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October, 2006 - Newsletter for the Maui Market
Don't forget, we provide a free Automatic E-mail Notification Service where an automatic email notification goes out to specific recipients when ever a new listing becomes available for a particular condominium complex. In each of these notifications includes a link to view the brand new listings in the MLS. We DO NOT SHARE YOUR EMAIL ADDRESS or your contact information with anyone. To subscribe to our Automatic E-mail Notification Service, please send us an email at Won@JamesBFoster.com with your first and last name, your email address, and the condo complex you wish to be notified of.
The current real estate market is like a gyroscope that has been knocked off center and has not yet righted itself. The Hawaii market is still unsettled and often follows the West Coast market by 6 to 12 months when markets there begin to change. Prices have been falling in many West Coast markets and as typical in real estate there are isolated pockets where prices have not yet started adjusting.
Mortgage rates have dropped in September and are lower than they were during August but still not anticipated to exceed 7% in the next several months. As of October 3, 2006 rates are around 5.875% if a borrower is willing to pay 2 points for their loan on a 30 year fixed rate.
Previously home owners and renters were not paying more than 25% of their monthly income on housing and in many areas now the real estate appreciation has pushed that percentage to as high as 50% with doubling up occurring and often more than one family in rental homes or purchasing home together. There should be some clearing in the real estate market window as we move towards the end of the year.
In the Maui real estate market, at the beginning of July, 2005 there were 165 condominiums for sale in the West Maui area and the total value was $159,356,997.00; August, 2005 there were 166 condominiums for sale with total value of $154,446,497.00; September, 2005 there were 176 condominiums for sale total with value of $163,215,390.00; October, 2005 there were 177 condominiums for sale with total value of $168,464,220.00; November, 2005 there were 199 condominiums for sale with the total value of $188,377,265.00; December, 2005 there were 231 condominiums for sale with the total value of $222,669,115.00; January, 2006 there were 226 condominiums for sale with the total value of $226,520,200.00;February, 2006 there were 280 condominiums for sale with the total value of $281,793,835.00; March, 2006 there were 297 condominiums for sale with the total value of $286,082,559.00;April, 2006 there were 350 condominiums for sale with the total value of $317,599,199.00; May, 2006 there were 354 condominiums for sale with the total value of $321,932,077.00; June, 2006 there were 362 condominiums for sale in the West Maui area and the total value was $333,616,070.00; July, 2006 there were 392 condominiums for sale in the West Maui area and the total value is $346,937,598.00; August, 2006 there were 393 condominiums for sale in the West Maui area and the total value was $344,119,142.00; September, 2006 there were 413 condominiums for sale in the West Maui area and the total value was $369,322,455.00; and at the beginning of October, 2006 there are 408 condominiums for sale in the West Maui area and the total value is $ 366,608,574.00. The condominium for sale inventory since July, 2005 has been as low as 165 and is up to 408 for October 2, 2006. The “for sale” inventory continues to increase.
As of August 2006, the total condominium sales for West Maui during the month of August, 2005 were 52 and the total value was $31,852,104.00; for the month of September, 2005 total condominium sales were 58 and the total value was $39,539,021.00; for October, 2005 total condominium sales were 38 and the total value was $23,503,291.00; for November, 2005 total condominium sales were 48 and the total value was $35,051,564.00 ; for December, 2005 total condominium sales were 47 and the total value was $26,101,467; for January, 2006 total condominium sales were 42 and the total value was $28,574,643.00;for February, 2006 total condominium sales were 48 and the total value was $32,995,078.00; for March, 2006 total condominium sales were 40 and the total value was $32,199,584.00; for April, 2006 total condominium sales were 43 and the total value was $41,898,525.00; for May, 2006 condominium sales were 51 and the total value was $39,644,886.00; for June, 2006 condominium sales were 40 and the total value was $ 32,533,500.00;for July, 2006 total condominium sales were 30 and total value was $26,212,000.00; for August, 2006 total condominium sales were 27 and the total value was $31 ,375,500.00;and for the month of September, 2006 as of 10/2/06 in the MLS data, total condominium sales were 28 and the total value was $ 23,831,000.00 The total condominium sales for August, 2005 was 52; September, 2005 was 58; October, 2005 was 38; November, 2005 was 48; December, 2005 was 47; January, 2006 was 42; February, 2006 was 48; March, 2006 was 40; April, 2006 was 43; May, 2006 was 51; June, 2006 was 40; July, 2006 was 30; August, 2006 was 27; and September, 2006 was 28.
For previous condo sale details, go to our web site, www.JamesBFoster.com and click on Condo Sales. For the time period of 1/1/2006 to 8/30/2006 the average price for a home on Maui was $1,001,331.00 which is up 5% from a year ago for the time period of 1/1/05 to 8/30/05 when the average price was $949,145.00. For the same time period the average price for a Fee Simple condo on Maui was $810,744.00 which is up 56% from a year ago for the same time period when the average price was $520,916.00 according to the RAM statistics.
