We Bought A House. It Needs Work. NOW WHAT?!

Special mahalo to Trevor Drinen of Signature Inspections Hawaii for his expertise!

Buying a home in Hawaii is a dream. It can also be HUGE disappointment, not only because of the cost, but because anything around the median price of a million dollars is going to be small compared to what you can get on the mainland. It will be 40-50 years old, won’t come with an acre or more of land, it won’t have a basement, is on post and pier foundation, might be on a hillside if your priority is an ocean view, or might be on sand if you want to be by the beach. All of this means, it will more than likely need renovating and on going maintenance. Don’t forget we are a tropical climate all year long with rain, wind, and sun beating down on the roof and paint. It’s often not until we get the home inspection report that the disappointment is realized and then we’re at a crossroads. Will the seller repair the things that have been deferred? What’s an actual safety or structural concern that the seller really should fix? But in a seller’s market, good luck having them do anything. Ohhh! But I really want this house! Now what? 

First, it takes skillful negotiation on your real estate agent’s part, but sometimes no matter how good they are at negotiating, some sellers simply won’t budge, especially if they accepted your offer before a higher offer came in or if they have a comparable offer in back up position (which they almost always do on Oahu). Very rarely, some sellers are hoping you cancel so they can move on to the next buyer, although that is never encouraged by a real estate agent as it automatically places a stigma on the property. But if there’s a backup offer waiting in the wings, they are more than likely calling the Seller’s Agent daily asking, “How’s your escrow going? Do my buyers still have a chance?” In the case of buying my house, the negotiation was won by me up front. We didn’t pay too much over asking and the terms in our contract were too good to pass up. That also meant there wasn’t much room left for them to fix or credit anything. 

Our home inspection was disappointing revealing foundation settlement, unevenness in the floors, leaks in the roof, and wood rot in the siding and beams. The number one issue: water. No surprise. As a matter of fact, that is the number one issue owning a home in Hawaii with the amount of rain and moisture we have. 

Problem: water.

Solution: divert. 

Sounds pretty simple right? It actually is, as long as you educate yourself, prioritize, set a budget, and find the right team to do the work. Home renovations will always take longer and cost more than you think. It’s not a perfect process. 

If I had a dollar for every burned out buyer trying to buy a turn key, move in ready home who said, “What about a fixer upper? That could be fun,” I could buy myself a nice pair of shoes. My question: fun? In what way exactly? If you think buying a home is stressful, buckle up during renovations.

The goal is not to scare anyone, but rather, to acknowledge the fear. The most courageous and experienced home owners, builders, flippers, and renovators will tell you, “Everything is correctable. No house is perfect. Every house needs maintenance.” When buying a home, your home inspector will likely not find things that you’ll find after living in the home for a few months. He or she is there for half a day. Don’t blame them if something isn’t discovered. It’s also easy to blame the previous owner. Don’t do it. Sometimes they really didn’t know there was wood rot on the siding by the exterior stairs because they never used that entrance. They went through the garage. But they left you with a really nice kitchen! Not everyone’s priorities are the same. 

If you own a house in Hawaii, maintain it. In the very least in Hawaii, keep water and termites away. If you’re buying a house…just buy the house. It’s scary. It’s courageous. You’re going to be ok. Prioritize, set the budget, and let the professionals do their thing. You got this! And when you wake up in the morning to birds singing and chirping, the smell of fresh coffee, and another 72 degree day, you’ll be so glad you did. 

What’s Going On in Oahu Real Estate in 2022?

Welcome to 2020 too. You almost can’t unsee that. Sorry. Rewind! 

WELCOME TO 2022!

2020 and 2021 created so much shift – in money, in business, in lifestyle, in mindset. 2022 seems to be the year we’ll actually plant ourselves in those shifts. For me, personally, I’m realizing I’m turning 40 freaking five! When the heck did that happen? I swear I’ll be 37 forever, but only if my metabolism and hair color would agree. Darn you JLo for raising that bar so freaking high and for having way more money than the rest of us to make a perpetual 37 years old a reality.

Who am I? Why am I here? I’m Maila Gibson-Bandmann (pronounced My-La not Mali-a). Much like “2020 too,” some of you all refuse to unsee and unsay Mali-a. I was a singer for the first 20 years of my adult life doing a little bit of real estate. Now that I’m in the next 20 years of my adult life, I’m a realtor on Oahu who does a little bit of singing. I wasn’t blessed with children, but I am crazy about my fur kids and I’M FORTY FREAKING FIVE!!! I might be in a midlife crisis. I’m not leaving my husband for a younger man or anything like that. I love him to life. My midlife crisis is more along the lines of realizing my generation needs a voice. I hope to be one of them who speaks truth, finds community, and as a bonus, if I get to help you with your real estate in Hawaii…YAY!

