Remote. Rugged. Hazardous.
These landscape features make homes in parts of Hawaii island more affordable than just about anywhere else in the state, but that last feature is putting an extra damper on the market since molten rock began flowing through a rural Puna subdivision Thursday.
Real estate brokers said it could easily be a year or two before real estate values in the immediate and surrounding areas of lava breakouts recover after the eruption ceases.
With lava outbreaks in the Leilani Estates subdivision where close to 30 homes have been destroyed, buyers are canceling purchases and lenders have quit making home loans in the two highest lava hazard zones, of which there are nine on Hawaii island where two active volcanoes exist.
It’s impossible to forecast how long the freeze will last once the lava event is declared over, or how big and long a home value downturn will be. But as past experiences have shown, it will be substantial but not permanent.
“This could go on for years,” Harry Pritikin, broker in charge at Koa Realty Inc. in Holualoa, said of the impact.
Pritikin said such impact will be greater than what happened in 2014 when lava flowed in Pahoa but spared homes. “Sales completely dried up in Pahoa, and prices came down,” he recalled. Then a few months later, it was as though nothing had happened. “It was pretty quickly that everybody forgot about it and things got back to normal,” Pritikin said.
This time, however, lava that has piled up in and close to Leilani Estates from 12 ground fissures will be a lasting visual reminder in the neighborhood that a Census report said had 940 homes in 2016.
“Bottom line, there is a massive flow in Leilani,” said Bill Parecki, a broker with Elite Pacific Properties in Hilo. “Nobody is going to buy into that subdivision for a while.”
Parecki said once lava broke out in the subdivision, lenders quit making home loans in lava hazard zone 1, which includes Leilani Estates, and the much larger zone 2, which includes subdivisions Nanawale Estates, Hawaiian Beaches, Puna Beach Palisades and others.
Such freezes are typically lifted at some point but depend on the size and duration of lava damage. When lenders return to the market, buyers will flock back in large part because of prices.
One-acre lots can be bought for $4,000 or $5,000 in Nanawale Estates, where a two-bedroom home is on the market for $74,900.
At Leilani Estates, a subdivision created in 1964 with paved roads, a community center, ball fields, meeting facilities, a playground and a fitness trail, 1-acre lots go for around $20,000, and homes are available for around $100,000 to $200,000 at the low end.
Median single-family home prices in April were $790,000 on Oahu, $725,000 on Maui, $640,000 on Kauai and $409,500 on Hawaii island.
On Hawaii island, Puna accounts for more single-family home sales than any other region, according to Hawaii Island Realtors data.
This year through April, there were 293 home sales in Puna for a median $223,000. The next-highest region for sales was North Kona, which includes resort homes and is in a moderate lava hazard zone, with 167 sales for a median $675,000.
Also in Puna, there were 410 sales of vacant land for a median $20,000 this year through April — far more than any other part of the Big Island.
Pritikin said price is the No. 1 factor for buyers interested in land or homes in Puna. Natural beauty is another factor. As for the lava hazard, even though buyers must be informed of it, Pritikin said most buyers from the mainland have trouble grasping details.
The U.S. Geological Survey first divided Hawaii island into lava hazard zones in 1974 and revised the zones in 1987 and 1992. There are nine zones, and Leilani Estates is in the zone with the highest risk, which means lava is most likely to occur in this zone.
Still, it’s hard for many people to imagine that lava will cover their property. “I never in a million years expected something like this would happen,” said Pritikin, a 40-year Hawaii island resident. “It’s crazy. It just popped up in the middle of the subdivision.”
Parecki, who lives in Kapoho, expects prices will come down even in his area because it’s in the rift zone — but not forever. “It all comes back,” he said.