Hawaii Real Estate Market
Hawaii’s beautiful landscapes, distance from the mainland, and tropical weather make it a special real estate market.
Many potential buyers are wondering if now is the right time to venture into buying on one of the islands. A few expect mortgage rates will be on the decliine thus allowing them to use a short term high rate mortgage for a few years, and then refinance at much lower rates in 2025.
It’s been a disaster-ridden summer with heat waves, fires, and floods ruining homes across the US and Canada.
After the Maui fires, housing will be at a much higher premium and prices might continue on the rise despite any economic slowdown. Replacing all the homes destroyed in the Lahaina fires will take time. The Lahaina catastrophe is likely to make it more competitive for buyers across the Aloha state.
Demand and house and condo prices in Oahu, kept pace in July even though sales are down 28.2% and 19.55% respectively. Hawaiian real estate is affected the same as California, Florida or Texas. When mortgage rates rise and credit is squeezed, the way it has, you would expect a big drop in sales and price.
As the Hawaii Realtors report shows, Hawaii is a market of million dollar properties. The Big Island of Hawaii offers the most affordable homes which have risen the least year over year. Kaui lead the way with price increases with a 37.5% rise YoY. Most house prices are up 8% year over year with the exception of Oahu, where house prices actually fell 1.6% year over year.
Statewide Housing Market Stats July 2023. Screenshot courtesy of Hawaii Realtors.
Yet, demand persists and prices are propped up by lack of inventory. The loss of all properties in Lahaina, Maui should add to the demand in Honolulu and across the islands as residents look for new accommodations.
Fran Villarmia-Kahawai, president of the Honolulu Board of REALTORS® said “Rising borrowing costs have buyers taking a more cautious approach, so homes remain on the market for longer periods, but demand and median sales prices are holding steady due to low inventory.”
Despite a weakening in contract signings from a year ago, July 2023 saw a 6.9% month-over-month hike for single-family homes and a 1.4% bump for condos. There were 247 pending sales for single-family homes and 421 for condos during the month.
Home Prices and Sales Oahu. Screenshot courtesy of Hicentral.com
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Maui Real Estate Market
Our hearts go out to the victims of the Lahaina and Kula fires and those who lost their lives. The loss to Maui will no doubt be devastating going forward. Businesses and livelihoods lost and the beautiful character of the town of Lahaina is lost forever.
Reports are that $3.2 billion is lost in the fires. And that’s just the insured property losses.
If the loss in real estate isn’t enough, it’s a tough time to be planning new construction and infrastructure development. And with fears of insurance companies pulling out of more and more communities, the outlook for new construction is cloudy. It’s likely that new building regulations will be steeper, thus raising the cost of building. With a weak economy, the demand for homes here will likely be weak. Many may lose whatever equity they had previously. Some may have lost everything but their lives.
One Maui Realtor believes homeowners here will hold off on selling their properties until things are a little clearer.
Median Home prices history chart. Screenshot courtesy of Maui Realtors Association.
Maui Realtors Association in their latest report showed Median Sales Price increased 8.4% and remains at record highs. Prices rose to $1,192,500 for Single Family homes and jumped 7.7% to $850,000 for Condominium homes.
Pending Sales decreased 20.3% year over year for Single Family houses and fell 18.7% for condos. Inventory decreased 9.6% for single family homes and 8.8% for condominium homes. New listings are down almost 30% year to date vs 2022.
Single Family housing market overview Maui. Screenshot courtesy of Maui Realtors Association.
Interestingly, sales to list price ratios dropped dramatically last month and are down to prepandemic levels. Affordability of houses is back near its lowest level in history. For buyers, the challenge of finding a new home or even a rental property is immense.
You can see more of the Maui housing market sales results on their report website.
Redfin Hawaii Market Reports:
Redfin shows that people are leaving Hawaii Las Vegas, Orlando, Tampa and Sarasota. And
And those moving to Hawaii are predominantly from San Francisco, New York and Los Angeles. That’s not surprising as Hawaii is known for being the favorite of Californians.
Source cities for arriving residents in Hawaii. Screenshot courtesy of Redfin.
Property Management Companies in Hawaii
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Big Interest in Hawaii Real Estate
Each year Americans, i.e., Californians search for houses for sale in Hawaii. Some are just looking as they visit for their annual golf vacations. And that’s how the word about Hawaii real estate has always spread.
Japanese and other foreign buyers are deeply interested too, however the 2020 Covid pandemic threats and travel restrictions have reduced interest from foreign buyers.
In an interview on sfgate.com, Hawaii Realtor Julie Peters, an agent with Island Boutique Realty said she sold 5 properties unseen. She cites that California, Oregon and Washington is where buyers are coming from.
From January to June 2020, California residents bought $587.6 million worth of Hawaii property, making up 41% of total sales during that period coming from the U.S., according to Title Guaranty, which owns and maintains the largest real estate database in Hawaii. – report on sfgate.com
Maui is a market of few listings and big price increases. Definitely a sellers market. Property investors and buyers from California, Arizona, UK, Australia, China, Germany, Russia, Japan, Canada, and other nations are the typical source for buyers according to sources.
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.
Looking for a Hawaii property management company? Ensure they’re using a modern cloud-based property management solution.
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.
Housing Market Conditions?
Screen capture courtesy of huduser.gov
The Hawaiian economy is strong, unemployment is low and wages have risen over 4%. That makes for solid demand for rental units. The issue however is that rent prices are beyond the reach of most.
In 2020, Hawaii will likely continue as the least affordable housing market in the country, and as you’ve learned condo prices in some Hawaiian counties are rocketing.
Note: if you’re interested in international real estate, please check out our posts on the Australian housing market and Berlin and London UK rental property market and the UK housing market.
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.
Screenshot courtesy of Hawaii.gov
Here are the latest Hawaii public housing starts numbers from the FED:
Screenshot courtesy of Hawaii.gov
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.
Screenshot courtesy of Hawaii.gov
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.
Hawaii economic report – screen capture courtesy of Hawaii.gov Research and Economic Analysis
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.
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.
Hawaii’s Rental Market
Although apartment rental prices have declined in the last 12 months, Hawaii is one of the least affordable states to rent or buy as a rental property investor. Limited supply translates to big rent increases. Rental prices may be falling, however prices are often beyond the reach of many Hawaiians.
2 bedroom rent prices in Oahu. Screenshot courtesy of Zumper.
Contrast Hawaiian apartment prices to general US rental prices for apartments or houses.
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See also: Property Management Software | Rental Housing | California Housing Market | Hawaii Property Management Companies | Las Vegas Housing Market | Phoenix Housing Market | Texas Real Estate | California Property Management Companies | HOA Software | Best HOA Software Features | HOA Websites
