Fixer Upper in Kaimuki – One of Honolulu’s Trendiest Neighborhoods
Kaimuki is similar to what Brooklyn is to Manhattan and what Mar Vista is to Beverly Hills or Malibu. It’s a spillover neighborhood for those who want to live in Diamond Head or Kahala without the same price tag and with a little more of a rooted feel. Kaimuki is an older, established neighborhood responsible for precious kid time memories among the lower end of Baby Boomers and the top end of Gen X’ers. Some of the greatest Hawaiian musicians were raised in Kaimuki (or Palolo Valley, rather) like Ernie Cruz, Jr., Chino Montero, Ben Vegas, Troy Fernandez, Greg Sardinha, and everyone’s favorite – the Hawaiian Supah Man – Bruddah IZ.
Homes in Kaimuki were built as far back as the 1930’s. The proximity to the the freeway and main surface streets as well as Waikiki and Diamond Head is unbeatable. Waialae Avenue and Kokohead Avenue presents a truly walkable block of quirky, fun shops and restaurants. Many trendy eateries have popped up like Pipeline Bakeshop, Via Gelato, Coffee Talk, and Kokohead Café. You can grab a nice bottle of wine from Tamura’s and a super cute charcuterie tray from Bubbly & Bleu. A local favorite, Fort Ruger Market is on the Diamond Head side and offers one of the best poke bowls in town.
Fixer uppers are common as homes have been passed down through generations. Many buyers these days are looking to preserve the old charm rather than knocking them down and building monster houses. Although, you’ll find your fair share of those monstrosities in Kaimuki too.
The streets are lined with mature trees. It’s definitely a townie neighborhood, but what a treat to have a house with a yard within the hustle and bustle. It’s classic, yet trendy; old, but new; evolving, yet familiar.
Check out the following blog from Dwell Hawaii for additional and valuable information.
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.
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.
Me (realtor): Congratulations on getting pre-approved for $550,000! Tell me your wishlist.
Buyer: We’d like 3 bedrooms (minimum), a 2 car garage, 2 bathrooms or more, a yard, split level, no jalousie windows (we hate those), no popcorn ceilings, preferably ground level, no one above or below us, pet friendly (our sweet boy Bailey is a slobbery 50 lb pit bull mix), and no HOA fees.
Me: (thinking…how do I tell them this just doesn’t exist on Oahu and how many more realtors will they talk to before they believe me and if they do wind up believing me, will they be back or will some other agent have them sign a Buyer’s agreement which they will because they needed to hear it 3 times to believe it).
So, yeah. That’s pretty much what it means, but not really. For the buyers who know next to nothing about Oahu real estate, it’s my job to educate and inform them of how little land we have on our beautiful island. When supply and demand are in an inverse relationship, that affects pricing (economics 101). Face masks are currently super cheap because they’re everywhere and no one’s using them anymore (except here in Hawaii…grrr). Oahu real estate is expensive because only 6% of it is fee simple to begin with. Add to that agriculture land, leasehold land that can only be leased to those who are 50% Hawaiian, golf courses, hotels & resorts, commercial space, nature reserves, military land, or land that is simply undevelopable/uninhabitable and you’ve got a supply issue. And don’t even get me started on how difficult it is to get building permits while the state of Hawaii has the highest number of state employees per capita…but I shall pump my brakes and swerve back into my lane. I am a real estate agent. An opinionated, sometimes unapologetic real estate agent who might also be startled awake in the middle of the night by the opinions I’ve shared out loud. Perhaps that will make you, as a client, a little more compelled to work with me as I enthusiastically stand by and communicate what I believe in.
Inventory is low. Here’s a solid example and hopefully I don’t need to say much more. I have a buyer right now who qualifies for $550,000. They’ve lived here almost all their lives so they understand the scarcity. Their needs:
2 bathrooms (but they’ll settle for 1.5 baths. They have 2 boys and mom simply can’t share a bathroom with 3 men anymore)
2 parking stalls – MUST. None of this “But you can find parking on the street.” Yeah. Right.
Preferred areas: Kaneohe, Kailua, Salt Lake in Honolulu, might go as far as Aiea, but probably not.
Must be pet friendly. Pets are family! And they’re not willing to lie and say their pets are therapy animals.
In preparation for the weekend, I had my eyes on the MLS all week. It yielded 2 listings. TWO. That’s it. They went to see them. One was a little too small. They loved the other one and were ready to make an offer! The listing agent had 4 offers in hand before the weekend was over and offers were due by Tuesday at noon. She was expecting more and already had offers over the asking price. Prior listings in the building said “pet friendly,” but I verified with resident manager it is not – therapy animals only. Ugh!!!
Inventory is low. Do I need to go on? Okay. Here’s one more example. Economists like to say things like, “There is 1.5 months of remaining inventory.” Translation: if nothing else came on the market today, it would take 1.5 months for everything to sell. Anything less than 6 months is considered a seller’s market. Beyond 6 months shifts to a buyer’s market.
Inventory is low.
So what does this mean for you? If you have property to sell, it’s time. How does lack of inventory help you? It’s not only about timing the market and getting the most money for your property. After all, statistics show that real estate on Oahu only goes up over time. So yes, you can wait and probably still make more money in the long run, but as interest rates increase, the amount of buyers willing to jump in now, hard, and aggressively will be less. With inventory so low, you’ll have the choice of cherry picking the buyer who will close fast and easy and with a grateful, cooperative heart. As a buyer, you could wait until the market cools a little and hope prices will come down in this increasing interest rate environment, but the real question is, will you end up paying more anyway? Maybe you won’t have to bid up the price as much to beat out 19 other buyers, but you’ll pay a higher interest rate, higher payment, or will have to settle for less because the interest rate prices you out over the home price itself.
My bottom line will always be this, however: the most important timing is your own. If it’s time for you to let go of a property, do it now. If you want to own a property and you’re in position to do so, do it now. This chick in her mid-40s is finally starting to understand how fast the clock is ticking. Lack of land and inventory has always made Oahu, Hawaii different from other markets like California or Las Vegas. As a buyer, you just have to get in and most only wish they did it sooner and bought more. As a seller, you can’t look back. Real estate on Oahu only goes up, some years more than others, but over time, it just does.
I write this from a flight over the Pacific back from Seattle in early March. When the pilot announced after take off that the weather is 80 degrees in Honolulu with northeast tradewinds at 15 mph, how do you think most people on this fully packed (fully masked) flight reacted? People love Hawaii. Politics aside, there is much to love about it. Demand is high. It always has been. It always will be. And I suppose that while I’m obviously mad we’re still wearing masks while the rest of the country is not, I’d rather wear a mask living in Hawaii than no mask somewhere else and clearly I’m not the only one who feels this way.
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.