2008 Kauai Real Estate Market Report

Several years ago I used to write bi-monthly market reports for a local real estate magazine.  The majority of these years were in an appreciating market and I remember struggling for new material to write about since there are only so many ways to say that the dollar volume, number of sales and median prices are increasing on Kauai.   So, I would lock myself in my office for a weekend, drink some caffeine and look at every sale on the island. Eventually a story or an assortment of mini stories would transpire.

Fast forward to 2009 and I have to admit that there is no lack of material to write about when it comes to the real estate market in 2008. If I had to choose a couple of words to describe the year, two would be "unprecedented" and "interesting".

When I first entered the business of real estate in 1984, the lending criteria of Fannie Mae and Freddie Mac were standards of the industry and there was a certain level of comfort knowing they were "guaranteed" by the government.   Whoever thought these two entities, along with Lehman Brother, AIG, and Bear Stearns would get in the trouble that they did.  Add historically high fuel costs, the Auto Industry bailout and the Presidential election and we had "interesting" times in 2008.

In Hawaii, we had the sudden shutdown of two mainland carriers, Aloha Airlines and ATA Airlines.  Aloha Airline's departure from the inter-island market left only 2 carriers for the major Hawaiian Islands and the high fuel prices brought the cost of inter-islands round trip tickets to $200.  Recently, a new company, Mokulele Air has entered the competition, fuel prices have decreased and for the month of February a one way ticket between islands can be bought for $28.

On Kauai, things started to get "interesting" at the end of 2007 when the county of Kauai finally put a sunset on the ADU (Additional Dwelling Units) allowance on Agricultural and Open zoned lands.   Owners of these types of properties have until December 31, 2009 to start construction on a 2ndresidence or lose the ability to do so.  In March of 2008, another controversial change occurred regarding the restriction of vacation rentals in non VDA (Visitor Destination Area) designated portions of the island.  A grandfathering process was put in place for a limited time frame for residentially zoned properties; however, if your home was on agriculturally zoned land, you were out of luck.  

These two changes by the County of Kauai could not have come at a worse time.  Construction loans are tough to obtain even in normal times much less the current credit environment.  Look for more parcels subject to the ADU restriction coming on the market and those on the market get more aggressive on their pricing.  Owners of vacation rentals were required to register their units which included additional costs such as architectural verification....definitely expenses that put a strain on decreased revenues due to lower occupancy rates.

What does this mean for 2009?  If you are a Buyer who 1) wants to own property on Kauai, 2) have good credit and 3) have steady income, these "interesting" times are great for you. 

Please go to my newsletter for 2008 Kauai Real Estate statistical information.