and offices on the second floor, and topped by a floor of office space, mostly for smaller users, she said.

“It’s slightly delayed, like a lot of projects,” Camp said. “The leasing is still pretty strong. We have very good interest from our initial targets.”

The four-building project will be built in four phases on three acres adjacent to the Kapolei Library along Manawai Street that Avalon bought for $6.7 million in December 2006. Avalon also is buying for an undisclosed price a 2.7-acre parcel that is zoned for business-mixed use adjacent to the Kapolei Pacific Center property.

Nearby, Maryl Group hopes to break ground on the first phase of its office-retail project, on three acres diagonally across from the state office building.

“We’ve recently reconfigured our development plan and we have scheduled now a phased multibuilding program up to 10 stories,” Maryl Group President Mark Richards said. “It would be taller than anything that’s there today.”

Each building will be between eight and 10 stories tall, with up to about 60,000 square feet of ground-floor retail and restaurant space topped by approximately 360,000 square feet of office space, he said.

The first building is in the design phase, and preleasing already has started, but no start date has been determined. Timing for the second and third phases will depend on demand, Richards said.

A third office project, which was to have been built by California-based Kahl and Goveia on three acres behind Island Pacific Academy, has been scrapped, and the land is back on the market.

Foodland Super Market plans to start construction early next year of its new store and shopping village on four acres along a yet-unbuilt stretch of Kapolei Parkway. The site of the 56,320-square-foot Kapolei Village Center is across from a half-dozen mixed-use parcels that are under negotiation, and which border D.R. Horton’s planned Mehana at Kapolei residential project.

More homes and jobs

The James Campbell Co. is working on three future projects that also will enhance the second city — the Kapolei Harborside Industrial Park, the Kapolei West residential and retail project and the Makaiwa Hills residential project. Combined, the three developments will add 6,500 homes and more than 7,000 jobs to the area.

In the meantime, the company is working on building out some $180 million in roads and other infrastructure by 2010 so that the planned projects can proceed on schedule, Myers said.

“It’s a pretty large undertaking,” he said. “I think it’s the largest private-sector [funded] public infrastructure initiative that I’ve ever heard about [in Hawaii].”

Credits: Pacific Biz Journals

The University of Hawaii has received $60 million for capital improvement projects throughout the state.

The Legislature appropriated the funds, which will be used for maintenance, repairs and health and safety projects.

More than $58.5 million will be used for repairs and other facility improvements at all UH campuses, according to a statement from Gov. Linda Lingle’s office. UH Manoa will receive $41.6 million for planning, design and construction of improvements; UH Hilo will receive $4.1 million for upgrades; UH’s seven community colleges as well as UH-West Oahu will receive $12.2 million; and $500,000 will cover facility assessments and audits.

Health and safety projects for improvements to address health, safety and building code requirements will receive more than $1.4 million.

The university expects to start construction on all of the projects by June 2009.

Credits: Biz Journals

It’s still anyone’s guess whether Honolulu’s real estate market, which peaked in 2005, has bottomed out or is gearing up to land.

Caution from real estate buyers continued to translate into few sales and lower prices on Oahu last month. However, the rate of decline has softened, and prices in a few luxury neighborhoods picked up.

Single-family home sales dropped 26 percent in July, and condominium sales declined 20.1 percent, according to statistics released yesterday by the Honolulu Board of Realtors. More than half of single-family homebuyers paid more than $620,000 for a house in July, a 3.1 percent decline from the year-prior $640,000. Meanwhile, the median price paid for a condominium in July decreased a scant 1.5 percent to $329,900 from $335,000 a year ago. It also took sellers longer — 52 days for a home and 42 days for a condominium — to turn their listings into solds.

The median prices in neighborhoods like Wahiawa, the Ewa plain and Makakilo experienced substantial declines as problems with the subprime market made their way over to Hawaii.

