The October home sale numbers just came out by the Honolulu Board of Realtors. And while the overall message is promising, it's important to tease out the important data from the statistical noise. For example, the post states that the Ewa and Kapolei area rose 30% from last year (October 2012 vs. October 2011). The rise was specifically the number of recorded sales, from 35 to 46.

So last month there were 11 more recorded sales in that entire region compared to the same month a year before. I'm admittedly not breaking out my statistical z-score formulas right now as it's now 6:00am and I've been up for 2 hours as I'm fighting jet lag having just come home from Thanksgiving in Philadelphia, but that increase of 11 sales, while encouraging, doesn't seem to be too much beyond statistical noise (random fluctuations). However, it is encouraging.

The flip side? Median prices declined by 4 percent (itself potentially just noise). So what's more telling to you - more sales or a dropping price point? It's not a rhetorical question - you likely have different needs or intentions as they relate to real estate and will, therefore, be influenced by different criteria than your neighbors. I'm just illustrating some of the challenges in making sense of data instead of just taking the spin. We gotta be analytical. Take it all in but focus on the numbers that relate more to your objectives, even if they're counter to current sentiment.

Let's bounce over to the windward side where in Kailua and Waimanalo, sales rose 85% from 13 to 24. That's a large percentage increase and is likely indicative of true market uptick, but it's such a small sample set that you have to at least curb your enthusiasm somewhat. The number to latch onto more is that that the median price for single family homes rose 40%. Even with a small set of only 24, that's a substantial increase.

Now the report doesn't mention if distressed properties (short sales and REOs) are included, but I'm assuming they've been weeded out. If not, then it's a giant asterisk of Mark McGwire proportions (baseball fans know what I mean).

I agree that October appears to be a good month and concur with my real estate colleagues that we seem to be entering into healthier times. I just like to be a bit conservative when looking at numbers because they can often incur emotional reaction that clouds judgment and more required analysis.

By the way - if you have a cure for jet lag, then please share below!

The traditional criteria for short sale included a hardship and having missed a certain number of mortgage payments. This is not unknown to Hawaii. Well before the 2011 moratorium on non-judicial foreclosures, Hawaii was ranked 11th in the state in foreclosure rates. No doubt this is welcome news for many underwater homeowners here in the islands.

Now, let's be clear as to new guidelines. After all, you still need to qualify. This is not a free pass for anyone to rocket a short sale through the system and come out the other side all sayonara, never to be seen again.

NEW Short Sale Guidelines

1. This is ONLY for Fannie Mae and Freddie Mac issued loans. If you're not sure, talk to your mortgage servicer. This will constitute a large percentage of borrowers, but I wanted to make sure you understood this first and foremost. Fannie and Freddie only.

2. You still must have an eligible hardship. Just because your payments are high isn't going to cut if if you have the income to still comfortably make the payments. However, "eligible hardship" is a loosely-defined term. You might be able to...uh.... get creative on this one. Death, divorce, etc. If you have to relocate 50 miles away for work, you're in like Flynn.

3. Reduced paperwork. Short sale realtors rejoice.

4. Fannie and Freddie will, in some cases, waive deficiency judgments in lieu of a cash contribution at closing or promissory note. Case by case basis.

5. If you're in our military (salute, salute) and get a Permanent Change of Station (PCS), this works for you.

6. Up to $6,000 to cover junior lienholders (second mortgages). Believe me, this is huge for some of the short sales I've seen here in Hawaii. Your junior lienholder can be a real stick in the mud and completely sabotage your short sale if they don't want to play ball. This helps feed them a bit at closing.

Click here for the official guideline document.

If YOU need a short sale on your property, then I want to earn the opportunity to help you. When you sell your house as a short sale, you'll need a buyer. Guess what? That's me. Let me put one of my top realtors on it (the bank will pay your realtor and closing costs) and let's get this done to help you move forward.

Just CLICK HERE to get started on your FREE short sale.

• Inventory is tightening up just about everywhere and prices have creeped up. Homeowners are in many instances holding on to properties whereas before they may have considered selling. Is this a sign that the housing bottom is behind us? Perhaps....
• ....but others still clamor that the banks are holding back about 90% of their foreclosed inventory and we're about to get whacked back down again, maybe sooner than we thought. Do you agree?
• I can tell you from my own experience running my real estate investment company that many homeowners today are also choosing to turn properties into rentals to either cash flow or at least break even and wait out an expected price appreciation to sell down later on the road for more gain.
• The controversial Oahu rail project continues on, despite calls for its removal both in and out of the mayoral race.
• Speaking of the Honolulu race for the mayor, who do you think is the best candidate for Hawaii's homeowners? Cayetano? Carlisle? Caldwell? (Apparently your last name needs to start with a "C" to be mayor...)
• The banks continue to foreclosure through the courts (judicial) and Hawaii homeowners who were in mortgage default for a year or even longer (yes, it's happened all around us) are finding out that the time has come to decide how best to move on

It's my opinion that the temporary tightening of inventory in Hawaii is just that -- temporary. Sure, the banks can't open up the faucet on wide of their shadow inventory and flood the market -- we all know that will depress the local housing market to levels possibly even lower than they were a few years ago. But they have to figure something out and that REO pipeline will stay open for, as some estimators predictor, 3 to 5 years.

