New homes in Hawaii - Gentry Latitudes

This weekend I viewed about 20 homes in Ewa, Kapolei, Mililani, and Royal Kunia, with a client of mine We saw some nice homes and then stopped by the builder's models at Gentry Latitudes.

As usual, the models were very beautiful and perfectly decorated with the most modern amenities and all the upgrades you could want. It's hard for a buyer to view models and not fall in love, and I think it's mainly because of the decor. I always tell buyers to try and look right past the decor, and instead see the shape of the rooms, the size of cabinets, and other things that are going to be the same when you actually buy a house. Unfortunately you can't usually buy the builder's model with all its furnishings. (sometimes you can.)

So after viewing the model homes, we went and looked at the houses under construction, which of course have no furniture in them. This was very helpful in seeing what the house is actually going to look like. It still had very nice floors and some upgrades, but not every single upgrade, and not brand new furniture.

For sellers in the Ewa area, you might want to stop by and see the models because this is what you're up against. Buyers in the $600k range are going to see your house and the models, and it's going to be hard for you to compete. Take notes on how they decorate. Notice they have plants in just about every corner. Notice it's very CLEAN! Notice there is no crap lying around.

You can make your home look almost model perfect, and that's always the best way to sell a house. Think about the upgrades you can do in your home. If you're selling a home for $600k, shouldn't you spend a few thousand to get it looking perfect? Maybe new stainless appliances? Maybe new flooring? Fresh paint?

My client is probably going to purchase from the builder, which is probably what I would do too...

The Pinnacle Honolulu is almost done! Buyers moving in this month!

One of my clients is buying a beautiful new condo at the Pinnacle Honolulu, a brand new luxury condo building in the heart of downtown Honolulu. The building has had several delays that has put it about 6 months behind schedule, but it's certainly going to be worth the wait.

The 38 story building has only 36 units, many of which are entire floors. Every whole floor unit feels like a penthouse, with the elevator opening directly into the unit. Of course you need a special key card to even get to your floor, so no chance of people just walking into your home.

With 2882 square feet of living space and 3 bedrooms, these condos are larger than many homes, with an entire floor dedicated to the amenities, which includes a pool, gym, lounge, etc.

Each unit comes with 4 parking spots, which are each worth about $500/month in downtown Honolulu. You could feasibly rent out 3 spots and make some Good money! (Not that owners in this building are hurting for money.)

The Pinnacle will have it's own private restaurant access, and the highest quality upgrades and amenities. Every unit comes standard with Viking appliances, travertine floors, and granite counters.

All it takes is about $2million to buy one. In a few months you may see some people reselling, who knows. My client plans to live in it for a long time because she loves the great location, and if you have $2million and want a nice condo in Honolulu, you might feel the same way.

Oahu is a safer place to live!

The Honolulu Advertiser gave us some great news today. Great news for Oahu residents and home buyers: "crime on O'ahu fell 3 percent last year — the fourth straight yearly decline — to the lowest total since the state started tracking the data 33 years ago, the FBI reported yesterday."

"The Honolulu Police Department and our partners are committed to keeping Honolulu the safest major city in the U.S.," said police Maj. Frank T. Fujii. "Like anything else, it's been a collaborative effort with the community, different law enforcement agencies as well as private businesses.

So when people ask me if Oahu is a safe place to live, I can say whole heartedly, "YES!"

Owning a Condo in Kailua

You can buy a condo in Kailua right now for about $350-400k. That's a 2 bedroom condo of about 850sqft. I sold one in "Hokulani in Kailua" last month for $365k, which was a good deal for a 2bedroom condo within walking distance of Kailua town, and about half a mile to the beach.

Craigslist has some for rent in this complex for around $1800/month. So let's do the math...

(Pay attention!)

You buy it for $365k, and with 20% down your payment should be about $1750/month plus the maintenance fee which is $368/month right now. Taxes are about $100. Total payment is about $2218. Your 20% down was $73k.

Now your monthly negative appears to be about $468, plus some expenses for repairs and vacancies. So let's call it $600/month of negative cash flow. But wait!

You depreciate 80% of the cost basis over 27.5 years, which is what the IRS allows, and you get $1061 of depreciation a year. AND the negative cash flow is a deduction for most people, usually up to $12,500 per year per person. Double that if you're married.

So in this scenario you get a $8261 deduction at the end of the year, and if you're in the 35% tax bracket, you save $2478 in taxes. (This is all totally hypothetical. If you base your taxes or a purchase on this example, well you need a shrink more than a Realtor.)

