Distressed property sales on Oahu remain low
BY LISA SCONTRAS
Part of the difficulty in determining exactly where the housing market is currently and where it might be headed centers around distressed sales homes owned by financial institutions and homes available via short sales and the impact on prices and market conditions.
The research department at Prudential Locations gathered data, showing the percentage of distressed properties sold short sales and bankowned real estate (or REOs) account for only 15 percent of residential sales on Oahu, compared to 85 percent of traditional sales.
And, it turns out, while distressed property sales are dragging down many housing markets on the mainland, the trend on Oahu is worldsor at least an ocean apart.
“Yes, foreclosures and distressed properties are still a hot topic in the news,” says Scott Higashi, executive vice president of sales at Prudential Locations. “But it’s not as big an issue here on Oahu as it is on the mainland.”
The bulk of the foreclosures on Oahu are clustered on the Ewa Plain, where a large chunk of sales, 270, were either REOs or short sales 41 percent in 2011. And 38 percent of the Leeward sales fell into this category as well.
However, only 3 percent of homes in Diamond Head and 8 percent in Hawaii Kai were distressed sales.
“In all regions, including Leeward Oahu and the Ewa Plain, distressed sales have not affected the pace of sales on Oahu,” says Higashi. “And values here remain stable.”
In May, Gov. Neil Abercrombie signed into law Act 48, which effectively put a moratorium on foreclosure auctions in the state.
“Though there are still some auction foreclosures, there has been a dramatic drop this year,” says Higashi. “And we still haven’t seen a big increase in the number of short sales or bank-owned foreclosures since the act was signed.”
Neighbor islands have a higher percentage of distressed sales, largely in part because the markets there are more driven by second-home/resort purchases and this segment had a higher-than-normal percentage of homes that went into foreclosure. Big Island sales are comprised of 42 percent distressed properties, while Kauai and Maui are at 40 percent and 38 percent, respectively.
A SHORT SALE is defined as when the bank agrees to allow the homeowner to sell a home for less than what is owed on the mortgage. In areas where median prices have dropped significantly, or in cases where a buyer bought at the peak of the market, it is possible that a home’s dollar value dropped below the outstanding mortgage balance on the property also called being “upside down” on your mortgage. In those cases, if a property owner was to try and sell the house, the proceeds would be insufficient to pay off the mortgage and the owner would have to make a request to the lender for a “short sale.”
REAL ESTATE OWNED OR REO is a property that did not sell to a buyer at the foreclosure auction. The bank was the highest bidder and therefore has taken back possession of the property. Because the bank now owns the property, potential buyers and their Realtors will work directly with the bank’s Realtor, and the process is generally less cumbersome than that of a short sale.