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Hawaii Housing Market Forecast

December 13, 2021

Hawaii Real Estate Market

Every year at this time, interest in Hawaii’s real estate market peaks. As the recovery continues, latent demand begins showing up online and with every flight to the islands. As demand grows, there are opportunities for home sellers and perhaps for investors in the rental sector.

What’s trending in the Hawaii real estate market is the boom in condo sales. Hawaii’s beautiful islands and lifestyle continue to attract home buyers who are more prepared and practical in their quest to own a piece of paradise.

This months housing market sales state show a severe shortage of single family homes (most luxury homes) resulting in price growth few buyers can afford. That’s produced strong growth in condo sales the last few months, including big growth on the island of Oahu in November.

Of course rental prices are on the rise just like they are everywhere else. And with such low supply of units, and prices likely to stay high, the environment for investment in rental properties looks good.

After a strong month of sales in October (year over year growth) the pace of selling is quickening on Hawaii, Oahu and Maui. Only the big island of Hawai’i is in retraction of sales. And only Maui has seen a reduction in prices, but only in condominiums. This is all against a backdrop of a lower inventory. It seems more condo owners are putting their units up for sale while prices are high.

A little bit of uncertainty about the future, might be contributing to the sales growth. With the good news about the lower threat of the Omicron virus, we hope the sales trend will continue and more construction will rev up the residential and rental markets in Hawaii.

It’s one of the world’s most rare and attractive housing markets, and has the recovery continues, interest in buying and renting in Hawaii is bound to grow. The trend to remote work will benefit the state as will the return of the vacation market and bolster the Hawaii rental market.

Statewide sales data in Hawaii, Kauai, Maui, and Oahu.

Screenshot courtesy of Hawaii Realtors. Statewide sales data.

As you can see from the chart, the rise in house sales is brisk with Kauai single family house sales rising 57% vs last November. It’s unlikely the market can sustain such high prices, but it does reflect tremendous interest in Hawaii real estate overall.

House prices on Maui, Oahu, Kaua’i, and Hawaii’s main island have jumped 18% to 37% year to date vs last year. The average home price reached $982,000 in November up from $822,000 in 2020. That’s $160,000 more on average in just one year. Those who insisted on buying in the fall of 2020 are enjoying a huge increase in equity.

Condos on Oahu too are up $120,000 in value since last November.

The housing crisis in Hawaii has launched some controversial decisions. On Maui, the islands county council moved to phase out short term vacation rentals to transition them to longer term rentals for locals. Yet the demand for vacation rentals drives a lot of development on the island. Constrained inventory will result in higher vacation rental prices.

The Hawaii Luxury Market

During the pandemic many new millionaires were born and plenty of them had their eyes on owning Hawaii real estate. The island of Kau’i was where many of them bought new million dollar dream homes. On each island however, there was growth.

Although there is an range of housing in Hawaii within reach, this market is more about the luxury market. High demand combined with limited availability creates ultra high real estate prices. The downside of that is a lack of affordable properties and also big challenges for renters.

Hawaii Life found that the growth of Hawaii’s ultra-luxury market this year has been exceptional. Transaction volume has risen from $151 million in 2020 to more than $1 billion in the first three quarters of 2021 alone.

The big news is how the ultra luxury market is faring in Hawaii. Hawaii Life reports strong sales activity in the luxury market with inventory falling from 5.3 months to 1.6 months of supply. Sales value has grown an astonishing 234.5% over 2020 (by dollar value). Hawaii Life in their major report, found that in the third quarter of 2021, 634 sales home priced above $3 million included 466 sales in the $3 million to $5.99 million range, 104 in the $6 million to $9.99 million range, and 64 sales of over $10 million.

You can see more on Hawaii’s exclusive luxury market and their beautifully packaged 3rd quarter report on the hawaiilife.com/blog/2021-luxury-market-report website.

Oahu Housing Market

Home and condo sales have levelled off on the island of Oahu and Honolulu in the last few months. Yet sales are still well up from last year this time.

Sales of single family homes are up 9.8% despite lower inventory for sale, which has driven prices up 10.3% from last November. Homes above $1 million dollars are an especially hot market.


Condo sales have rocketed by almost 48% in November, year over year, rising 19% in price to a new median of $500,000. Honolulu Board of Realtor’s president Shannon Heaven believes buyers are entering the market well prepared to buy. She noted that sellers are receiving bids above asking prices which suggests demand is strong.

Most of the condo sales happened in the more affordable range of $400k to $500k. HiCentral.com reports that single-family homes sales have risen 21.4%, while condo sales have rocketed up 57.7% year to date compared to 2020. The year-to-date median price of a single-family home has grown 19.8% compared to 2020.

Oahu Single Detached House Prices Historical

Maui Housing Market

House prices on the island of Maui have grown 16% or $135,500 since last November. Condominiums sales have risen slightly however condo prices have dropped about $107,000 since last November.

Realtors Association of Maui reports that new house listings fell 9.8% year over year and condo listing are down 19.2%. Total inventory of houses for sale has plummeted 44.% and condo listings have dropped 82.3% year over year. They report the median price for a single family home has dropped 27.3% while condo prices have dropped 46.6% to just over $729,000.

Maui median selling price increased 27.3% to $996,500 for single family homes and rose 46.6 percent to $729,125 for Condominium homes.

Screenshot courtesy of Realtors Association of Maui. Single family housing market.

Maui Home Inventory

This chart from Realtors Association of Maui shows how severe the lack of housing has become on the island.

Screenshot courtesy of November report from Realtors Association of Maui. Months of home supply decreasing.

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Property Management Companies in Hawaii

Looking for a property management company in Hawaii?  Service providers are evolving with new digital software solutions that may make a big difference for you in 2022. Check out these property management firms in Hawaii.

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.Buyers from California, Arizona, UK, Australia, China, Germany, Russia, Japan, Canada, and other nations are the typical source for buyers according to sources. With recession talk in the past, one more stimulus payout, and good economic reports coming out, are Oahu real estate prices going to surge significantly in 2022?

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 (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 expectations of big price increases.  Hawaii income rental property investors will be challenged to find suitable properties for rental.  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 is a brisk 62% over last years.

Screenshot courtesy of Hawaii.gov

Screenshot courtesy of Hawaii.gov

With house and apartment construction numbers flagging so badly, we might forecast home prices and rent prices to rocket in 2021.

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.

Contrast Hawaiian apartment prices to general US rental prices for apartments or houses.

 

If you’re looking for a home to purchase in Honolulu, Hawaii, check out Honolulu Magazine.  See more on other housing markets and trends in property management on our blog.

 

Additional Housing and Property Management Topics:

See also:  Property Management Software | Hawaii Property Management Companies | Property Management UpdateUS Housing Market Predictions | Colorado Housing Market |  Rental Property Software |  Phoenix Housing Market | California Housing Market | Hausverwaltung Software Germany | Berlin Germany Property Management  | Property ManagementCalifornia Property Management Companies | Las Vegas Housing MarketAustralia Housing Market ForecastLandlord AppHOA Management Software | Best Property Management Apps  | Reviews of Property Management Software

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