We have gone in to the MLS database and pulled information for 2000 through 2006. In 2000 - 654 condominiums sold in the West Maui area for a total value of $209,064,010; in 2001 - 605 condominiums sold for a total value of $271,681,337; in 2002 - 730 condominiums sold for a total value of $240,178,915; in 2003 - 737 condominiums sold for a total value of $319,748,466; In 2004 - 700 condominiums sold for a total value of $375,033,467; and in 2005 - 682 condominiums for a total value of $408,582,315.00. To date for 2006 (January thru September) 350 condominiums have sold for a total value of $ 289,774,716.
Mortgage Rates as of 10/2/06 from Town Island Mortgage, LLC – Hse/Condo: 5.875% 30yr fixed 2.0 pts (6.12 APR); 6.125% 30yr fixed 1.0 pt ( 6.25 APR); 6.50% 30yr fixed No Points ( 6.57 APR). No Docs: 6.50 % 30yr fixed No Points ( 6.57 APR); No MI 90%: 6 .375% 30yr fixed 1.0 Pt (6 .5 APR); $1M Interest Only: 6.375% 30yr fixed 1.0 Pt (6.50% APR); No Down 80/20 6.50%, 30yr fixed 1st 1.0 Pt. (6.62 APR) No Income, 100%, & Stated Land loans (Pts incl. origination)
If you would like to view the most current sales statistics for Maui or West Maui Condominiums, you can go to my web site www.JamesBFoster.com and click on Condo Sales in the upper left corner of the home page. If there are any specific condominium complexes that you wish to be notified by email when a condominium becomes available for sale, send me an email as I check the MLS data about four times daily, and if a new listing comes on the market, I immediately notify any clients who have requested that information. Many owners also like to track what the units are selling for in the building where they own which they can do from my site.
Some recent news about what is going on in Maui.
Sansei Kapalua has reopened - One of the favored restaurants in West Maui, Sansei Seafood Restaurant & Sushi Bar, in the Kapalua area closed when the mall it was located in was demolished. It is open again for business and now located at 600 Office Road, up the hill from the Ritz-Carlton Kapalua and their phone number is 808-669-6286. It is situated in a stand-alone building in the new Honolua Village above historic Honolua Store. Sansei is island-renowned for its Thursday and Friday late-night menus and karaoke from 10 p.m. to 1 a.m. All guests over 21 years of age get 50 percent off all sushi, appetizers and drink specials – and singing karaoke is thrown in for free. They will be open for dinner seven nights as week – just like before – beginning at 5:30 and running until 10 p.m. So the early-bird specials will remain the same seven nights per week. Just be seated and then place your order by 6 p.m. for 25 percent off of your food tab.
Another brush fire on Maui burned 2,900 acres at Kahikinui along the slopes of Haleakala. The largest section involved 2,332 acres stretching from the roadway nearly to the 4,000-foot elevation between Manawainui and Kepuni gulches. A second section burned 665 acres in the Kahikinui Hawaiian Homes ranch lands.
Although the fire was estimated to have spread to 5,500 acres at one point, Tam said the actual burned area was determined to be a bit more than 2,900 acres based on an evaluation completed Tuesday.
The rain came but did not end our water worry – Heavy trade showers the weekend of September 23 rd boosted water flow into the Upcountry system while helping to keep demand down, according to the county Department of Water Supply. The Kahakapao Reservoir remains at a third of its 100-million-gallon capacity and there’s no assurance that the showers will continue so we are being asked to conserve water. The winter rains don’t show up until late November and the recent trade showers were not the long, soaking winter rains that restore the watershed.
Hawaii room rates reach record high average in August - Hawaii set a record in August with average room rates of $198.78. Maui’s occupancy rate rose from 82% to 84.4%. The average daily room rate of almost $199 was a record for any month. With Maui leading the way, state lodging businesses have been able to raise their rates by double-digit percentages, although occupancy gains have begun to level off. West Maui enjoyed nearly as high an occupancy rate, 87.5 percent, which was up from the previous year. However, inventory was down. The average West Maui room went for $253 a night, so that operators improved their revenue per available room (RevPAR), which jumped by $33 to $221.
Mercedes-Benz Championship – If you are interested in attending the Mercedes-Benz Championship at the Plantation Course at the Kapalua Resort during January 1 st to January 7 th 2007, you can call 1-877-772-5425 for ticket information. This event brings people from all over the world and accommodations are filling up fast.
