The latest RealtyTrac U.S. Foreclosure Market Report shows that there were 395 Hawai'i properties with foreclosure filings in October—a 202 percent increase than the same time last year.
"Hawai'i foreclosure filings tripled in October compared to last year," says James J. Saccacio, chief executive officer of RealtyTrac. "Statistics show that the state's home values and home sales have fallen below the national average during the past year. This is likely contributing to the recent rise [in foreclosures]."
The large number of foreclosures, one filing per 1,266 Hawai'i households, has kept real estate appraisers working overtime to keep up with bank requests for Broker Price Opinions throughout the islands. Most foreclosures were in developing communities such as 'Ewa and Mililani, as well as lower value homes in Waianae and islands neighboring O'ahu.
"O'ahu always has a market because space for properties are so scarce [compared to other islands]," says residential appraiser Christopher Converse. "Either land isn't developed, or land is not going to be developed."
The recent foreclosures are the result of an over-inflated real estate market adjusting itself to a hurting economy, Mr. Converse explains. The newer communities in 'Ewa and Mililani tend to have homes with little equity and a higher chance for foreclosure.
"If I bought a home two years ago, I've only made two years of payments—not much equity," Mr. Converse says. "Compare that to if I lived somewhere in Hawai'i Kai for 20 years, I'd have a stronger interest in keeping my property."
In October, 'Ewa had 126 foreclosures, Mililani had 66, Waianae had 59, and Kapolei had 39 out of 197 total foreclosures on O'ahu. Neighboring island counties had 198 foreclosures: Hawai'i County 103, Maui County 71, Kaua'i County 24.
"When economic hardships occur, the first property values to go down are what appraisers would rank as the least desirable neighborhoods, which are not as accessible, such as Waianae." Mr. Converse says. "The values are dropping down by hundreds of thousands of dollars. No one is going to keep the kinds of properties that keep losing dollars."
Hawai'i real estate blogger Jeff Manson sees the foreclosures as an opportunity for people looking to buy a home at an affordable price.
"The rise in Hawai'i foreclosures creates prices to soften and great buying opportunities," Mr. Manson writes. "Not just foreclosures either, it forces the really motivated sellers to compete and lower their prices as well."
The State Department of Business, Economic Development, and Tourism does not forecast Hawai'i's economy to begin to recover until at least 2010. With at least two more years of economic hardship, a homelessness state emergency declaration, and the price of homes dropping, community planners must capitalize on developing housing that is affordable and equitable.-----