This week I've been looking with a client at luxury condos in and around Waikiki with a great ocean views. So after a couple days of looking at listings, I thought I would post some of my best findings and explain a bit about these buildings.

First of all, the true luxury condo market begins at about $1.2million in Oahu. And most of these properties are right in Waikiki, Ala Moana, or Kakaako. There are also some nice ones in Diamond Head which are more expensive but those seem to be dropping fast.  And it's important to understand that there's a big difference between ocean view and ocean front. If you want ocean front over about 1500ft, it's going to nearly double the price of a luxury condo, to around $2-4million.

Some of these units have an elevator that opens right into your condo, because they take up an entire floor. Right now there are several almost new buildings where you can get a luxury condo that has hardly been lived in. At the Pinnacle in downtown Honolulu, you can get a fantastic brand new condo for about $2million with an ocean view, and very large at around 3000sqft.  However it's about a mile inland.

At Keola Lai, a new building in Kakaako, the penthouse sell for around $2million and are about 2500sqft. The building is right across from the ocean, so it's got fantastic views. They also have smaller, lower floor 1500sqft units for under $1million.

Just down the street from Keola Lai is this building pictured here, called Ko Olani. A great building with a valet and fantastic ocean views. Very nice building and great finishes everywhere. Bargain priced at around $1.3million for an upper floor with great ocean views.
People love the luxury condos in Hawaii because they can leave them closed up and have very little to no maintenance while they're gone. In exchange they pay a monthly fee to the building management, which takes care of everything on the exterior.

For a luxury condo in the $2million price range, the monthly fees are about $1500-$2000/month. That sounds high until you think about how much you have to spend maintaining a house of that value. Yard work, paint, pool, repairs, roofing, etc. It all adds up.

If you live here in Oahu, you've probably driven right past Paiko Lagoon without ever noticing it. Even though it's just one turn off of Kalanianaole Hwy, it's a sort of secret spot. With fantastic ocean front homes, a sandy beach, and nice calm water, it may be the best kept secret in the Hawaii Kai area. I say "area" because it's not quite in Hawaii Kai, but actually considered part of the Diamond Head region in the Honolulu MLS.

This is kind of unfortunate, because Diamond Head makes people think of something very specific, something very not Paiko Lagoon. Paiko is a lot more like the Portlock area in that the shoreline is flat with small sandy or rocky beaches, and no waves at the shore. There are nice waves about a half mile out though. The water looks like this:

If you want to live in an ocean front home in Hawaii and you have about $3million, Paiko Lagoon might be for you. Some of the homes in Paiko Lagoon might remind you of Portlock and other areas of Hawaii Kai, with their large open layouts and high price tags.

It's only about 2 miles from Paiko Lagoon to the middle of Hawaii Kai, with Costco, the Koko Marina center, and everything that you love about Hawaii Kai. So why is it included in the Diamond Head district? Beats me. It's farther to Diamond Head than it is to Hawaii Kai, but Paiko Lagoon is west of the actual sign on Hawaii Kai Drive.

If you want to buy oceanfront property in Hawaii and you would like a nice beach with year round calm water, consider Paiko Lagoon.

For many it sounds like a dream, owning a home in Hawaii, but the cycle of the Hawaii real estate market can drive people crazy. If you've been watching the Hawaii real estate market long enough, you know about the "Japanese bubble" and the foreclosure market of the 90's. Go back even farther and you can see the impact of the two world wars.

While no one can know the future of the market in Hawaii's real estate, looking at the past can teach us many lessons.  I frequently run into homeowners who have been in the same house for 30+ years who understand this. They tell me about buying the house for $50,000 in 1968.

Those same owners are now sitting on properties worth $800,000 or more. As I meet owners around Hawaii Kai, I'm often amazed at how long they have been in that same house, and the ridiculous amount of equity they have gained by sticking it out in the up and down Hawaii real estate market. It's mind boggling how much money they COULD HAVE made, had they bought more than one property.

But look, if you had bought real estate in Hawaii around 1985, you probably would have lost money by selling in the 90's. Even if you had bought after 1990, you probably would have lost money had you sold before 2000. Unlike California and other markets, Hawaii's real estate market was still struggling in 1999. That year there were dozens of foreclosures in every Hawaiian city.