What happened in real estate on Oahu in 2021? The same thing the rest of the United States experienced: historically low inventory, historically low interest rates, tons of buyers, not enough homes to sell, people working from home therefore abandoning their condos in the city and moving further away and into the homes of their dreams. The media likes to tell it this way: “Home prices escalated to unaffordable levels due to wealthy mainland buyers buying every single house for sale and pushing locals to the streets or Las Vegas.” Here’s the truth and you can look it up in public records. The number one buyers of real estate in Hawaii were Hawaii residents. Where did the rest of them come from? Second place goes to California buyers with less than a thousand purchases on Oahu out of 15,741 homes sold. They accounted for only 6% of all home sales on Oahu. Next was Japan and then Washington for less than 400 sales combined. What makes California buyers love Hawaii so much? Other than similar lifestyles and a salad bowl of cultures, our property taxes are the lowest in the country. For every $1000 of assessed value, it’s only $3.50. On a home assessed at $1 million, that’s only $3500 per year. Cost of living in Hawaii is expensive (let’s not beat that dead horse), but property taxes are low. Now there’s a win!

So if Hawaii residents really bought all this property, how did they afford it? Low interest rates coupled with appreciation. Interest rates were in the 2’s and 3’s all year. Many sold and bought something else or they refinanced and cashed out. Single family homes ended around a median price of $1M. Condos ended up around $500K. Condo sales surged as new construction in Kakaako (such as ‘A’ali’i) became available. 

What’s going on in 2022? Is the market going to crash? Probably not, but I’m not psychic. We still have a supply problem. We just don’t have enough homes. Interest rates have shot up into the 4’s, but that’s still low! If you’re a child of the 80’s, you’ll remember that interest rates hit 18%. However, interest rates follow the rule of 10x. For every 1% increase, you can expect a 10% decrease in borrowing power or a 10% increase in your monthly mortgage payment. That’s huge. For example, if you take out a mortgage for 1 million dollars, you can expect a monthly payment to be somewhere around $5000 at today’s rates. If the interest rate goes up a point, that payment for the same amount is now $5500. Or, if you need to stay at a $5000 payment, now your purchasing power is only $900,000. The difference between a $900,000 home and a million dollar home is vast. Will this affect the market? Of course. Perhaps we’ll see less buyers competing for homes and less bidding up the price like we saw in 2021. Will there be a crash? Probably not. Prices may not even drop. They just won’t increase as much or as quickly and quite frankly, I’m ready for a more balanced market. Presenting 23 offers on a single family home is a lot of work and rejecting 22 broken hearts shatters my heart too. 

It’s important to talk about legislation. Bill 41 is a big one. It seeks to extend the minimum time for short term rentals (AirBnB, VRBO, etc) from 30 days to 180 days! The government is hoping this will solve our housing shortage crisis. It won’t. Most short term rentals are studios or 1 bedroom condos in Waikiki with no parking or luxury homes along Lanikai Beach that cost $3M or more. Bill 7 is an important one too. It allows for 3-4 times the number of units allowed on the same lot size. Think: all those old houses in urban Honolulu next to 3 story walk up apartments on teeny lots. Those are the ones this bill targets and developers are foaming at the mouth for these little nuggets. The caveat, however, is that they are to be priced at affordable rents. What we really need are more homes like Ho’opili and Koa Ridge, but where are we gonna get the land? This is why Hawaii has and always will be expensive. Land is precious and no one’s making more of it. 

What should you do in 2022? Owning a principal residence is a long game. Timing the market shouldn’t be your goal as a buyer. Buy when the time is right for you. If you’re an investor, that’s a different story. If you’re a seller, your timing is also most important, but with our housing crisis, you’ll almost never go wrong selling in Hawaii. And watch when Japan opens up again for travel. They’ll be back and they looooove Hawaii real estate. 

2022…I’m here for you. I like that much better than 2020 too. 

Oahu Single Family Home Inventory is Plummeting

I’ve had several people contact me recently saying, “I hear Oahu home sales are down! Are prices dropping? Find me a deal!” Headlines are tricky aren’t they? Click bait is all the rage. So sorry, but this is NOT what this means in the slightest. The state of the Oahu housing market is right in line with what’s going on all over the United States – low supply, high demand. For those who took an economics class in high school or college, what’s the one thing you remember? When supply is low and demand is high, prices only go up.