Medical Facilities on Maui – Dr. David Sakamoto, administrator at the State Health Planning and Development Agency decided NO on the Certificate of Need for the proposed Malulani Hospital on Maui. This was very disappointing. If you have an opinion regarding his deciding NO on the issuance of the Certificate of Need (CON) send an email to Dr. David Sakamoto at SHPDA@DOH.Hawaii.Gov.
Oahu offers a lesson for Maui - Oahu traffic is approaching a point of no return and there is a serious effort to establish a light-rail system serving the heart of Honolulu. It is a good time for Maui to consider a similar people-moving system.
Maui didn’t become an autocentric community overnight. Mass transit will not happen overnight. Now is the time to plan an efficient, environmentally sound way to move people around the island. If you look at a map of Maui some 90 percent or more of the land needed for a light-rail system running from the Kahului Airport to Wailea and Kapalua stands empty but it won’t stay that way for long. Honolulu faces the cost of buying developed property for any rail system it builds. There is still time for Maui to avoid that cost. The tourists can be taken off the road for the journey to the resorts. The rental car companies could relocate to the resorts and the afternoon crush on the airport-resort highways would be eased by hundreds of cars each day. Maui should not wait until traffic here is as bad as it is on Oahu. County officials should acquire the land corridors needed for a light-rail mass transit system now.
Traffic on the Honoapiilani Highway, DOT and the Lahaina Bypass – T he state Department of Transportation has again advertised a request for proposals from contractors to design and build what’s known as Phase 1A, a two-lane road running from Lahainaluna Road to the future Keawe Street extension. The Keawe Street extension is a Maui County project that will connect to the bypass segment to relieve traffic at the Lahainaluna Road-Honoapiilani Highway intersection. Governor Lingle said she expects the Phase 1A bid to be awarded before the end of this year. Meanwhile, work on an environmental impact statement for the next phase of the Lahaina bypass is under way. The state is also working on gaining public use of cane haul roads for use by motorists as alternative routes.
Real Estate & Financial Planning Tips
Home Prices Finally Hit Wall - The price of existing homes declined nationally for the first time in 11 years in August, signaling that the long-awaited other shoe has finally dropped on the real estate market. Home sales have been slowing for months but sellers appeared to be holding out to get their price. Now the pressure to sell is intensifying, leading to a drop in house values across the country.
Real Estate and Financial Planning - Two major laws have been passed this year critical for real estate and financial planning.
1) The Tax Increase Prevention and Reconciliation Act of 2005. Passed in May 2006, this new law establishes a higher Alternative minimum tax (AMT) exemption, extends the 15 percent capital gains and dividend rate (5 percent if you're in the lower tax brackets), allows anyone to convert to a Roth IRA in 2010 and beyond, and raises the age limit for "kiddie tax" to 18.
Alternative minimum tax (AMT) is a thorn in many people's sides. The new law will raise the exemption amount to $62,550 for married filing jointly (up from $58,000) and $42,500 for single taxpayers (up from $40,250), but only for 2006. This AMT increased exemption amount is for one year only. These increases are small and will have minimal impact on most planning.
The lower capital gains tax and tax on certain qualified dividends were scheduled to expire at the end of 2008. The new law will extend that through 2010. That means that if you're in the 10 percent or 15 percent ordinary income tax bracket, you'll pay 5 percent on capital gains from now until 2008 and 0 percent from 2008-10. For those people in ordinary income tax brackets above 15 percent, the capital gains tax rate will stay at 15 percent until 2011. At this point, it looks like these rates will go back to 20 percent for capital gains and as high as 39.1 percent on dividends in 2011. If you're doing future planning, you'll want to make sure you keep these higher rates in mind. If you think that taxes will increase in the future, you may want to sell securities sooner rather than later to take advantage of the fairly benign capital gains rates now.
Roth IRA conversions are being used as a way to reduce minimum distribution requirement when the owner turns age 70 1/2. One of the barriers we run into is that you can't convert unless your adjusted gross income (AGI) is $100,000 or less. The new tax law will eliminate that income threshold so that anyone can do a Roth conversion. But not until 2010. At that point in time, you'll be able to recognize the conversion income either in 2010 or average it over two years. If ordinary income tax rates do go up in 2011 as scheduled, a lot of people will want to take advantage of converting in 2010. Even if your income is over $100,000 now, you can make nondeductible contributions to a traditional IRA and then convert the entire balance in 2010.
"Kiddie tax" refers to the tax that is owed on unearned income (like interest and dividends) of a minor child. Currently, if a child is under age 14, the first $850 is tax exempt, the next $850 is taxed at the child's rate, and anything above $1,700 is taxed at the parents' rate. Under the old law, once children were 14 and older, they paid income tax at their own lower rates. The new tax law pushes up the age to 18 and net unearned income above $1,700 will stay taxable at the parents' rate until the child is 18.