In the 80's and 90's a famous Japanese investor, Mr. Kawamoto, bought and sold dozens of homes all over Hawaii, turning them into run down rental dumps. On many of them he lost a lot of money. A LOT. We are talking multiple millions after all the losses were added up. The problem? He tried to time the market.

In 1999 A friend of mine bought a condemned foreclosure in Kailua for about $250k. It was a mess, with termites eating every piece of wood you could see. Then he put hundreds of hours of work into it and turned it into a beautiful little place with new just about everything. Last year he sold it for $825k. That's right, a profit of nearly $500k.

It's amazing, and I think there is a great lesson here for us in all these stories. You'll most likely make money in Hawaii real estate if you wait long enough. It might take you 20 yrs, but you're probably going to make a lot of money if you are patient and DON'T try to time the market.

Timing the market can be a dangerous and difficult task. People have lost their entire fortunes by trying it. But many who have just bought and held have made literally millions.

Will the Hawaii market go up this year? Next year? In five years? Nobody knows. One thing I do know: Hawaii is an island state with a very limited amount of land. Someday we may run out of space to build, and then what?  Someday my house will be worth $10million.  You think that's stilly, but my house is already worth about 20 times what it sold for in 1950.

I saw an article in the Star regarding the drop in number of Hawaii Realtors in 2009. The article highlights the total number of Hawaii real estate agents that haven't renewed their licenses this year, but that's not what I love about it.

Sure, "the Hawaii Real Estate Commission saw a 21 percent decline in license renewals this year," but that's no big deal.

The part I love is this - "Of all Honolulu board Realtors, 44 percent made no sales, and  18 percent made only one sale last year. "

That is amazing. I guess these are part timers or people who just have their Hawaii real estate license just in case. But I can't imagine trusting a part timer with the most important financial decision of your life - your home sale.  So about 64% of the Realtors on this island did 1 transaction or less last year. 

If you're going to buy or sell a house in Hawaii, don't take the rist of working with an amateur. At least find out how much business the agent you're working with has done.  Work with a full time agent that has closed at least a hundred escrows or so. 

Why should you buy a house in Oahu rather than Maui, Kauai, or the Big Island?  People often tell me they are thinking about moving to Hawaii but aren't sure which island to choose. They probably don't realize that the differences are huge.  I have 10 reasons to choose Oahu below, though I can think of a lot more.

1 Oahu has the best health care. If you live on the outer islands and have a serious health problem or emergency, they will fly you to Oahu, during which time you may die. Serious.
2 The outer islands are slooooooow. Everything is slow. Cars are slow, people are slow. Change is slow. It will drive you nuts. Unless of course, you like slow.
3 The traffic in Kauai is crazy. Yes, it's worse than Oahu. If you want to get from Liue to Kapaa or even worse, to Princeville or Hanalei, you better be prepared for the slowest drive of your life. There is a 2 lane road the whole way.
4 The outer islands shut down at about 8pm, while Oahu is up all night. If you want a late night snack, you better be on Oahu, or you better like hot pockets.
5 Real Estate in Oahu has been much better than the outer islands have been for 4 years. Why? Because their market is too dependant on tourism. They have little local industry, while we have most of the major the businesses in Hawaii.
6 If you lose your job on the outer islands, you'll be moving or on welfare. On Oahu, you can apply for a new job at one of our thousands of employers. Oahu's market is far deeper.
7 Oahu has symphonies, rock concerts, trade shows, outlet malls, every kind of car dealer, and soon, Whole Foods and Target. We have it all. The outer islands are just now enjoying Walmart.
8 If you buy real estate in Oahu, you'll never have to go to the outer islands except to vacation. About once a year I take my family to the Big Island or Kauai just for fun. If I lived on Maui, I would have to come over here for a lot of things. Things that the outer islands will never have.
9 It costs about $50 to fly inter-island. I can get to the outer islands anytime I want.
10 Schools. This should actually be much higher ranked in this list. The schools on the outer islands are for the most part, far behind Oahu's. In fact, much of the reason that Hawaii as a state gets a bad rap for schools is that the outer island schools are lumped together with the Oahu schools. If you look at the school reviews done by Honolulu Magazine every year, most of the top 50 are on Oahu.

