Hawaii remains one of the world’s most rare and attractive housing markets. Is it still a place you might like to call home or perhaps a good city to buy a rental property?
For sure, supply of single family houses, and even multifamily units is lacking. With challenges for new supply so high, and sales prices on the rise to new records, it’s obvious buyers and investors feel the value in Hawaii real estate is good.
Interest in property here has been strong the past 12 years, with price appreciation in some areas of more than double over that time. However, it appears homeowners are withdrawing properties from the Hawaii market and are perhaps unwilling to sell for what buyers are willing to pay. See the listing to sales ratio below.
As in California, many owners are waiting for the housing market to return next late spring, supposing that inflation is beaten and mortgage rates will drop and prices will be down. That’s all conjecture however as US GDP, employment and inflation remain strong.
The Islands still have the allure, however housing supply, regulations, price appreciation and high mortgage rates are collectively slowing the housing market. Overall, the US rental market is strong, yet financing and purchasing a home you can rent out will be a big challenge in the Aloha State.
Hawaii’s Economy in Question
The University ofHawaiʻiEconomic Research Organization(UHERO) most recent report forecasts rising interest rates, weakening pandemic era savings and a U.S. downturn will pause growth in the state. Mitigating that loss is a predicted recovery of the Japanese visitor market and surging construction in the public sector construction which may make a recession in the islands unlikely.
Hawaii’s tourist visitor numbers have recovered to pre-pandemic levels according to Hawaii.edu. They said Hawaii’s labor market is better than the US average, and inflation will ease below 4% in 2023, and further down to 2.5% by 2024. Inflation-adjusted income in the state should rise only 1% during 2023, and then rise to 2% for the coming years.
They found home prices in Hawaii are are some of he highest in the US. In 2021, the median single-family home resale price reached 2.5 times the national median price. They also pointed out the housing regulations in the state are crippling and some of the most restrictive, thus curtailing availability of homes and rental units for residents.
Novembers Price and Sales Report
After October’s house price increase of 5% statewide, November’s prices declined. With rising interest rates almost a certainty from the FED, home prices will likely decline further in the months ahead. 5% per month would put the market in correction mode.
The average price of a house in Hawaii rose 10.5% to $970,000. The prices are not consistent with the government’s plan for lower inflation.
Sales of houses however grew substantially to 628 houses last month, although are still down 12.9% year over year. The downward trend is consistent with October’s drop.
The average rent for a one bedroom apartment in Honolulu reached $1800 a month according to Zumper and rose 5% as well for 2 bedrooms. Studios, 3 bedrooms, and 4 bedroom homes saw a steep drop however. Rent prices overall though are not high compared to the period of 2014 to 2016 where rents actually hit $3000 per month for a 2 bedroom unit.
Hawaii Realtors Monthly report on Hawaii, Kauai, Maui and Oahu home sales and prices. Screenshot courtesy of Hawaii Realtors.
The housing sales stats chart above released by Hawaii Realtors show a marked difference between Honolulu/Oahu and the rest of the islands. Houses on Kauai (+36.7%)and condos on Maui (+18.1%) still enjoy strong price growth.
The Islands of Hawaii, Kauai, Maui saw steep drops in sales of house and condos year to year, yet the island of Oahu enjoyed a surge of 9.76% in sales last month.
Except for the Island of Hawaii, house prices rose year over year by varying amounts and was up 17% statewide. Condos on the Hawaii Island have also fallen 11.4% in price while sales have plummeted 59% over the past 12 months. Oahu had a growth of 48% year over year in condominium sales.
Oahu Real Estate November
Sales and price trends in November mirrored those of October and September.
Year over year change in prices of houses on the Island of Oahu rose in November. Sales fell 48% year over year yet prices are up 9.5%. Condo sales similarly fell 43.4% and prices lowered by 4%.
The number of homes and condos which sold over asking price dropped between 68 and 73%. Homes stayed on the market for an average 18 days, up almost twice that of 12 months ago. New listings declined during the month by 26.2% for single-family homes and 18.6% for condos, YoY.
Houses in the $700,000 to $1.1 million dollar suffered the largest drop in sales, down 55% year over year. Only 180 properties sold under $500,000 last month.
Oahu real estate, home sales and prices, November 2022. Screenshot courtesy of HiCentral.
HiCentral reports that properties available for sale in the $600,000 to $999,999 range grew 175% year-over-year and condos in the $400,000 to $2,000,000 price range grew 45% year over year.
Redfin Hawaii Market Reports:
Redfin reports the median house price in Hawaii reach $696,000 in February which is up 10.4% from 12 months go. It shows a downtrend in price. Redfin also says home inventory has dropped 22.3% from 12 months ago and that 39.8% of homes old above list price, which is 14.6% from last February.
Redfin Hawaii Home Prices. Screenshot courtesy of Redfin.com
Redfin Hawaii Home Sales History Chart. Screenshot courtesy of Redfin.com
This chart below shows a strong trend were homeowners are receiving less than asked for. Still, in some areas, homes are selling for above list price. The decline looks steep but will this retreat to pre-pandemic levels by summer 2023?
Redfin Hawaii homes sold above list price. Screenshot courtesy of Redfin.com
In marked contrast to the beginning of 2022, is the current list of cities with price rises, a change of -51% for Kailua vs February 2022, yet Hilo has reduced only 2% since then.
Fastest price growth in Hawaii. Hilo, Honolulu, Kihei, Kailua. Screenshot courtesy of Redfin.com
Maui Housing Market
Realtors Association of Maui reports that the median price of a home on Maui rose 2.5% to a record $1,025,000, up from $1,000,000 12 months ago.
Given construction constrictions on Maui and rising costs and financing costs, supply is definitely in doubt. With HA’s economy looking better than most for 2023, we wouldn’t expect housing prices to fall next year.
New listings of houses for declined by 34% year over year in November 2022 while days on market climbed 35%. Months of supply of houses are up 100% YoY. Closed sales fell by 40% and pending sales are down 32.6%.
Single family sales report for November 2022. Report screenshot courtesy of REALTORS® Association of Maui.
In the condo market, new listings have fallen sharply by 22% during 2022, and are down 44% vs November of 2021. Pending sales have been falling for 18 months and are down 41% during 2022. Days on market up substantially at 43% YoY. The median price for a Maui Condo is up almost 20% in 2022 and has reached an all time high of $856,000, up $131,000 vs one year ago.
Condominium sales report for November 2022. Report screenshot courtesy of REALTORS® Association of Maui.
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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 RealtorJulie 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.
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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.
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 marketand Berlin and London UKrental 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
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.
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