To help in your search for your Maui home or Vacation home, here is a list of pet friendly comlexes in Kihei:

Hale Kanani 

Haleakala Gardens 

Island surf 

Kai Ani Village (new, under construction) 

Kai Makani (new in North Kihei) 

Kamaole One 

Kapu Townhouses 

Ke Alii Ocean Villas 

Keonekai Villages 

Kihei Garden Estates 

Kihei Holiday 

Kihei Villages 

Koa Kai 

Koa Resort 

Maui Banyan 

Maui Gardens 

Pacific Shores 

Royal Mauian 

Royal Menehune 

Southpointe at Waiakoa 

Villas at Kenolio 

The Housing Crisis Is Over 

By CYRIL MOULLE-BERTEAUX
May 6, 2008; Page A23 

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now. 

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor. 

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982. 

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what’s going to stop the housing decline? Very simply, the same thing that caused the bust: affordability. 

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much. 

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst. 

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in. 

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do. 

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months. 

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in “months of supply” terms. That’s the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months. 

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually. 

Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won’t stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market. 

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they’ve been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons. 

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading. 

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity. 

When the rate of house-price declines halves, there will be a wholesale shift in markets’ perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face. 

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure. 

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets’ perception of risk related to housing, the financial system, and the economy. 

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now. 

Mr. Moulle-Berteaux is managing partner of Traxis Partners LP, a hedge fund firm based in New York. 

See all of today’s editorials and op-eds, plus video commentary, on Opinion Journal. 

Welcome to our new blog.  We have added new features and made it easier to search our archive of old posts.

First-quarter data show some cooling, but not much
By HARRY EAGAR, Staff Writer
The Maui News
POSTED: April 10, 2008
KAHULUI — Maui County residential real estate sales numbers and prices were steady at the end of the first quarter of 2008.

Terry Tolman, chief staff executive of the Realtors Association of Maui, noted that Maui real estate has shown a “general cooling trend” since its peak in mid-2005. But nothing like the plunge being experienced in many Mainland areas.

The association compiles the numbers from its Multiple Listing Service database. Tolman cautions that particular neighborhoods can diverge from the overall trend.

The trend for single-family homes shows a 12 percent decline in average prices, which were over $1 million a year ago. So far this year, the average is $909,000.

But median prices, which are less affected by whopper sales, have moved much less. They are down 4 percent to $603,000.

The number of days on market, which gives an idea of how hard it is to sell a house, was 162. That was about a month longer than last year.

Even the closing of a number of “affordable” houses in Central Maui barely depressed the median price there. It was down 3 percent to $545,000.

Most areas unaffected by subsidized prices showed gains in median price, which is the point at which half the sales were for more, half for less.

Haiku, for example, saw median prices advance 19 percent to $800,000, although average prices were up only 5 percent to $1.17 million. The number of sales was almost unchanged from January-March 2007: 14.

However, another big area, Kihei, saw median prices decline 27 percent to $568,000. Average prices there were down 20 percent to $646,000. The number of sales was down from 51 to 36.

Tolman describes Maui’s market over the past two years as “up, down and sideways.”

Downward price movements were more pronounced in the most expensive areas: down 40 percent on average at Kapalua to $5 million, down 30 percent on average at Wailea-Makena to $3.3 million, down 24 percent on average at Kaanapali to $2.2 million.

The numbers of sales in those areas were so small that percentage swings could be exaggerated.

Other pricey areas showed equally large gains in average prices. Maui Meadows was up 45 percent to $1.9 million, and Kula-Ulupalakua-Kanaio was up 39 percent to $1.5 million.

Overall, the single-family housing market shrank considerably in the first three months of this year compared to last year. Total dollar volume dropped by $146 million to $207 million.

Condominium trends were quite different.

The average price was up 15 percent to $940,000 (higher than the single-family house average), and medians were up 6 percent to $587,000.

The number of sales was almost unchanged: 276. Total dollar volume was up by $33 million to $259 million.

Kihei, which has the most condos, saw median prices rise 23 percent to $445,000 and averages go up 23 percent to $530,000.

The number of sales jumped from 86 to 118.

The Wailea-Makena condo market continued to be extremely hot. There were 64 sales (compared with nine at Kapalua and 12 at Kaanapali), and average prices zoomed 34 percent to $2.1 million.

The association’s MLS showed 1,169 residential properties for sale as on Wednesday (including some with pending contracts). That was significantly more than last year, when the number for sale never rose above 1,000. That changed in October, and the number has been climbing slowly but steadily since.

• Harry Eagar can be reached at heagar@mauinews.com.