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February 1, 2006 - Newsletter for the Maui Market
Don't forget; if you currently own a property and would like to be notified when there is a new listing in your particular complex, we can set you up to automatically receive the new listings via email. The service is also available for those interested in purchasing a condominium, home, land or other property. If you provide me with your first and last name, your email address, and the condo complex you wish to be notified of, we can program the system to notify you as new listings become available.
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 are 226 condominiums for sale with the total value of $226,520,200.00; and at the beginning of February, 2006 there are 280 condominiums for sale in the West Maui area and the total value is $281,793,835.00. The condominium for sale inventory since July, 2005 has been as low as 165 and is back up to 280 for February 1, 2006. For sale inventory continues to increase.
The total condominium sales for West Maui during the month of August, 2005 was 40 and the total value was $21,749,104.00; for the month of September, 2005 total condominium sales was 51 and the total value was $36,318,521.00; for the month of October, 2005 total condominium sales was 32 and the total value was $18,973,291.00; for the month of November, 2005 total condominium sales was 38 and the total value was $28,453,380.60 ; for the month of December, 2005 total condominium sales was 43 and the total value was $25,171,967; and for the month of January, 2006 total condominium sales was 36 and the total value was $23,362,643.00. The total condominium sales for August were 40; September was 51; October was 32; November was 38; December was 43; and January 36.
For previous condo sale details go to our web site, www.JamesBFoster.com and click on Condo Sales. The year to date ending December 31, 2005 average price for a home on Maui is $927,354.00 which is up 36% from a year ago for the same time period ending December 31, 2004 and the year to date ending November 30, 2005 average price for a fee simple condo on Maui is $565,823.00 which is up 30% from a year ago for the same time period according to the Realtor Association of Maui statistics.
We have gone in to the MLS data base and pulled information for 2000 through 2005. In 2000 - 654 condominiums sold in the W. 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 - 698 condominiums sold for a total value of $374,342,467; and in 2005 - 672 condominiums for a total value of $402,340,315.00.
Mortgage Rates as of 1/30/06 From Central Pacific Home Loans - House/Condo: 5.75% 30yr fixed 2.0 pts ( 5.98 APR) 6.0% 30yr fixed 1.0 pt ( 6.13 APR); No Doc Loans: 6.125% 30yr fixed 1.0 pt ( 6.25 APR) No Points Loan: 6.375% 30yr fixed Zero pts ( 6.50 APR) Condotel Loans: 6.125% 30yr fixed 1.0 pt ( 6.25 APR) Interest Only Loans: 6.375% 30yr fixed 1.0 pt ( 6.50 APR); and Jumbo Loans$1M 20% down: 6.375%, 30yr fixed 1.0 pt ( 6.50 APR).
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. I also post a Vacation Rental Management Report for your viewing. To view the Vacation Rental Management Report, click on the “Vacation Rental Info” tab which is located in the upper part of my website just below the picture of Kaanapali Beach in between the “Search Properties” tab and the “Maui Info” tab. 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.
Hotel Hana-Maui’s spa named best in the U.S. opened its spa in February, 2004 after retrofitting a section of the original hotel to provide nine treatment rooms and a Watsu water therapy pool with views of Hana Bay and Kauiki Head – the landmark cinder cone on Hana Bay and reputed birthplace of Hawaiian Queen Kaahumanu.
Kapalua Mauka project had panel members of the Land Use Committee vote 6-3 to advance the last of three bills to the full council for approval of Kapalua Mauka, the last of the Kapalua resort, with 690 resort-residential units, golf and commercial development.
Lahaina Mini Bypass could be built out three years from now . A bidding dispute delayed the Mini Bypass in 2005 but Sen. Baker said the state Department of Transportation is ready to restart the bid process and condensed so the design-build contractor may be awarded a notice to proceed in August.
New Trail for exploring the history of Kaanapali provided by the Kaanapali Historical Trail and History and Legends Tour gives free tours every Tuesday and Friday to all those interested and the phone for additional information is 808-661-3271.
The growth rate for tourism on Maui is peaking and it is because the infrastructure is just about at its maximum. That would be around 5 percent better than 2004, based on statistics released Monday by the Department of Business, Economic Development & Tourism. According to DBEDT statistics Maui County welcomed 2,414,381 visitors last year. The entire state of Hawaii had 7.4 million visitors, the first time the 7 million barrier has been broken; and visitor expenditures of $11.5 billion, up 8.4 percent and also a record. Maui’s share was 2,263,676 visitors but the island was strained to fit them all in.
For 2006 and beyond there will be a loss of several hundred hotel rooms due to demolition to make room for new resorts at Kaanapali, Kapalua and Wailea.
Finding hospitality workers to serve the larger number of vacationers is “a continual battle, especially on the housing-short west side. Hotels last year were running as full as they possibly could. There were times in the high season where there was no room at the hotels or vacation rental condominiums. Given that our capacity is not going to grow by leaps and bounds, we are just about where we’re in balance.”
Rushed developments threaten update of Maui’s General Plan. The traffic situation continues to deteriorate; service workers need affordable homes; the infrastructure is getting overloaded and approvals continue being granted to new developments. On the mainland new developments have to pay “impact mitigation fees” in advance of approvals and if the infrastructure is not available then no approval. Maui County has a law to prevent these problems. It’s the official Maui County General Plan. Right now the General Plan is about to be updated by a broad cross-section of people appointed by the mayor and the County Council.
The committee will attempt to analyze the cumulative impact of all proposed development to prevent future traffic jams, allow for sufficient water and sewer capacity, beach accessibility for residents, and attempt to balance construction of luxury homes with affordable homes. The General Plan will determine where urban zoning makes sense and define what kind of development should take place or none if not appropriate.