Are we in a bubble? Many sitting on the sidelines are doing the Dr. Evil pinky in the corner of the mouth with the snicker just waiting for prices to come crashing down. I can’t say I know for sure and I tread lightly with my answer to this question, but I had an epiphany yesterday while talking to my husband. We recalled the last crash of 2008 and discussed why that happened. Money was incredibly easy to borrow. Anyone could buy a home with little to no money down and stated income loans were kryptonite. You could basically say you make $10,000 a month with no documentation to prove it and the bank would say, “Booya! Go buy a house.” People were buying property like crazy and prices went up, up, up. Sounds similar to what we’re experiencing now, right? Yes and no. The difference now is supply is so low, buyers are having to compete to win. Who are the winners? Those with the most cash. So, whether you’re paying all cash or financing, even those who are financing are putting a significant amount of money down therefore, allowing for built in equity as soon as they get their keys. In 2008, many did 100% financing at inflated prices. They were so upside down on their homes, it was easy to walk away and let the bank foreclose.

Most people aren’t gonna walk away from a home with equity. Also, those who have stayed in the homes they purchased in 2008 have experienced an incredible run in the market. Maybe their homes are paid off? Maybe they’ve refinanced to 2.75% and have very affordable monthly mortgage payments. So, for those of you wishing, waiting, and snickering for deals in the near future, my hyper positive Pollyanna logic says you might be waiting for a while. And while there may be deals in the future, who’s to say that a deal 5 years from now wasn’t today’s highest price?

I’m not psychic and I can’t see into the future. I may wind of eating a big bowl of these very words. I don’t want to see a crash not just for my interests as a real estate agent, but for families, couples, people who are living the dream of owning real estate. But history is one of our best teachers and one thing’s been true for decades: real estate is cyclical. This market will shift. How and how much? We’ll see.

See Locations Article Here

What Does $2.8 Million Get You In Hawaii?

It depends where in Hawaii, but a house on the beach? You can pretty much count on it being at least $2 million or more just for the land itself. This one got multiple offers in under a week. Check back to see what price it closes at in a couple of months. For now, go on a virtual tour below:

Virtual Tour

Who Owns The Beach in Hawaii?

It’s an emotionally charged subject in Hawaii, both for ocean lovers (surfers, fisherman, and people who just plain love the beach) and those who own beach front homes. Good news for beach lovers: NOBODY gets to own the beach in Hawaii. There are NO private beaches. Bad news is, if your only way of getting to it by land is to cross someone else’s property, forget it trespasser. You can certainly boat in, swim, standup paddle, or walk from a public access point, but not if you wind up on vegetation. Step on anything green and again, you will get nabbed for trespassing and believe me, ocean front homeowners are incredibly territorial. Look for hidden cameras in the trees. They are watching and often times, they are totally unafraid to be confrontational. These are not the type of people who will passively call the cops. They will get in your face and ruin your day. They own luxury homes and a whole lot of other stuff. Even though the law tells them they don’t own the beach, they still think they do.

What does the law officially have to say about this? By definition, Hawaii Supreme Court law states the following: “any land below the highest wave line is considered state property and open to the public.” Here’s where it got tricky in the past, however – property owners were watering the vegetation and fertilizing it so it would grow further giving them more manipulated ownership of the beach. DLNR wised up to this and made it a misdemeanor if they catch you manipulating your boundary line. (Nice try people). You can read more about this below:

So how do you access the beach without facing off with a property owner in places like Kailua, Portlock, Diamond Head, Paiko, and Niu Peninsula? Like I said above, you either access by sea or use a public access right of way, but this still won’t guarantee you won’t get the, “What are YOU doing here” attitude. A wise person actually pinned these access points on Google. Notice how Waimanalo has a TON of access points. Paiko all the way through Niu Beach and Aina Haina has just one.

Speaking of Niu Peninsula, it seems they found a major loophole around this. Niu Peninsula is an incredibly charming street of less than 50 houses, but you wanna talk territorial? Ohhhh boy. Perhaps it’s all in love because they love their beloved little nook, but let’s have a moment of silence and remember what was once a Native Hawaiian Fish Pond given to Alexander Adams by King Kamehameha I.

Who’s to say whether or not the king knew what Alex’s intent was, but brother man filled that fishpond in, built homes, and blocked the beach. Then, an association was formed and gates were put up where the beach access is. Even smarter, the Niu Peninsula Association owns those little parcels of beach access. So, if you don’t belong to the association and you happen to have a code to the gate or wander through it somehow, count on getting tattled on, yelled at, made to feel very small, and kicked out in no time. One could argue the enforcement is needed due to pollution, homelessness, and overcrowding while others could argue that such a special place should be shared and enjoyed by all.

This post comes on the heels of an emotional day at my listing on Niuiki Circle. It has beach frontage. It’s in original 1950s condition, but I could feel the mana (Hawaiian for spiritual energy, power, and strength) standing on that lawn. As curious neighbors tracked in and out giving their strong willed opinions about the home, I quieted their noise with visions of that fishpond and thought of Bruce Lee saying, “Be like water.” Check out the listing here:

140 Niuiki Circle, 3 Bedrooms/2.5 Baths, $2,800,000