Real estate loss from eruption approaches $400 million

Despite being next to one of the world’s most active volcanoes, homebuyers came from all over to own their own piece of paradise.

Rural and remote. Open and peaceful. Lush and beautiful. It was Hawaii. Perhaps best of all, it was affordable.

Several neighborhoods in one of the most affordable housing markets in the state are now gone. Hundreds of those homes in the Big Island’s Puna region have been wiped out by lava in Kilauea’s latest volcanic episode, displacing thousands who are scrambling to find rental housing or who have moved into shelters and are staying with family and friends.

As of Friday, 614 homes have been destroyed or been made inaccessible by lava. The market value loss of the homes and lots has totaled $371,617,500, said Lisa Miura, Hawaii County real property tax administrator.

“And the number is still growing,” Miura said.

The property losses are being calculated as officials are forecasting property tax collections to set budgets. The county has deemed the homes and lots to have zero value, disappointing some owners who have challenged the county’s valuations. Even if some houses survived and are still standing, the county still estimated them as having no value as the properties cannot be used, sold or even accessed.

Miura said they are being respectful to property owners’ thoughts.

“I think there’re still a lot of emotions running right now. A lot of people feel their property is not worthless, that it’s worth something,” she said. “But we have to go based on the market’s reaction, and the informed buyer is not really willing to pay any money right now to purchase that property.”

Maybe that will change in the future after the eruption stops. But as long as the fiery lava trudges through residential neighborhoods to the ocean, many buyers will be cautious.

There’s inherent risk owning a home on the slopes of the world’s most active volcanoes. But many who have purchased in Puna couldn’t resist the prices, where they are far less than most of the Big Island or the state. Before the eruptions a single- family home could be purchased for $250,000, far below the nearly $800,000 median price on Oahu.

“It’s affordable and you can find good-sized lots,” Miura said about property in Puna. “Leilani Estates is 1-acre lots, so you have more privacy. It’s still lush and green, yet you’re still an hour away from Hilo.”

Because of the loss of property values, the county will take at least a $5 million hit annually in property taxes. Property taxes account for nearly three-quarters of the county budget.

Hawaii County is also fielding questions from some property owners who mistakenly believe that once lava covers their property, ownership automatically goes to the government or the state.

“That’s not true. They still own the property,” she said. “We get asked that every single day.”

Jan Anderson has lived in Kapoho for four decades. She told the Hawaii Tribune- Herald that lava buried her nursery businesses and vacation rental home. Her home is standing but is inaccessible.

“I feel lucky in one sense that we have insurance and eventually we can find something somewhere,” she told the paper. “But we haven’t found that somewhere yet.”

Jaymes Song is a top-producing agent with Better Homes and Gardens Real Estate Advantage Realty in Kahala. He can be reached at 228-3332 or JaymesS@BetterHawaii.com.