There are approximately 36,000 new units proposed for Maui by various developers. If there is not a workable General Plan to manage growth, Maui will soon end up looking like a suburb of Los Angeles. The County Council and mayor should delay approval for major projects until the General Plan has been updated and the infrastructure is available. There is not currently a cost estimate for the needed infrastructure improvements and it would probably be beyond the current county budget. Without guidance from an updated General Plan, the county and state are likely to dramatically underestimate the costs of infrastructure when assessing impact fees on developments. We need to plan and manage future growth if Maui is to remain a paradise.
Real Estate, Tax and Estate Planning Tips
Maximize Tax Saving on a Second Home - If you own a second home, you can maximize tax savings from your vacation or second home. Advance tax planning can save you hundreds or thousand of tax dollars.
Y our second-home mortgage interest and property taxes are generally tax deductible if you itemize deductions, the amount of your personal use time determines additional income tax deduction savings:
1) Less than fourteen days of annual rental - You can deduct only mortgage interest, property taxes, and any uninsured casualty loss cost. But other expenses such as insurance and repairs are not deductible. If you rent your second home up to 14 days per year, you don't have to report that rental income to the IRS. However, if you rent to tenants for greater than 14 days annually, then the second home will fall into one of the following categories.
2) Annual person use exceeding fourteen days or ten percent of the rental days (if rented over 14 days in 2005) - In this category of heavy personal use and modest rental time, second-home owners must report their rental income on Schedule E of their tax returns, along with applicable expenses. But in this category any resulting tax loss when rental expenses exceed, rent collected cannot be deducted against ordinary income from other sources, such as job salary. However, unused losses are "suspended" for future tax deduction benefits so it pays to keep track of such losses.
The correct order for deducting second or vacation home expenses in this category is mortgage interest, property taxes, uninsured casualty loss expenses, operating expenses such as insurance and repairs, and depreciation for the rental period. However, when the mortgage interest, property taxes, and uninsured casualty loss expenses exceed the rental income, they become itemized deductions on Schedule A.
3.) Annual Personal Use Below 15 Days or ten percent of the rental days - This is the most desirable tax category for a second home. The reason is there is no limit to your tax loss deductions against your ordinary taxable income, (except for the $25,000 annual passive loss limit explained below). Rental income and deductible expenses are reported on Schedule E of your tax returns. If you occupied your second home for 10 days in 2005 and you rented it for four months. Because your personal use time is below 15 days per year and under 10 percent of the rental days, you can deduct up to $25,000 of qualifying expense losses, including depreciation, against your ordinary income. The Internal Revenue Code 183 says you must show a rental activity at least three of every five years in this category.
4.) No Personal Use Time - If you didn't personally use your second home during 2005, other than a few days while making repairs, and it was rented or available for rent the entire year, then your second home falls into this rental property category. The tax result is that all your income and expenses, including depreciation, are reported on Schedule E of your tax returns. Virtually every applicable expense is deductible on Schedule E, such as mortgage interest, property taxes, insurance, homeowner association fees, utilities you paid, repairs, and depreciation.
Additionally, you can deduct reasonable "ordinary and necessary" travel expenses to inspect (but not occupy) your rental property, even if it is in Hawaii. In this category, you are very likely to have a "tax loss," primarily due to the non-cash rental depreciation deduction. However, even if you select the tenants and collect the rents, rentals are a considered "passive activity" tax wise.
If your 2005 adjusted gross income is $100,000 or less, you can deduct up to $25,000 tax loss from your rental passive activity. But any rental tax loss exceeding $25,000 must be "suspended" for use in a future year, or when you sell the property to offset capital gains. Should you qualify as a "real estate professional," such as a full-time sales agent, then the $25,000 passive activity loss limit does not apply.
To deduct "passive activity" rental property losses against your ordinary income, subject to the limits explained above, you must have "materially participated" in managing your second home. This means you must own at least a 10 percent interest in the property and others cannot manage it in a "rental pool." Without material participation, your rental tax loss is not deductible from ordinary taxable income and it must be "suspended" or saved for use in a future tax year.
Summary : Although second or vacation homes are not great tax shelters, they can save tax dollars while usually appreciating in market value for future resale profits. An additional possible future benefit, when you get ready to sell, is to move into your second home to make it your full-time principal residence for at least 24 of the 60 months before its sale. Then up to $250,000 principal residence sale capital gains will be tax-free (up to $500,000 for a married couple filing joint. For those of you who enjoy or use the internet on a regular basis or use your computer frequently, here are some interesting web sites you may want to visit.
http://tinyurl.com - Here's another neat “One Trick Pony”! This great place provides a simple free service that solves a common problem. When you locate a page on the web with an address that is too long to comfortably paste into an email or other document, you can use this free service to generate a shorter, simpler address that will take folks to the same Internet spot. If you wish you can paste this tool on your browsers link bar so, when you are at a page where you want a shortened link, with one click the short link is reduced.
http://www.cleverkeys.com - Here’s your one click information “Gofer” any time you are on your computer. What’s neat about this is that it works in just about any program. Once this little program is installed, just highlight any word, in any program including your word processor, web browser and most e-mail programs. Then press Ctrl + L and up come definitions, synonyms and facts at your fingertips. Great little time saver that makes you a genius. And it is free!
http://www.spywarewarrior.com - When was the last time a dialog box popped up on your screen, screaming "Warning! This web site evaluates the spyware programs and provides a list of Rogue/Suspect Anti-Spyware Sites. So the next time you are tempted to run their “test” or buy spyware software, just check their evaluations here first! Lots of good additional information here -- a great education with a Masters in Spyware!
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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