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Hawaii Housing Market Forecast

November 22, 2019

Hawaii Housing Market 2020

It’s not just American buyers who want a slice of Hawaiian paradise during these good times. Foreign buyers too are pouring billions more into the 2020 Hawaiian housing market.

Hot Oahu, Kauai and Maui

It’s not just American buyers who want a slice of Hawaiian paradise during these good times. Billions of dollars have been poured into the Hawaiian housing market, giving it a positive outlook for the next 5 years, if the US economy holds.

This is despite the controversy of the China Tariffs which are thought to hurt Hawaii’s manufacturing exports, home sales, and tourism. The Hawaii tourism association says tourists from China are down 36% this year. Fleeing Hong Kong residents may brighten Hawaii’s housing market outlook.

Price Growth of Late

Overall across Hawaii, home sales grew 12.3% while prices fell slightly by 2.5%. Condos and townhouses rose 6.5%. Condo prices increased 13.1% to a median of $390,000. Hawaii Realtors Jenny Brady believes low mortgage rates grew more sales last month. Not many are talking about potential sales to Hong Kong investors, but it may be a source worth investigating.

New Listings of new single family homes rose 7.5% and condo listings declined 7%. Active listings are said to be positive compared to 2018.

Sales of single detached homes in October in the 400k to 900k price range rose 25% compared to October of last year. And YoY, condominiums in the $400k to $700k range have rocketed up 39%.

Home buyers may be waiting for the trade deal to happen before committing to buying in Hawaii. Yet, even with the tariff slowdown period, prices haven’t dropped much.

Home Sales in Oahu, Kauai and Maui

Listings are up so, why is property so expensive across Hawaii? Just as in other housing markets, high prices, International demand, and lack of affordable property pushes prices higher.

Hawaii home price history timeline courtesy of Hicentral.com

On Oahu, new listings increased 8.7% for single family homes yet lowered by 9.9% for condos. Average sales price rose from $1,164,405 to $1,442,323 which is up 23.9% YoY.

The average price of Hawaiian single family homes rose from $777,000 in September to $780,000 in October. Condo prices rose $13,000 to $441,000 from September’s median price of $428,000.

Condos suffered a severe decline in the fall but seem to be recovering.

The chart at right from hicentral shows prices have not increased to the same degree as they have in other hot cities such as San Jose, San Francisco, Vancouver, Miami, Los Angeles, and San Diego and for California in general.

The affordability index rose from last year’s 39 to 46, which will be welcome news for buyers.

Inventory of homes available for sales dropped by 42 units to 453 for sale. Days on market rose to an eye opening 138 this October. We can say the Oahu housing market is unique.

Single Family Home Sales Hawaii- Courtesy of Realtors Association of Maui

Buyers from California, Arizona, China, Germany, Russia, Japan, Canada, and other nations compete for this valuable real estate. With recession talk in the past, and good economic reports coming out, is Oahu real estate prices going to surge significantly in 2020?

Single family home availability is consistent yet condominium supply is weaker. With renewed demand, condo prices in Oahu hold more potential for higher prices.

Hawaii new home listings growth – Chart courtesy of Maui Realtors Association

Income rental property investors can find properties here however and might be intrigued by the low new construction climate here.

Maui Real Estate October Update

Listings are hard to find in Maui, yet market sales volume is up.

In Maui, home sales grew 5.9%, while prices fell 14.5% and listings fell 12.3%. New Listings increased 8.7% for Single Family homes but fell 9.9% for Condominium homes. Single Family home prices decreased 5.5 percent to $732,000 while condo prices increased 3.2%.

In September house average prices grew 7% while condo average prices fell 5%. Homes sold fell 4% and condos sold dropped by 6%. As more new construction units come up for sale, prices may moderate while sales will grow.
pic ramaui all properties.

Hawaii Housing Demand (next 5 years) 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 compete for too little real estate resulting in big price increases.

Income rental property investors can find properties here however and might be intrigued by the low new construction climate here.

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. 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.

Foreign investment in Hawaii. Screenshot courtesy of hawaiinewsnow.com

Housing Market Conditions 2020?

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 post on the Australian housing market and Berlin and London UK property markets.

Zillow Home Prices Hawaii

Zillow rates Hawaii’s housing market as cool, with an expected slight rise over the next 12 months.

GDP Hawaii – Chart courtesy of Statista

Oahu and Honolulu Forecast

According to the Honolulu Board of Realtors, sales have declined over the past year, however prices continue to climb.

Last June 2019, single-family home sales fell 10.4% while condo sales fell 13.5% YoY.  Prices rose moderately with single-family homes up by 2.3% $800,000 while condos rose 3% to $432,500. New home listings declined by 8.9% from June 2018, yet overall inventory increased 6.7%. More condos were listed in Oahu.  They went up by increased by 6.3%, as did overall inventory by 13.8%.

Oahu home sales – chart courtesy of hicentral.com

DOM for single-family homes was 18 and was 27 for condominiums.

Honolulu condo market, the median price rose 3% to $432,000  and sales dropped by 13%.  These are better conditions since our last report, the market supply across Hawaii, and in Honolulu’s housing market is still constrained. Millions of new apartments are needed across the nation and in Hawaii.

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%).

GDP was predicted to grow 2.6% for 2019. Hawaii’s real GDP growth is expected to increase 1.4% in both 2020 and 2021. Wages are rising and that should support higher apartment rental prices. 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.

Oahu Housing Chart

This chart showing the Oahu housing market sales and price stats, reveals 2018 hit the skids with sales, but not price. It’s a similar pattern in other similar housing markets including San Francisco, Los Angeles, San Diego, Phoenix, Denver, and Las Vegas.

Resales and Average Prices for Residential Property in Oahu. Screen capture courtesy of hicentral.com

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.

Contrast apartment prices to those across the US.

According to Rent Jungle, apartment rent prices rose $77 over the last 6 months.  One bedroom apartments have increased by $126 (8.3%) and two bedroom apartments have decreased by $33 (-1.9%).

Rent Price Timeline from Zillow

Hawaii Average Rent – Chart Courtesy of Zillow.com

If you’re looking for a home to purchase in Honolulu, Hawaii, check out Honolulu Magazine.

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