But here's thing -- it's still very much tied to JOBS. And while Hawaii's unemployment rate is very favorable compared to those of our mainland cousins (thanks to encouraging recent tourist numbers), we're still connected to the national system and all its wonderful nuances.

STAT TIME

Let's look at some interesting stats courtesy of RealtyTrac...

As this bar chart surely shows, the key point of interest is the steady decline in properties in Preforeclosure. In case you're not familiar with the term, "Preforeclosure" generally means homeowners who are in default but have yet to be officially foreclosed upon. In other words, they are still the homeowners on title.

To the point, I have a hard time believing that the numbers of homeowners in default went from just under 500 in January to under 100 in June -- as is many times the case, stats can be deceiving and not tell the whole story. I suppose there could be a logical reason for this, some mix of increased refinancing and/or successful loan modifications (the latter unlikely). Anyone care to shed some light?

In this chart we can see, unsurprisingly, that the vast majority of homes either headed for foreclosure or already past that point fall in the 300-400K category. Unfortunately, these numbers include all housing types (SFH, townhouse, condo) so making a clear inference is a bit difficult, but it would appear that most homeowners in Hawaii needing help are in the lower end of the price spectrum when compared across the state. However, interestingly enough, the high end luxury homes are represented as well -- I guess some people bit off more than they could chew in the good times!

By the way -- completely unrelated -- but is anyone else enjoying this year's flowers as much as me and my girlfriend??

That being said, what's an honest investor to do when the market itself has become no better than a weekend trip to Las Vegas and betting it all on 28 black? Well, I'm no fan of the stock market for many reasons (no equity, no collateral, no insurance, to name a few). It should be no surprise, that real estate offers many investment opportunities that the market simply can't compete with, but there's one in particular that I feel needs specific mentioning: the ability to say YES or NO at a 'unit level'.

What do I mean 'unit level'? I mean being able to say YES or NO as to whether to invest in or buy a particular house, i.e the 'unit' is a house (or townhouse, condo, etc.). With the market, you're buying shares of stocks or mutual funds but are you actually directing the board of a company to make certain decision? Of course, not. You're investing in a ticker symbol that represents a company (or mix of companies) that has its board of people you'll likely never meet that make critical decisions every single day --- without any input from you. How dare they! But it's the truth.

However, in real estate, unless you're investing in a hui or REIT, then you are the 'board' of your own personal investing firm and YOU're the one calling the shots. Not everyone's comfortable in that scenario, but I LOVE IT.

Now we're in June, here in Hawaii. Summer is traditionally a good time for real estate -- the grass is greener, kids are out of school, love is in the air, yada yada. And while no Hawaiian city made a recent Top Ten list by my friends at FortuneBuilders, there are bound to be some fantastic deals around the corner.

Why? Well, the banks are primed to start releasing more distressed properties, of which there are plenty in Hawaii. Some might say it's actually started. That means if you have cash to invest or are pre-approved for a mortgage and can thrown down a sizable down payment, then start looking NOW for properties where you can get yourself 15% or more upfront equity. Maybe you can rent it out to cover the mortgage while you watch it appreciate over the next decade (btw, never buy a house at retail -- just don't do it). This goes for here in Hawaii as well as on the mainland. My colleague Scot Stafford of Landmark Properties is finding amazing real estate deals in NW Washington!

Combined with the upcoming glut of more distressed mortgages on the market is the expiry of the non-judicial foreclosure moratorium, which I've mentioned many times before and won't go into again here. In summary, get prepared for more DEALS here in the Hawaii market. If you're aggressive or get on an investor's buyers list, you should be able to get a nice deal that suits your criteria and budget.

Bottom Line: The Facebooks of the world can promise the moon and have all the razzle dazzle, but in the end even the biggest firework can be a dud. Real estate, if done properly, can offer all kinds of rewards that a ticker symbol can never compete with.

Hi Mike. The first time I purchased a home, I went at it your way and stuck to the 70% rule. However, I found that because I wasn't backed by a realtor, they didn't take me seriously. What I discovered is that when I went into the deal with a realtor's backing, the 70% rule worked! I think they figured I was a potential buyer when I had a realtor with me. For now, though, I'm just looking for some houses to rent in the Hawaii area until the prices come down. Know of any? I figure when the time is right, I'll jump on it. I have some properties in mind already.

I don't really work in the rental market, but drop me a line when you're ready to buy and I'll see if I can get you into a good under-market deal that I lock up.

However, watching the big guys take a fall doesn't really do more for those of us in Hawaii than provide a nice diversion and maybe an "I told you so". So with that being said, let's look at the March foreclosure info for Hawaii.

