This morning the Maui News FINALLY ran the article that the new Hawaii Foreclosure Bill had been signed by the governor. I say FINALLY because he signed it 10 days ago on May 5…not exactly late breaking news! The bill is a 105-page complex document so maybe they decided to try to get it right…which they did better than most of the earlier reports but still had a few “untruths”. Here is the link to a good synopsis that is understandable and provides numbers where people can call for more information.
The media is sensationalizing this way too much in my opinion. While they captured the law correctly, the basis used in most media reports is somewhat off. When the bill was first initiated, I was totally against it because it would just extend the whole foreclosure process and add more chaos to the market and our economy. But as it evolved, I found it was something that I could support. I am not looking forward to the first few months of chaos as individuals and banks sort through though! Later in the article I’ll describe that only about 20% of people may be impacted or <250 people per year across Maui County.
April 2011 Maui Real Estate Market Trends
First lets take a quick look at the latest in market trends. As shown in the graphic above and supporting reports, there is general stability, slightly higher prices in some areas and fewer foreclosures. There were strong sales in North Shore and Upcountry regions, a median residential price of an even $500,000 (easy to remember that one) with no change in residential price trends over last year at this time. Condos haven’t done quite as well with a median price of $338,603 and 28% fewer sales compared to trends last year. That sounds worse than it is because last year in April, condo sales were very high due to the release of Honua Kai.
I put these reports out almost every month. The news predicted a huge decline in foreclosures with the robo-signing findings late last year. We see some declines but not significant. It seems that most banks have worked through those issues. Bank-owned properties and Short Sales sales are steady and selling. The number of bank-owned properties on the market is stable between 210 and 225 at any given time. The median days on market of a bank-owned property is just 80 compared to 126 overall and 231 for short sales. The number of short sales on the market has significantly decreased; I believe that is primarily because more are being successfully sold. So many people think that the banks are holding “inventory” to avoid an huge market decline. Realty Trac stated that there were 236 Foreclosure filings in Maui in April. Many short sales (my guess is 90%) have had a foreclosure notice before they are sold. There were 44 REO properties sold and 30 short sale properties sold in April so that is a pretty significant difference to the 236 filings. So I asked “What does Realty Trac count as foreclosure filing?” Just the first notice of default? Just the first time a property is put up for foreclosure auction? Or each time a property goes up to auction? Many have 4-5 auction dates. Well, the answer is — YES, they count all the actions in a given month. So any given property has at least 3 “filings” when the notice is given, when the auction date is set and when the property is actually foreclosed on. And many will have many more as foreclosure dates are postponed. So that number is hardly a great indicator of inventory.
Back to what I see as discrepancies in the news reports. I get my numbers from the foreclosure announcements in the Maui News. By my estimates that is about 33%-50% of the total with others listed in Honolulu papers. The paper indicated that judicial foreclosures are very rare. While non-judicial foreclosures are more common, they constitute 73% of notices with 27% being judicial. I don’t think 27% is “very rare”; typically judicial foreclosures are held when the parties have assets to distribute beyond just a single house. Another assumption is that most foreclosures impact owner-occupants. Remember that the new law only impacts owner-occupied properties. By my count (again not perfect but based on homeowner exemption status), just 44% of properties auctioned or scheduled for auction this year are owner-occupied. So by my estimates, the law may apply to about 39% of the people facing foreclosure.
I find that many agents over-emphasize the foreclosure work they are doing. An agent cited in the the article said that 60% of her work was foreclosures. I looked at her numbers and that was way overestimated. I would believe 60% of her work! It was also possible that she was referring to her office. There is no doubt that REALTORS are spending a lot of time and effort on short sales and foreclosures. My message is to just be wary when people throw general numbers at you!
The article also doesn’t address how many people WANT to delay foreclosure and fight to stay in their home. Many people I know just want to move on with their lives as quickly as possible. They are tied up in bankruptcies, short sales and want out. How do we measure this? Although I know that there are many people who have listed a short sale that would prefer to get a loan modification just the number of short sale listings is a good indicator that people want out of the situation. Of the foreclosures listed in the Mercury News, about 15% are currently listed with about an additional 20% that have been listed in the last year. So that would bring the number of people that would be impacted down to about 20%.
While the law has some good points to protect consumers, I don’t feel that it will really halt many foreclosures; just extend the pain for most and our economy. I hope that I’m wrong and many of those 250 families are helped. Please share your thoughts and comments!