However, sales were up in luxury Kapahulu/Diamond Head and Waialae/Kahala — an indicator that demand for Hawaii still exists among those that can afford it.

Caution from real estate buyers continued to translate into few sales and lower prices on Oahu last month, but the rate of decline has softened and prices in a few luxury neighborhoods picked up.

It’s still anyone’s guess whether Honolulu’s real estate market, which peaked in 2005, has bottomed out or is gearing up to land. However, it’s safe to say that lackluster consumer confidence, which has been sharply hit by the mainland mortgage crisis, the frenetic stock market and the rising cost of fuel and other necessities, is slowing down the market.

“We are seeing the market plateau, but we aren’t seeing wild swings any way,” said Scott Higashi, executive vice president of sales for Prudential Locations LLC. “The net effect has been relatively mild overall. I hope it maintains itself but you never can tell.”

Single-family home sales dropped 26 percent in July, and condominium sales dropped 20.1 percent, according to statistics released yesterday by the Honolulu Board of Realtors. While the market drop was still in the worrisome double-digit category, the percentage drop was not as dramatic as in June when both categories posted year-over-year 30-percent-plus declines.

“The rate of decline has softened a bit, and this could signal that we’re nearing the bottom of this slower market, but we need to see a few more months of data to confirm this,” said Harvey Shapiro, HBR research economist.

More than half of single-family homebuyers paid more than $620,000 for a house in July, a 3.1 percent decline from the year-prior $640,000. Meanwhile the median price paid for a condominium in July decreased a scant 1.5 percent to $329,900 from $335,000 a year ago. Again, the decline was not as widespread as in June, when the median price of a single-home fell by 8.8 percent from the year-earlier period and the median price for a condominium fell by 1.9 percent.

“The number of resales in the Oahu housing market may be starting to stabilize at these reduced levels,” Shapiro said. “Our prices are still staying near current levels, although these softer market conditions may require more seller concessions to make a deal.”

It also took homeowners longer to sell their properties last month, said Dana Chandler, HBR president. Single-family homes needed 52 days to sell, and condominiums took 42 days, both increases from last year’s 44 and 38 days, respectively, Chandler said.

“Buyers may be more cautious with the current state of the economy, but so far our markets still seem to be operating normally, and Honolulu continues to provide a stable environment for both buyers and sellers,” Chandler said.

Oahu’s slower market should not be mistaken for a bad market, Higashi said.

“Prices by and large have maintained themselves, and owning a home is still a good idea,” he said. “People who need to buy and want to buy are finding great opportunities.”

Neighborhood by neighborhood, the performance is different on Oahu, said Chason Ishii, president of Coldwell Banker Pacific Properties.

Oahu neighborhoods in which a greater percentage of buyers used subprime loans or other creative financing to purchase homes are starting to see market declines due to rising foreclosures and short sales, which is when the lender agrees to take less than what is owed on the mortgage from a distressed owner, Ishii said.

“Prices in neighborhoods like Wahiawa, the Ewa plain and Makakilo are substantially down,” he said. “We had more subprime activity in these markets, so we are starting to see more short sales and foreclosures affecting these neighborhoods.”

Wahiawa experienced the largest month-to-month, single-family-home drop of any region, with the median price falling 23 percent.

Still, strong gains in luxury markets like Kapahulu/Diamond Head and Waialae/Kahala, where financing has historically not been as big an issue, demonstrate that demand for Hawaii remains strong, he said.

“Most luxury buyers are cash buyers, and they are not affected by the stricter underwriting standards,” Ishii said.

Single-family home sales increased 50 percent last month in the Kapahulu/Diamond Head region. Sales also went up 25 percent in Aina Haina/Kuliouou and 7.7 percent in Waialae/Kahala.

“Typically, the luxury homeowner has more staying power and can hold on to their properties even with lifestyle changes,” Ishii said. “First-time homeowners or owners in areas where more subprime loans have occurred generally don’t have as much staying power.”

Credits: Star Bulletin