Question: How have improvements to U.S. wealth and investor confidence and the emergence of more leisure travelers from developing markets affected resort sales?
Answer: Domestically, the strength in the stock market and the overall economy has bolstered everyone’s confidence. Buyers are confident that it is a good time to buy. Although at Hualalai Resort on the North Kona Kohala Coast, we aren’t seeing buyers from the emerging international markets yet, we think we’ll start to see them come once they are able to fly here directly.
Q: What is the link between direct flights and real estate sales in Hawaii?
A: We are all creatures of convenience, but that’s especially true of high-end real estate buyers. If they have to take three flights to get here, I’ve already lost them. We are working very hard on Hawaii island to encourage improvements to Kona International Airport so that direct international flights there can resume. On Oahu the flight frequency from emerging markets is picking up, so you’ll see more of these buyers. We know that will happen because when we get new lift from a domestic location, we see an uptick from that market. Access is an important element.
Q: Describe current improvements to the Hualalai market.
A: Last year was the 13th year in a row that we did over $100 million in sales. This year is a barnburner. Year to date, we’ve already exceeded last year’s sales. We’re 18 percent above the whole year of 2012. What that means is that we’ve had dramatic reduction in inventory levels, so in accordance with supply-side dynamics, our prices have started to climb. Depending on the category, our prices have climbed 2 to 10 percent, mostly in the last few months.
Q: Are you seeing signs of a cyclical upswing at Hualalai and elsewhere? If so, what are they?
A: The real indicator in an improving market is the return of the spec builder. They are back in the game after they’ve measured the market and seen that we have very few homes for sale. I just sold four lots to one spec builder and am under contract to sell another four to another one. We hadn’t sold a lot to a spec builder in four years. I’m also in discussions with two more developers to buy larger parcels for development.
Q: Do you think the high-end trades that you are seeing at Hualalai will be a precursor for a 20-teens rebound?
A: I agree that all indications suggest that we’ll continue to see higher prices. Growing investor confidence, reduced inventory and increased building costs will all contribute to higher pricing. Emerging markets also will have a positive impact. While we haven’t seen it at Hualalai yet, my instinct tells me that it will give us an extra boost. These buyers are already affecting high-end markets nationally, primarily on the East and West Coast seaboards. I think that we will receive more Chinese investment on Oahu. And money from EB-5, an immigrant investor program, will impact development.
Q: What are the top mistakes that you see buyers and sellers making?
A: Some buyers still think it’s a buyer’s market. The market has obviously shifted — prices are rising, and buyers will need to adjust their expectations. At the same time, sellers need to be educated on the fact that if a buyer has a good agent and has been well informed, they know where the market value is. A seller shouldn’t expect way-above-market prices. They should be prepared to negotiate a fair transaction. If a seller said, ‘The market is moving up, and I want to list my property for 20 percent above today’s market value,’ I’d tell them to wait. People need to be realistic.
Q: What types of improvements do sellers need to make to sell their homes now, and is it worth it (or necessary) to do kitchen and bath renovations to get a better sale price?
A: Generally, if you redo a place it will sell faster; however, if the property is solid and clean, I don’t recommend spending a lot of money, especially in a rising market. Still, there are a number of things that you can do to make the property pop that don’t cost a lot of money. It’s relatively inexpensive to clean up landscaping, make the entry more welcoming, replace worn carpet, repaint or change a dated countertop.
Q: There are lots of real estate agents in Hawaii. How does a consumer know he or she is working with the best?
A: If I were going to list my home, I’d want them to bring me three personal recommendations, and I’d want them to tell me about their sales production over the last three or four years. Someone can talk a nice story, but if they aren’t getting the job done, something isn’t connecting. Either you are selling or you aren’t.