Posted on: Monday, April 25, 2005

Land rush to the Puna frontier

By Kevin Dayton
Advertiser Big Island Bureau

KEA'AU, Hawai'i Marci and Jim Browne live in their home in the Puna subdivision Hawaiian Paradise Park, and earlier this year bought another lot there with an eye on building a bigger house closer to the ocean.

Jelena Clay, 40, and Charles Clay, 41, are building a three-bedroom home on a Hawaiian Paradise Park lot. They bought the Puna lot in January, and have already been offered twice the price they paid for it. They plan to sell the home when it's completed.

Kevin Dayton The Honolulu Advertiser

James Berg, who lives north of Sacramento, Calif., bought in the same huge subdivision in February after vacationing in Hawai'i last year. Berg knew his Paradise Park lot has no water service, but it was affordable, and he wanted to own land in Hawai'i, he said.

Honomu residents Jelena and Charles Clay also bought in Paradise Park this year, and have begun building a three-bedroom house on their lot that they plan to sell when it is finished.

All three buyers are part of what Big Island real-estate agents are calling the second major real-estate boom in the Puna subdivisions, vast tracts of land that developers and land speculators carved up decades ago into more than 70,000 lots in Upper and Lower Puna. The Puna area is roughly the size of O'ahu.

The roads to most of the lots are substandard or unpaved, and most lots have no water service. Many had no telephone or electrical service when they were first offered for sale, but Mainland speculators bought them anyway. Most of those lots remain undeveloped decades later.

Now, sellers ask ever higher prices for the Puna lots, and buyers pay willingly.

"Before, you couldn't give the land away. Nobody wanted it," said Charles Clay, standing on the Hawaiian Paradise Park lot where he has already poured a slab and begun framing a new house that will be bordered by a young 'ohi'a forest.

He has also poured a slab for a large water tank, part of a water-catchment system the new house will need because there are no water lines serving the area. These systems are common in Puna and capture rainwater from rooftops and store it in large tanks for household use.

Jelena Clay, who recently obtained her real-estate license, said she has already been offered double the $36,000 she and her husband paid for the Paradise Park lot in January. The Clays are betting the abrupt surge in prices won't reverse itself anytime soon.

"It's weird, but I feel like Puna's been a sleeper for so long, it's very affordable," she said.

Even in the hot statewide real-estate market, the escalation in the price of vacant Puna land stands out. Prices abruptly increased in the first "boom" in the Puna subdivisions in the early 1990s, but not this fast or by this much, observers said.

In March 2002, the median sales price for vacant land sold in Puna was $7,375. In March 2004, the median price, which is the level where half of all sales prices are higher and half are lower, had jumped to $14,700.

Last month, the Puna median was $32,500, with a brisk sales pace that led to 452 land transactions closing that month, according to Multiple Listing Service statistics.

The one-acre lots in Hawaiian Paradise Park tend to command higher prices than lots in most area subdivisions, but real-estate professionals who watch the market said prices in all the Puna subdivisions have been rising rapidly.

Historically, the Puna subdivisions were the one place in Hawai'i where an ordinary working stiff with a restaurant or hotel job could still buy land and build a house. The recent price escalations seem wacky to many longtime Big Island residents, who grew accustomed over the years to an abundant supply of cheap land in Puna.

"I think it's gonna get wackier," said Marci Browne, who moved from Southern California to Hawaiian Paradise Park last year. "Look at how many baby boomers are out there. The word is slowly getting out, and as it's getting out, more and more people are interested in living in paradise."

For many years, drawbacks such as substandard roads and catchment water led many Mainland and local buyers to avoid the subdivisions, but "it isn't stopping them at all now," said Ginny Aste, a longtime Puna resident who worked as a planning consultant on the Puna Community Development Plan years ago.

Aste said there is a large flow of Mainland money and buyers into Puna, including many who enthusiastically throw themselves into building homes on their new lots to live in or rent out.

"Most of the people I hear talking about boards and nails and house packages and septic systems and such are Mainland haoles," she said.

Aste sees benefits and drawbacks to the surge of new interest in the subdivisions. The newcomers bring money, education and talent that can be an asset to the Puna community, she said.

"The down side is property values are way up, and local families that might have had a chance to buy a lot and build a house have had that opportunity pass them by," she said.

But a spot check of recent Puna subdivision sales suggests many of the purchasers live in Hawai'i or in the Hilo area. Marie Isom, an agent with ERA Pacific Properties in Hilo, said many Hawai'i residents are scooping up Puna lots that didn't interest them years ago.

"We get all kinds, but I'm feeling a lot of people just want to grab something now," she said. "A lot of people get the feeling the prices are never going to go back to being $7,000 or $8,000 for a lot, or $10,000 for an acre. They sense that, so before it gets too out of control, they just want to grab something and hold on to it."

County planning director Chris Yuen said building permit statistics show that many of the Puna buyers are building immediately instead of holding their land for the future. That is especially true in lower Puna, he said.

Last year the county issued building permits for 868 new homes in Puna, roughly equal to the number of permits issued for the entire island in 1998, he said.

As new homes bring new residents to the Puna subdivisions, county officials can expect louder and more pointed demands for better police and fire services, and for better roads to serve Puna.

Many Puna residents already complain about rush-hour traffic congestion on Highway 130 between the towns of Kea'au and Pahoa, which is the only major road in and out of Lower Puna.

Yuen said he doesn't believe county officials expected this when the subdivisions were chopped up almost 40 years ago.

"The county in allowing this in the '60s was simply responding to the desires of the developers to have a piece of ground that they could sell, and not really thinking what happens when people do move out to these subdivisions," Yuen said.

"I think people didn't take seriously the prospect of it because it was a real-estate scam when these things were done," he said.