March 4, 2005 – Newsletter for the Maui Market
Aloha!
If you have not visited our web site lately it has been completely redesigned. Please visit www.jamesbfoster.com and let me know what you think. We have redesigned the site from an existing template to a new design from scratch and we are continually working to improve our site.
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 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.
An excellent idea for owners is to have a Net Proceeds Statement prepared as property values change. This outlines the various costs a seller has at closings and is an important item to have in your files. If you would like to know what your net proceeds would be if you sold at a particular price, let us know and we can prepare one for you and email you the document in an ADOBE pdf format. If you are not a Hawaii resident, you will have to deal with the Hawaii Real Property Tax Law HARPTA when you property sells and 5% of the selling price is withheld unless you do a tax deferred exchange or have transferred title to a Hawaiian registered entity such as a Limited Liability Company. HARPTA is not a tax . This is a common misunderstanding. HARPTA was enacted to provide a means for the state to collect capital gains taxes from absentee owners. HARPTA is very similar to laws passed by several o the r states as well as to a federal law that applies to non-US citizens that sell real estate. These are items to discuss with your attorney and accountant.
In past newsletters, I have mentioned that the easiest way to minimize the tax impact when selling is to do a tax deferred exchange. If you have questions about tax deferred exchanges visit www.ixg1031.com. They provide free consulting and we have worked with them on many tax deferred exchanges. If you are considering selling your property in Hawaii, a tax deferred exchange will exempt you from the 5% HARPTA withholding and also the Federal Capital Gains Tax. Planning in advance for the disposition or acquisition of assets is always a wise decision. Another invaluable tool for sellers in doing a tax deferred exchange is having the option of using tenant-in-common (TICs) for qualifying for replacement properties. Many property owners who currently own underperforming assets can sell those assets, taking advantage of tax deferred exchanges, and turn an underperforming asset such as land into an income producing asset. Call me or send me an email if you would like additional information.
For prospective buyers, it is a good idea to become familiar with the buying process and how it works before you purchase. If you would like a copy of the purchase contract typically used, we can email one to you. The document is called a Deposit Receipt Offer and Acceptance (DROA). A large number of transactions are completed with the purchaser physically located on the mainland and closing documents being emailed or sent via Federal Express. We have prepared information for prospective buyers that explain the process and answers many questions in advance and can provide this information via email.
You can also purchase real estate using your Roth IRA, Sep/IRA, Education Savings Account, or 401-k, 403b, 457, ESOP and other pension plan rollover accounts. A good place to obtain additional information is www.PENSOCO.com.
Most buyers of condominiums use their units for a portion of the year and use a vacation rental management company to manage it for them during the rest of the year when they are off the islands. Understanding how this process works and receiving information from vacation rental management companies prior to purchasing allows buyers to purchase with a lot more confidence than those who are uninformed.
At the beginning of December, 2004, there were 186 condominiums for sale in the West Maui area and the total value was $156,629,640.00. At the beginning of January, 2005 there were 202 condominiums for sale in the West Maui area and the total value was $181,300,850.00 which translates in to a 9% increase in the number of condominium units listed for sale and 15.75% increase in total value. At the beginning of February, 2005 there were 213 condominiums for sale in the West Maui area and the total value is $192,803,740.00. At the beginning of March, 2005 there are 191 condominiums for sale in the West Maui area and the total value is $175,106,140.00 which translates in to a 11.5% decrease in the number of condominium units listed for sale and 1% increase in total value. As you can see from these statistics, the inventory has decreased slightly and the perceived value of the sellers has also increased. Prices are continuing to go up but are gradually slowing compared to the previous four year (2000 to 2004) Hot Market. The year end statistics are now available on our web site, just go to the tab in the upper left hand corner and click on condo sales then click on MLS Statistics 2004. In West Maui, using a scale of 1 to 10 with 10 being a good Seller’s Market, West Maui is approximately an “8” and will likely weaken a bit for Sellers as 2005 progresses. We are beginning to see some price reductions for listed properties that have been on the market for sixty days or so and have not sold.
The single family real estate market is also very active. The year to date ending January 31, 2005 average price for a home on Maui is $924,411 which is up 40% from a year ago for the same time period ending January 31, 2004 according to the Realtor Association of Maui statistics.
Even though interest rates are beginning to creep upward, they are still relatively low, and it is still a very good time to buy or sell. Properties that are priced according to the market are moving very quickly. Current mortgage rates as of 2/28/05 are: House/Condo: 5.125% 30 fixed 2.0 pts ( 5.35 APR) 5.375% 30yr fixed 1.0 pt ( 5.51 APR) Change from 2/22/05: None - No Docs: from 5.50% 30yr fixed 1.0 pt ( 5.63 APR) Condotels: 4.875% 5yr ARM 1.0 pt ( 5.76 APR) Construction: 6.125% 30yr fixed 1.0 pt ( 6.26 APR) Land: 7.0%, 3yrs 2.0 pts ( 7.67 APR) No Income, No Doc, 103% loans (Pts include origination) These are rate quotes from Central Pacific Bank and may vary depending on the lender.
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 by clicking on that tab in the upper left corner of my web site. The fourth quarter, 2004 should be posted soon. 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.
Kindest Regards, Jim Foster
Chase 'N Rainbows Real Estate, Inc.
P.O. Box 10398
Lahaina, HI 96761
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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