2) The Pension Protection Act of 2006 was passed in August and covers 529 plans, charitable contributions, and pensions. The tax benefits of 529 plans are no longer scheduled to disappear after 2010. So if the "sunset" issue was preventing you from using a 529 plan to save for your child's or grandchild's college education, cross that off the list.
If you find yourself with a tax refund, you'll now be able to direct the IRS to deposit up to $4,000 ($5,000 if you're over age 50) directly into your IRA account.
The Pension Protection Act makes two important changes to rollover rules. For the first time ever, in 2007 and beyond, a nonspouse beneficiary will be able to directly roll over a deceased benefactor's retirement plan, like a 401(k), into an inherited IRA. This inherited IRA will need to be opened in the name of the deceased and payable to the beneficiary. This is good news for any beneficiary who inherited a retirement plan which would allow for distributions only over a five-year period. With the new law, required minimum distributions for the beneficiary can stretch over the beneficiary's lifetime--extending the tax-deferral advantage. Just keep in mind that the direct rollover starts only in 2007.
A second major change to the rollover rules is that effective in 2008, you will be able to roll over your company retirement plan (like a 401(k)) directly to a Roth IRA. Right now you have to roll your company retirement plan proceeds into a traditional IRA and then convert. This new law skips that middle step and allows you to go directly to a Roth.
One caveat: You still must have AGI (adjusted gross income) of less than $100,000 to convert to a Roth until the year 2010.
There are other important changes and you should review the Pension Protection Act with your financial planner and accountant to see how it might apply to your particular situation.
Lease-options - As the real estate market continues to change, sellers may want to consider Lease-options which is a real estate lease of a house, condominium or commercial property, which gives the tenant the option to buy the property and offers both the tenant and landlord many advantages. The renter has the choice of buying the property or not by the end of the lease term. With a lease-purchase, the contract requires the tenant to buy the property, usually within a year or two. But a lease-option doesn't force the tenant to buy.
Lease-options work especially well when the local market has either an oversupply of house and condo rentals and/or an oversupply of houses and condos listed for sale.
The amount of the monthly rent credit toward the tenant-buyer's down payment is the key to a successful lease-option. As an example, if a house rents for $1,400 per month with a $500 per month rent credit. At the end of 12 months, the tenant will have built a $6,000 rent credit toward the purchase price. The amount of credit given can vary with the circumstances, such as the property condition may warrant a higher credit.In a slow market for sellers, a lease-option sale is usually better than no sale and can work in all price ranges.
Lease-option advantages for owners include (1) income tax benefits, including depreciation deductions, until the option is exercised, (2) up-front move-in cash from the tenant, which is the first month's rent and non-refundable option money, (3) monthly rent cash flow instead of having a vacant house or condo, (4) there are usually more lease-option buyers than sellers, (5) above-market rent, and (6) lease-option tenants usually treat the property very well because they expect to someday own it.
Useful Internet Sites:
http://cl1p.net/ At this site you can copy text from one computer to another -- even if they are half way around the world! You get on the Web, go to the URL provided and add your descriptive word. Then copy/paste the text and send the URL to your intended recipient. That’s it! They simply click on the link and there’s your text ready to paste into their application. You can also use this neat trick to jot down notes for later review.
http://www.phraseexpress.com/ Say more and type less. This program is simple to use and will save you from typing phrases you commonly use over and over again. It organizes your frequently used text phrases and pastes them into any application with a click. And you can save pages of information for one click typing. To make it even better, this handy program comes with an excellent on-line manual.
http://www.emporis.com/ This is the world's largest publicly available database on architectural and building data. The site has indexed and made available the most comprehensive and reliable technical data on all buildings and structures public or commercial. This place is fascinating and their collection of building photographs around the world is a must see before traveling.
https://www.retirementliving.com/RLtaxes.html If you are thinking about moving, here’s a great place to get a good thumbnail sketch of how taxes stack up on a state to state basis. You can get a quick run down on each state’s income, sales, gas, cigarette, property and inheritance taxes.
http://www.Pandora.com/ If you love music, use this site to enjoy the type of music you identify – exactly as you ordered it. No downloads – no cost – just a little advertising. Type in the name of one of your favorite songs or artists, a “station” appears that plays songs that are musically similar to the song title or artist you provided. This site is one of the best! Try it!
http://www.Komando.com/ This is a great site for staying current on new technology, new software and internet issues.
Kindest Regards,
Jim Foster
Chase 'N Rainbows Real Estate, Inc.
P.O. Box 10398
Lahaina , HI 96761
Toll Free 888-661-7994
Direct Line 808-661-7994
Cell 808-870-5858
Fax 808-667-2957
Real Estate for Sale www.jamesbfoster.com
Vacation Rental www.chasenrainbows.com
Email jim@jamesbfoster.com
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