Flow suppressed Puna real estate market

Last summer, as the front of the June 27 lava flow descended upon Pahoa, it carried with it truly frightening prospects for property owners in lower Puna.

Of course, there was the possibility it could directly impact any number of homes, setting them alight and leaving only a black scar in its wake. But even more worrisome to some were the potential indirect impacts the flow could have on everyone in Puna, even those whose homes were nowhere near the flow’s path.

Predictions had the flow potentially crossing Highway 130 just north of Pahoa, cutting off everyone below the line from accessing the rest of the island. The county and the state cleared an emergency route farther makai of the highway, but its capacity was sorely limited, and area residents began preparing for the possibility their homes could be cut off from their places of business, sources of food, water and electricity, and more.

The stage was set for a real estate nightmare, with many owners and renters looking to escape the possible impacts. Property sales — and purchases — took a big hit following Mayor Billy Kenoi’s Sept. 5 emergency declaration, which set in place a moratorium on providing new insurance policies or expansion of coverage for properties south and east of the Ainaloa and Hawaiian Paradise Park subdivisions.

The real estate market took a sizable hit in short order. The previous month, the Pahoa area (ZIP code 96778) saw 27 residential home sales totaling more than $5.8 million, according to data provided by the Hawaii Island Realtors. But by the end of September, residential sales had dropped to 12, totaling just $2.2 million.

From the beginning “through the start of this new year, we definitely saw a decline in residential sales, but that was primarily due to insurance not being available in the area,” explained Kehaulani Costa, executive officer of the Hawaii Island Realtors.

“We really saw a double whammy, with the lava right after Hurricane Iselle,” added Realtor Greg Dencker with Savio Realty’s Pahoa office. “(The market) dried up quickly. … The sense of panic here was palpable.”

Many people, primarily relative newcomers to the area who might not have had much experience with lava flows, opted to get out fast, taking very low, cash-only offers from savvy investors, he said.

“We had some very smart people that came in and made some ridiculously low offers,” Dencker said. “There was somebody in Hawaiian Shores that sold (a house) at upwards of a 60 percent discount. There was one house that I remember selling for $85,000, it should have sold for $220,000.”

Realtor Jan Mahuna, of Hilo-based Jan Mahuna Inc., agreed, saying despite “people trying to get out of Puna,” during the lava flow’s approach, there still were those buyers looking to capitalize on the situation and purchase property at low prices.

“We still had people looking to buy in the area,” she said.

Now especially, Costa said, buyers are looking heavily at properties within the Hawaiian Paradise Park area, which at the time of the flow’s approach was located north of where the lava was predicted to cut across the highway.

“Right now, it looks like the market is coming back a little bit stronger and there are a lot of properties on the market, especially in Hawaiian Paradise Park, where there is a lot of activity,” Costa said.

Residential home sales have been climbing the last couple of months after hitting a low of only seven sales totaling just $763,400 in January. But with the lava flow now having been stalled for months and the Hawaii Property Insurance Association announcing June 2 it was lifting the moratorium on new business applications and coverage increase requests, the real estate market now is set to make a comeback.

“I’ve seen a real increase in homes on the market right now in (Hawaiian Paradise Park) specifically,” Costa said. “I don’t know if that’s because the market coming back stronger and we see confidence in buyers, or if that is a delayed reaction to lava flow. Maybe they’re starting to list their homes because they thought about going through the whole lava threat. I don’t know if it just took people some time.”

Sales still are slow now compared to before the flow, Mahuna said, and the market could take some time to normalize.

“It’s sort of like when Mauna Loa erupted many years ago,” she said. “It took two years before people felt comfortable about buying in Kaumana.”

Dencker added the heightened media interest in Pahoa served to put out bad vibes about the area, which still are reverberating through the real estate market.

“The thing that amazed me was the national news coverage. All of a sudden, it gave us a notoriety that lasted quite a few months,” he said. “I think often people on the mainland can’t distinguish between Hawaii Island and Hawaii. … We even saw a depression in sales on the Kona side, and it had no real threat over there.”

Email Colin M. Stewart at cstewart@hawaiitribune-herald.com.