The end of May means schools get out, vacations start, and people start buying houses in Hawaii. It's
probably the same in every state, but particularly in Hawaii, summer means the beginning of the tourist season and also the high season for home buyers and sellers.

Each May and June hundreds of homes are listed as people are hoping to make their move or pocket their profits while most of the buyers are out and about. Sometimes tourists visiting Hawaii will buy something if they've been here a lot and they plan to be here more, but usually it's just local Hawaiian people moving around and job transfers from the mainland.

One other factor is that the military makes a big shift in personel in the summer. Hundreds of military families will come from all over the world to Hawaii and buy a little piece of real estate in paradise.

It's time now to make your move. If you're planning to sell a home in Hawaii, do it now! Every year it starts to pick up in the end of June until about the end of September.  Time to sell!

7 Reasons you shouldn't buy Hawaii real estate right now

- you like to paying the $2400 average rent in Hawaii
- you don't need a tax write off
- you like to move every couple years, whenever your landlord feels like you should
- you are flat broke
- you are a hippie, living on the beach in a tent
- you don't plan to stay in Hawaii
- real estate is risky, unlike the stock market has been.

It's happened to me too many times to count now. When buyers come to Hawaii from the mainland, they often want to use the lender they are familiar with from their home state. Some want to use a lender they found on the internet.

Nearly every time I have worked with a lender from mainland, something has gone wrong. The last time was a purchase of $775k in Kaneohe, a beautiful tropical retreat purchased by a great young couple from the mainland. Their lender, who happened to be from New York and worked for a big lender, delayed the escrow by 2 weeks. Then he proceeded to yell and curse at my escrow officer here in Hawaii. Why?

Because the lender didn't know that Hawaii recordings in Land Court require full names, not middle initials. The lender sent over the loan documents with the middle initial instead of full name, so we had to get the loan docs redone. It was a nightmere, because the buyers were ready to move in and had the moving company all scheduled.

Another buyer of mine found their lender online from did-it mortgage, which probably doesn't even exist anymore. The buyer was purchasing a great fixer upper in Hawaii Kai for only $725k, which was a great bargain since homes there in Kamehame ridge were selling for over a million dollars.

With 1 week left in the escrow, the lender told the buyer that they couldn't get him the rate they quoted because the debt raitios were too high. Uh.... are you kidding me? His debt ratio didn't change during escrow did it? We changed lenders and used Amy Benga here in Honolulu who swooped in and rescued the escrow with just days left. She was awesome.

There are many things about Hawaii real estate that are unique to Hawaii, and most mainland lenders don't know all these rules. If they miss just one, it could cost you the entire deal. For instance, do mainland lenders know that in Hawaii the recordation of the title is different based on which system it's recorded in? No, most don't know that we even have 2 systems.

I work with some great lenders here in Honolulu so if you are going to buy real estate here, you should work with a Hawaii lender. Besides, we often have lower rates in Hawaii than the mainland. I saw a Wells Fargo rate sheet that showed the rates from here and mainland and ours were about 0.125% lower!

I have several clients interested in short sales and some listings that are short sales - all take a long long time. It's been 4 months with one listing  with no end in sight yet. Short sales are slow because lenders are a) backed up with massive numbers of short sales, and b) not in a hurry to lose money.

While short sales are a great way to get a good deal, another tactic is to go to another listing that is not a short sale, inform them of your offer price on the short sale and see if the seller will accept the same or similar price. Once in a while this may work for you, even if you have to pay a little bit more money. The benefit of course is you get to close when you want to.

The longest I have heard of a short sale going in Honolulu is 13 months. So if you're in escrow for that long and prices drop even further, what do you do? You've just wasted 8 months. The name of the game in purchasing a short sale is - patience.

Appraisers are swamped, lenders are working long hours, and home owners are rejoicing at lower payments. Refinancing helps the real estate market as home owners have an easier time owning their property, and some that might have defaulted or needed to sell can now stay in their home.

There will also be owners of rental properties who might have had to sell, who now can afford to keep their property and continue to rent it out.I've spoken to several lenders and heard they are now suddenly backlogged with new loans, and appraisers are going crazy too. All of this is great news for home prices, because lower payments means less homes for sale, which means prices can hold better. It also might mean some sellers who were going into foreclosure might be able to get a loan modification from a loss mitigator, and actually keep their home.