So your $7200 negative cash flow is actually more like $4722/yr, or $393/month. BUT WAIT! The rent is going to go up at some point, probably about 5% per year forever!

What is the point?

For $393/month or less, you can invest in a condo in Hawaii and own it, in theory, forever. PLUS, you can deduct the cost of your trip out to Hawaii to buy it, maintain it, work on it, etc.

Now some day, I'm nearly sure that your condo is going to be worth double what you paid for it. Perhaps it will take 50 years to double, but all you've paid is $393/month. And also, you've paid down your mortgage every month, so at the end of 30 years, you own it free and clear.

If this was all too complicated for you, here is the bottom line. Investing in a condo in Oahu is actually a lot cheaper than you think, and will probably make you a millionaire someday. And even though it's negative cash flow now, it probably won't be for long.

Median price is not the way to measure the market. But I have the solution!

Nobody keeps this statistic, but in my opinion, the best way to measure the market is by keeping track of dollars per foot.

Dollars per square foot of house and per square foot of land. If we could go back and get the average dollars per foot of house and land in an area over the years, I'm sure we would have a better way to understand the direction of the market.

Right now the median price is $649,500, which is about the same as it was last year, but in some areas that money is buying you so much more house in the same areas, that it's impossible to understand how much the market has dropped without seeing the houses for that price. In other areas, that same price is buying you LESS than it was last year.

So is the market up or down? It's both! It's down in Ewa, Maili, Kapolei, and Mililani, while it's up in Hawaii Kai, Diamond Head, Aina Haina, and core Honolulu. And even that statement needs to be clarified further. It's only up if you have a really nice home that is ready to move in. The tear downs are down in price, but the really nice houses are up in price.

Bottom line - it's impossible for the median price of all of Oahu to tell us anything at all about the overall market! There is no overall market! There are pockets of markets in pockets of areas, with some rising, some falling.

May Hawaii home sales stats are out!

If you're reading this blog, you probably already know that the Honolulu Board of Realtors puts out the housing sales stats at the end of every month. The trick is understanding what the numbers actually mean.


The median price of homes on Oahu overall was $649,500 compared to $650k in the same month last year. Does that mean anything at all? Here's what it doesn't mean - it doesn't mean that the average price of homes fell $500. In fact, I would say overall that prices have fallen quite a bit more than that on the West side of Oahu and the North Shore, while price in Metro Honolulu and the East side of Oahu are up about 10%.


The median price just means that half the homes sold were above that price and half were below. So maybe people are spending about $650k as a median, but that $650k will buy you more this year on the West side than it would have last year. That same $650k will buy you less house on the East side that it would have last year.

The number of sales is actually more helpful to understand that market. 252 homes and 382 condos closed in May, most of which probably went under contract in February. Compare that to 357 homes and 543 condos last year, and you can see how much the market activity has fallen.


But to understand what price are doing, the most helpful things are the neighborhood sales numbers. In core Honolulu, the median price of homes sold was $849,500, compared to $764,600 last year, with the number of sales up 41% since last year.

The biggest drop in sales and prices is on the North Shore, where only 2 homes sold and both were very cheap. Last year in the same month, 13 homes sold for about $800k average. The North Shore is mostly driven by California buyers, who made up about 73% of the buyers in 2006. In 2007, the market in CA fell down a greased slide about 25% in price and 50% in number of sales, which explains why the North Shore market is absolutely dead right now. If you want to get a bargain in Oahu, buy a house on the North Shore.

Island wide, the average home that sold did so in 52 days, and the average condo sold in 41 days. These numbers are vastly lower than most other states, and indicate a pretty good market in Oahu overall. We've noticed lately that homes tend to sell in about 2-10 days, or about 4-6 months. If you price a home to sell, it will sell right away.


The inventory grew a little bit, to 2043 homes for sale and 2717 condos for sale. That's a lot of condos for sale, and most of them are in Leeward Oahu, meaning Ewa, Makakilo, Kapolei, Pearl City, etc. For some reason there are a ton of condos available in town too, even though the number of sales there are equally high.

My theory - people are moving from East and West Oahu into town, even though they can only afford a condo. That's why prices of Honolulu condos are strong and rising in many cases, while condos on the West and East are dropping. The only bad market seems to be the leasehold market, which makes sense because most of the leasehold properties are now reaching that point where they have less than 30 years of lease left.

Overall there are 8 months of inventory remaining, but if you look at houses only over $1million, then there are 17.5 months of homes on the market. So basically the million + market is much slower than the rest of the market. That's probably because over 1 million it's very difficult to get a loan these days, and also many of those are vacation homes.

