North Kona Home Sales

RESULTS of Bank of America’s Equity Research November 29,2007 real estate survey just hit my desktop. If you are still holding on to hope there will be appreciation soon – their predictions will disappoint you.

Portfolio Managers’ Summary

Our 12-month thesis on the sector. We are cautious on home building stocks. We
see risk over the next 3-6 months. On the negative side, we see limited buyer
traffic, a lack of mortgage availability, excessive inventory and risk from continued
price declines (necessary to remedy the excess inventory). Further credit troubles
(subprime resets) will likely add even more inventory to the market. On the
positive side, we see a 55% decline in new construction activity and the potential
for lower interest rates, which would help affordability and the stocks.

Our call today in a nutshell. Traffic index up slightly, but due primarily to lower
expectations (based on continued weak demand and a seasonally slower time). Our
traffic index improved to 20 in November from 18 in October, but remains
depressed. Price index inches back down, and only limited talk of interest at lower
prices. Our price index was essentially flat at 17.1 in November, down from 18.2 in
October (readings below 50 indicate sequentially lower prices). Once again, agents
noted price declines in every market we surveyed. However, what was interesting
is that few agents noted any positive buyer response to the lower prices, primarily
as buyers remained concerned about buying before the bottom.

Risks to our call. Continued lack of mortgage capital would lead to further
troubles. On the other hand, a significant decline in mortgage rates would aid
affordability and stimulate demand.

Luxury Home Council Report on the California market was no more cheering:

California October 2007 Sales Report

A total of 25,832 new and resale houses and condos were sold statewide last month. That’s up 5.6 percent from 24,460 for September, and down 40.9 percent from 43,720 for October 2006. Last month’s sales made for the slowest October in DataQuick’s records, which go back to 1988. On a year-over-year basis, sales have declined the last 25 months.

WHAT DOES IT ALL MEAN? It seems pretty dour that the bright spot the analysts see in the market is a slow down of new starts. On the other hand I cringe each time I see a new construction trailer move onto a piece of land because as long as there are new opportunities, the re-sales will move slowly. Slow re-sales trap people in their existing homes and make the market less fluid. I think the California revelation that the sales have declined for the last 25 months is quite important. This gives us a September 2005 bench mark for the top of the market. I would have guessed June or July 2005. We continue to look forward to a stable market.

TO REQUEST YOUR COPY of the full 63 page Bank of A report, send your e-mail address to BofA@KonaBigIsland.com .

Joyce Murphy, Realtor Broker BIC
Hawaiian Isle Real Estate LLC
Luxury Real Estate Florida, Inc.
In Real Estate, Experience Counts
808-443-4302 / 808-327-1155
Joyce@KonaBigIsland.com
More Kona Real Estate Information at:
www.LuxuryRealEstateHI.com

Filed under: Real Estate Information