Tourism Slowdown Drives Kauai Island Foreclosures for Sale

by on States

Just like the other islands of Hawaii, Kauai Island also depends largely on tourism to shore up its economy. Most of the island’s workers are employed by enterprises that cater to tourists and travelers that visit the island.

With the number of tourists dwindling because of the recession, many workers have been losing their tourism-oriented jobs, including their homes to foreclosure.

Local businessmen said vacation rentals are not being occupied because the number of visitors has been dropping. The recession has prevented Americans on the mainland from traveling to Hawaii.

Based on real estate records on the island, the number of foreclosures for sale has been rising since 2008. As of the first week of August, a total of 425 homes are already counted as foreclosures.

In the past years, the number of foreclosures in Hawaii was so insignificant for lenders to notice. Now as job losses increase and home values decrease, more people are walking away from their mortgages and moving to places where they can get employment, according to broker Phil Fudge.

Across Kauai Island, there are 112 pre-foreclosures, 196 bank owned units, three government-owned units and 114 units for foreclosure auction. Out of these distressed homes, over 200 units are located in Lihue, over 100 units are located in the Kapaa-Wailua area, around 60 units on the North Shore, around 30 units on the South Shore and over 10 units on the Westside, based on foreclosure data in Hawaii.

Since January, the island has posted 222 home sales and out of these units, 10.8 percent were short sales or real estate owned units.

According to Fudge, approximately 10 percent of all types of homes and condos for sale on the island are in distressed situations. Fudge added that although short selling is a time-consuming and a difficult process to undertake, many homeowners are still doing it to save their homes from foreclosure. He expects short sales to rise further in the coming months.

According to real estate analysts on the island, the number of real estate owned homes is expected to rise during the last months of 2009. They also observed that most foreclosed mortgages were loans originated by subprime lender Countrywide, which was later acquired by Bank of America.

According to local analysts, the only thing positive coming out of foreclosures is improved home affordability. Home prices now are more affordable for buyers who previously could not afford to buy. The median sales price has dropped from $650,000 last year to around $470,000 in 2009.