So in summary - the market is slower but still very strong in the best areas. Prices are falling on the outskirts, while core Honolulu is strong.

If you want a good investment, buy something either in a great area of Honolulu, like Makiki, Manoa, or Nuuanu, or buy something in the most desirable upscale areas, like Hawaii Kai, Kailua, and Diamond Head.

Less traffic in Ewa Beach?

I drove to Ewa Beach from my home in East Oahu yesterday and encountered terrible traffic, but not the normal kind. It was actually good traffic. Why? Because the city and county is widening Fort Weaver road, the only road into Ewa Beach.

It looks like there are going to be one or two extra lanes each way, which would be great for Ewa Beach. The first thing everyone says about real estate in Ewa Beach is that it takes too long to get there. Sure the homes are newer, nicer, larger, and cheaper, but is it worth sitting in an hour of traffic each way? It is for many, but things are about to get much better.

When this road widening project is complete, the traffic should lighten up quite a bit. In theory it should be cut in about 1/3 or even 1/2. That could be huge for home sales and prices in Ewa Beach. Since traffic is the main thing keeping Ewa beach home prices down, residents there should be jumping for joy, not just for the traffic, but for their investments.

The alternatives to Ewa are Kapolei and Royal Kunia, both of which have higher prices primarily due to less traffic. I can't wait to see how it turns out. But then again, I live on the East side, which has about 1/10 the traffic of the west side.

One more reason that East Oahu homes are about twice as expensive than the west side for the same house.

Kailua Beachside house in Escrow

Kailua is one of the most desirable areas in Oahu to live in, and one of the best neighborhoods within Kailua is called Beachside.

I have this house in escrow right now, listed at $1.969million, three houses from the beach with this beautiful kitchen. It has custom mango wood cabinets and counters, with extra thick granite.

The house is three houses from the beach with deeded access to the sand on the best part of Kailua beach. It has a great open floor plan, which is pretty much what everyone wants these days. The custom gourmet kitchen has a viking stove, a great subzero fridge, travertine flooors, lush mature landscaping, and it's gated for privacy.

It takes about $2million to get a nice house near the beach in Kailua these days. My client and I looked at homes in Lanikai too, and we found that this home was the best option. Lanikai has great sand and water, but this central part of Kailua beach also has great sand, and some nice waves, which Lanikai doesn't have.

The same house would be about $1million if it wasn't 3 houses from the beach, and it would be about $7 million if it was right on the beach.

Single Story Homes Vs. Two Story

When you're searching for a home, one of the first things you'll decide is how big a home should be for you. In Hawaii homes are smaller than on the mainland overall. You might be coming from Texas where a $300k home has over 6000sqft. On Oahu that same money will buy you a 2 bedroom condo of about 900sqft. Hey, it's Hawaii.

One way to get more home for your money is to look at single story homes. A two story home has around 15-20 steps, each of which take up square footage. There is usually also a landing area and some hallway that is not really usable space.

Yesterday I was looking at homes in Ewa Beach around 1200-1400sqft, and we found that the 1200ft single level homes felt larger, and had more usuable space in the living room and bedrooms.

We saw a little 1069sqft house that seemed bigger than all the 1300ft two story homes we looked at. It had a larger living room and kitchen, and even the master bedroom was quite a bit larger.


So if you are thinking about how many square feet your home should be, remember it's a different number if the home is a single story home. And the funny thing is, you might pay more for two story homes even though they are cheaper to build. Single story homes by their nature take up more land on a lot, which is why two story homes can be more preferable if you're trying to save lot space.

Condo For Sale in Mililani

I listed this beautiful little condo in Mililani for $309,000. We got an offer after just 9 days, but we are still in negotiations. So it's available if you want it!

It's located in lush Launani Valley, which is the North end of Mililani. Very green mountains with cool air blowing all year. It feels like you're in a tropical rain forest, probably because you are.

This condo has a brand new kitchen, from top to bottom. Appliances, cabinets, sink, everything is new! And check out the great view out the windows to the forest.

Mililani is located in central Oahu, which is a great area that allows you to get anywhere on the island in under about 30-40 minutes with no traffic. You can get downtown faster from Mililani than from the Ewa and Kapolei areas too.

If you don't like hot weather, avoid the West side, and consider Mililani. It's cheaper than Kailua or Kaneohe, but the weather is similar. Also the homes are cheaper. This same condo in Kailua would cost you around $425k.