Looking at the data, it's no surprise that most of the foreclosures were on Oahu. However, the Big Island had the highest foreclosure rate with 1 out of every 460 housing units in foreclosure, mostly in Kona. Maui was right behind with Lahaina and Kihei contributing to the 1 out of 514 foreclosure rate. Statewide, bank repossessions (REO) more than doubled from 102 to 214!

Yet at the same time, inventory is dropping under the 6-month mark and prices have creeped upwards. It remains what will be done when the statewide moratorium on non-judicial foreclosures comes up for renewal in July , but it seems obvious that this will have a tremendous affect on the future of Hawaii housing and real estate.

With Bank of America, a major provider of home loans to Hawaii residents, revamping their short sale process this past week, now might be the best time to get out from an over-leveraged mortgage if it's crippling your family's budget, especially with the 2007 debt forgiveness act still in effect through the end of the calendar year.

Let me know what you all think!

Reinstatement -- Reinstating your loan means bringing it current. You'll do this by paying off the arrearages (how far behind you are) and possibly some accrued attorney fees. Your lender will give you the amount. Your loan should then go back into a 'good' standing with your bank. The caveat? If you had the funds to reinstate your loan, you probably wouldn't be reading this article. But maybe you have a relative or other source of funding you didn't have beforehand (like a new job) and can now get back on track.

Filing Bankruptcy -- Ok, filing for bankruptcy is a bigger deal than just stopping foreclosure, but it does halt the process in its tracks until you get your affairs in order. By all means, consider the consequences, both temporary and long-term of filing "BK" as there are different "chapters" with different schedules and intended outcomes (ex. wiping out debt versus reorganization). Consult a bankruptcy attorney if you have any questions as it can be a tricky legal process.

Deed-in-Lieu -- A deed-in-lieu of foreclosure is when you voluntarily deed your property back to your lender. It's still a form of foreclosure, but you're potentially saving your bank thousands or more in legal fees by not forcing them to take your foreclosure to the end. In return, they may be willing to offer you incentives for a smoother "exit". This is something you'll have to negotiate with them. Again, just be sure you are clear on the legal and/or tax consequences.

Facing foreclosure in Hawaii or any other state sure isn't fun. The current moratorium in force only affects non-judicials directly, but judicial foreclosures are still proceeding, so there's no time to lose. Getting educated is the first step in moving forward in the best direction possible. Hopefully you've found the information here and in the last post informative and helpful. There are other sites out there as well, so take it all in and proceed in whatever direction you feel suits your situation and objectives the best.

Have you been down the foreclosure road already? Any insight to share as to what's worked and what hasn't? Share your experiences here!

These activists marched around the neighborhood with balloons, brass bands, vuvuzelas and all on the glorious day of the actual occupation. Yes, vuvuzelas, those annoying horns from the World Cup that apparently haven't realized that they, too, are only welcome once every four years. The police gave them the necessary escort but didn't escalate the situation by preventing access to the home that Bank of America still legally owns.

"Foreclose on banks, not people!"

The basic premise behind these "liberators", as they are apparently calling themselves, is that they consider the foreclosure of the house itself to be illegal. "Foreclose on banks, not people!", read their signs, and in light of the many allegations against the big banks over the past couple of years, it's hard to find fault with that argument. No one is giving the banks a free pass here at all.

However, does that mean that we all just rise up and take over abandoned properties in our own neighborhoods and start sticking our homeless in them? No doubt we have a homeless problem here in Hawaii. From park closures to scheduled maintenance and cleanup, the homeless are getting shuffled around the islands like a bad Christmas present at a party. But it seems rather illegal as well to storm vacant properties and call them our own. You do it once, you get attention from local and national media for your housing cause. You do it again and again and inevitably the legal owner or police will get involved, especially when a homeless person is injured in one of these unsafe properties and sues the state.

How will it end?

No one would want to be homeless in a New York winter (or anywhere, of course), and on the surface it honestly is a shame that there are vacant properties that could at least provide shelter to people who need it. It's also heartening to see a community come together so strongly for a cause they believe in. I just wonder how this is going to end -- because it has to come to an end in some fashion. This family will not be living there illegally for the next ten years. Love BOA or hate BOA, but they won't turn a blind eye forever.

What would happen if that same scene played out here in Hawaii? Should we occupy a foreclosed home in Kalihi? Kahului? Kona? Would the community support it or would they squash it before it got started? How do you feel about what's transpired in Brooklyn? Are you all for it or have the "activists" gone too far?

Extra Feature

Ok, I promised something a little extra. I was recently introduced to a woman that has a very fascinating business. Lisa Simon is a Personal Historian. She interviews older people about their lives, captures it on video and then creates a DVD as a historical memento for the person's family. How neat is that?? She's seen people do this before in her previous home in Chicago but found that most people, while having the best of intentions, never got around to doing it until the opportunity was gone.  Lisa is also a member of the Association of Personal Historians. You can learn all about her very unique service at: http://www.reme.....-media.com/.

Aloha,
Mike

Proper expectation management and market research are crucial to selling a house in Hawaii (or anywhere) in a timely manner.

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