Hawaii Real Estate Market
Just like Florida or California, there never seems to be a lack of interest in buying a home or property in Hawaii.
There is no place like the Hawaiian Islands for Americans (or foreign buyers from Asia). The fact is, this land of paradise has many benefits to offer, such as being part of the US. And the top reason why buyers want to buy here is the lifestyle.
Buyers of homes and condos can also profit from appreciation and rental income, as many do. Still, it’s the allure of living in a tropical and modern paradise with all the amenities and services that makes Hawaii irresistible. With its serene and picturesque vistas, warm climate, lush landscapes, magnificent mountains/volcanos, diverse microclimates, beautiful beaches, and unique local cultures, it’s a place you must visit. And when you do, it will cross your mind to buy a home or condo and call it your home.
Yet 2023, was a bad year for home buying with sales hitting lows not seen since the financial crisis of 2008. Mortgage rates at 8% were the negative factor, yet expectations are that interest rates will come down substantially within two years. What hurts the Hawaii housing market then is the difficulty for buyers to obtain large home loans to purchase a house or condo. As you’ll see, Hawaii house prices are up slightly while condo prices are rising quickly.
During the last two months, Hawaii’s real estate market behaved typically for a US state, however while most mainland cities were subject to severe weather of recent, Hawaii’s lower sales and prices might be a reflection of economic uncertainty. And with higher home prices here along with 6.5% mortgage rates, many buyers find it difficult to find an ideal property and close a sale.
During December 2023, house prices dropped, however they are up an average of $12,000 from 6 months ago. For condos since last July sales have fallen 50% and prices are down $109,000. That might signal a buying opportunity, given mortgage rates are set to drop over the next 2 years and 2024 is expected to be a strong year for travel.
And we can’t dismiss travel as a real estate sales factor, as visitors outnumber residents 5 to 1. Some vacationers become buyers, supporting the local business and real estate economies. The state is known for its incredible golf courses which are a big tourism draw this time of year.
Yet listings are down and new listings aren’t growing much, as homeowners won’t sell if they have to refinance their next home at 6+% mortgage rates. Likely this summer, prices will rise as demand outstrips supply. For cash buyers, the growth in price might make 2024 a buy opportunity. 2025 will likely be boosted by much lower mortgage rates where more buyers and sellers can transact.
Housing Market Demand in Hawaii
Hawaii.gov’s report on housing demand across the islands shows demand is about 140% of supply and much of that housing is not in the affordable range for most buyers. For sellers, the problem is compounded by the fact that fewer than a third of Hawaiians can afford to buy a house or condo, and one third can’t afford to rent.
Is Hawaii Investible for Rental Landlords?
Rent prices are on the decline across the state, although this month’s price rise is notable. Rent/Price yields have fallen substantially in the past 8 months. However, for urban Honolulu, prices have risen substantially (Zumper rent price report).
Oahu Real Estate Market
The Honolulu Board of REALTORS®, O‘ahu reported home sales fell more than 25% during 2023, with single-family house sales dropping by 26.3% and condo sales plummeting by 28.0%. Year over year median sales prices for single-family houses declined 5% to $1,050,000, a 5% decline, while the median sales price for a condo eased .3% to $508,500. Both homes and condos are selling much faster YoY.
Honolulu Board of REALTORS® reported that single-family home sales priced above $1 million declined 21.1% (90 sales compared to 114 one year ago). Single-family home sales below $1 million rose 4.5% uptick. Higher-priced condos (above $700,000) dipped. However, condos priced under $700,000 plunged 30.3% compared to last year, dropping to 198 sales.
This December, new listings rose 9.8% year-over-year in the single-family home market, and were up 5.9% for condos. However, active inventory showed little change. At the end of December 2023, there were 600 active single family homes for sales, up 0.5% December 2022w while active condos grew 5.4% to 1,234 active units on the market.
Maui Real Estate Market
In Maui, home prices too have risen while active and new listings have dropped. The median sales price for all home types rose 11% year over year although sales declined 16.7%.
Maui Housing Supply
The fact that so few homes or condos are available with big demand coming in the next few years, it’s reasonable to assume investment buyers will profit well.
Redfin Resident Flow Reports:
Redfin’s migration report shows strong interest in Hawaii across the US. Hawaii residents however, primarily move to southern states with warmer temperatures.
