The number of completed foreclosures in the state of Hawaii decreased substantially in the third quarter of 2010. This is one of several indications that the economy of Hawaii, in particular the Hawaii real estate market, has started to recover more strongly. Pacific Business News reported in early December that the number of foreclosure sales in the Aloha State fell by nearly twenty-five percent, mirroring a similar nationwide trend. According to figures from real estate reporting service RealtyTrac, just over 400 single-family homes were either repossessed or slated for auction between July 2010 and September 2010. Relative to the second quarter of 2010, this represents a twenty-four percent decline. A comparison to the third quarter of 2009 shows a sharper drop – 2010 third quarter levels were a full twenty-nine percent lower than a year ago. The figures from RealtyTrac went on to note that foreclosure sales in Hawaii accounted for slightly over ten percent of single family home sales in Hawaii during the third quarter of 2010. The average sales price of these house was $353,540, about twenty-six percent lower than homes which were not in the foreclosure process. Within the entire United States, there were 188,748 foreclosure sales between July and September 2010, a drop of twenty-five percent from the second quarter and a decrease of more than thirty percent from year ago levels.
This decline in homes foreclosed on is particularly curious, because it coincides with record-high levels of foreclosure activity. Although this seems paradoxical, it basically means that there were more distressed properties even though the number of executed foreclosures declined. According to an article in the Honolulu Star Advertiser, this seemingly contradictory situation could be a mirror of a larger national trend, an indication of foreclosure backlog, or the result of the foreclosure robo-signing scandal. Unfortunately, foreclosure activity reached extremely high levels in the third quarter of 2010, but the number of completed thankfully declined considerably. Real estate information service RealtyTrac suggested that this could be a result of overall lower sales following the expiration of the federal housing tax credit. Their figures suggested that, of the thirty-nine states it analyzed for the July-September period, sales rose in only three states. The aftermath of the so-called robo-signing scandal may have also stalled some impending foreclosure actions in Hawaii, much as it did in other states. Over the third quarter of 2010, the number of foreclosures initiated increased by nearly fifty percent, although the completion rate did not follow suit. This reverses the year-over-year trend seen in the second quarter of 2010, when the foreclosure sale rate increased by more than eighty percent relative to the second quarter of 2009. Taking into consideration actually bank-auctioned properties as well as “short sales,” or the bank-sanctioned sale of a distressed property, the median sales price for these foreclosed properties was just over $353,000. According to RealtyTrac, this average price was 26 percent less than the average for regular home sales over the same period.
Despite lingering uncertainty about single family home sales, government officials are expressing confidence that the state’s economy will improve in the upcoming months and years. This is especially good news for the Hawaii real estate market, because it means that Hawaii homes and condos for sale will likely be sold at a higher rate as the economy improves. According to from Bloomberg Businessweek, Hawaii government officials are more optimistic about the economic forecast for 2010 and 2011. The Department of Business, Economic Development and Tourism, which is responsible for analyzing trends which affect the state’s economy, issued a statement indicated a projected uptick in overall visitor arrivals and the money spent by tourists. The Department Director, Theodore E. Liu said that the growth of the two most important sectors of Hawaii’s economy (tourism and the federal government) is “very healthy.” The Department’s figures project that more than seven million tourists will visit Hawaii over the next year, placing the state on sounder financial footing than many others in the continental United States.
There are, however, lingering negative effects of the recent recession in the commercial and industrial real estate sectors. One repercussion is a partial collapse of the self-storage market. According to the Honolulu Star Advertiser, Hawaii Self Storage purchased Aloha Island Self Storage in Kapolei following a court-mandated repossession. This is the second time in just months that one self-storage company has acquired another. This same phenomenon took place in August as well, when the mainland firm Public Storage bought out a self-storage facility in Waipio. This trend may continue even if the situation of residential real estate improves in upcoming months, since industrial and commercial real estate usually trails the trends of residential property by a few months to years. Hawaii’s self-storage market was hit particularly hard by the recession, since developers were just starting to build millions of square feet of storage space when the downturn hit. The amount of total space available literally doubled between 2005 and 2010, but the demand for that space sharply declined with the collapse of the economic bubble, forcing owners to decrease rates.