In April, I wrote about buying farmland on Kauai, and about how prices on vacant land were beginning to drop. Let’s revisit the topic and see how things have progressed.
Looking at Kauai vacant land over 1 acre priced under $1 million, there are currently 119 active listings. While it’s difficult to tell how many listings there were 5 and a half months ago, we can assume there were a similar number, maybe slightly fewer. Over that time, we’ve seen a total of 11 sales of those land listings, with 3 going into escrow. Also during that time, 57 of the listings reduced their price at least once.
What can we gather from these statistics? Rather than try to make the stats conform to any pet theories, let’s just make a few observations. First, at the present rate of sales, and barring any new listings, it would take 5 years to sell the present inventory. Second, and more pertinent – most of the sales prices, in addition to being significantly less than the asking prices, were SUBSTANTIALLY less than County assessed values. As in 20 to 50%. And third – all but 2 of these sales were cash or Seller financed.
Knowing all this, let’s look at currently active listings – how many of them are taking into account this information? Well, of the 119 active listings in this category, I counted 27 with listing prices significantly less than assessed value. Now granted, this is strictly a short-hand method of valuation – County assessed value does not necessarily reflect the true value of a piece of property; that would require an independent appraisal. However, I would not really be stepping out on a limb to say that less than a quarter of these land listings are actually priced to sell.
What is going on here? First of all, Sellers have many levels of motivation, and I won’t pretend to make any blanket assumptions about them. But it appears as if many Sellers believe that the market has already reached bottom, and will once again come up to meet their prices (as it did in the first half of this decade). Clearly, the majority of Buyers do not share this belief.
What happens now? Probably, aggressive (and mostly cash) Buyers will still be able find motivated Sellers willing to offer excellent value. And it appears that the bulk of the listings will remain priced where they are, until it becomes more clear to all whether the bottom of the market has already passed, or is yet to come. Stay tuned….