Property Management Companies in Hawaii
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Hawaii New Housing Construction
Will Hawaii’s builders come to the rescue? The stats actually show builders have grown their construction permits in the 3rd quarter of 2021 but are not keeping up with demand.
dbedt.hawaii.gov reports that during the 3rd third quarter of 2021, private building authorizations in the state increased $94.2 million or 11.2 percent with the third quarter of 2020. And so far this year, private building authorizations throughout all islands grew $764.8 million or 32.9% vs same period last year.
Hawaii Housing Market Forecast: Demand to 2025
The Hawaii state government produced a report that suggests 19% growth in population by 2025. It adds that by 2025, Hawaii County’s population will grow 29%, Maui County’s by 25%, and Kauai County will rise by 19%. They forecast that housing demand by county is 25,847 units for Honolulu, 19,610 for Hawaii, 13,949 for Maui, and 5,287 for Kauai during the 2015-2025 period.
Foreign Buyers are the Key
Buyers from California, Arizona, China, Germany, Russia, Japan, Canada, and other nations have competed for too little real estate resulting in bidding wars and ultrahigh prices. If international sales slows, we’d wonder about where demand would come from in the years ahead. Given inflation and rising rent prices in Hawaii, income rental property investors will find this state a tough market to be successful in.
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Hawaiian Paradise Too Hard to Resist
And Hawaii’s peace and serenity, beaches, parks, golf courses, hiking, Honolulu urban life, and culture are irresistible to buyers and tourists around the world. And you never know which tourist will decide to buy property on the Hawaiian islands.
Hawai‘i is a competitive, low-inventory housing market. The growth of purchases in the Aloha state in the last few years is astonishing yet housing supply will inevitably curtail sales and grow prices in 2021. Billions of real estate investment dollars have flowed into the Hawaii real estate market in the last few years.
Honolulu is the focus of most real estate investment interest. Investment is likely to grow.
Building Permits
Building permits reflect future construction trends and volume, and Hawaii’s year over year growth was at a brisk 62% over the last few years. Because of the pandemic, 2022 stats are not available as yet. Please bookmark this page and we’ll update when new data is released.
Hawaii’s Economy Doing Well
Hawaii’s economy is very dependent on US overall economic activity, tourism and upon Japan’s economy.
Tourism spending dropped 2% YoY in May, although spending by Canadians rose. Visitors from California and Japan slowed their spending, and dropped severely by visitors from elsewhere around the globe (-17%). Stats show a strong increase in visitors arriving via the airports and projections forward are for steady, strong growth.
GDP was predicted to grow strongly through 2022. The pandemic has taken a toll on all economies, however Hawaii should bounce back as shut in Americans, Japanese, Canadians, and Europeans come of out of lockdown isolation.
Hawaii’s real GDP growth is expected to increase 1.4% in both 2020 and 2021. Wages were rising and that should support higher apartment rental prices in 2021. See this forecast chart on economic indicators forward to 2021.
Types of Property Purchases in Hawaii
Similar to most housing markets in the US, Hawaii lacks housing supply which drives up prices. Another factor comes from lending rates affected by Hawaii’s unique real estate laws. Buyers who buy leasehold properties may not qualify for 30 year mortgage rates.
Hawaii real estate is offered in two different types: fee simple and leasehold. With fee-simple, property buyers have complete ownership of the property, which includes the land and any improvements to the land in perpetuity.
Leasehold ownership on the other hand means the buyer does not own the land; instead, they have a right to use the land for a predetermined amount of time. When the lease is up, the land reverts to the lesser. If you’re buying multifamily property, these rules could pose a problem.
Buyer Relief Programs
Hawaiian lenders may prefer owner-occupied property financing, and those investing in rentals may face higher financing costs. There are residency requirements to qualify for government-backed Fannie Mae or Freddie Mac loan programs. Buyers should investigate the state’s VA loans, FHA loans and USDA loans along with the state’s basic home tax exemption of $50,000 for homeowners under the age of 60, $85,000 for homeowners 60 to 64 years of age $90,000 for those aged 65 to 69 years and $105,000 for homeowners 70 to 74 years of age.
Maui offers a first time homebuyer down payment assistance program up to $30,000 or 5% of the purchase price or appraised value
of the residential property, whichever amount is less for:
Single-family detached dwelling
Multi-family dwelling
Residential lot with plans to construct a single-family detached dwelling
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