HAWAII – The Hawaii real estate market is progressing rapidly, with prices hitting new highs. Demand is also driving up mortgage interest rates. Oahu real estate is continuing to show new records in median home prices, while condo sales are also surging. With this strong demand, buyers have many opportunities to purchase homes in Hawaii.
Ka’anapali real estate has experienced a significant decline in transaction activity in the past year. However, the underlying trend is still positive. Approximately 45% of homes are sold for the asking price. Prices for the next few years will be affected by the limited supply of homes on the market and continued strong demand.
The decline in sales volume can be attributed to a shortage of listings at lower price points and in higher-priced Ka’anapali neighborhoods. In 2017, there were no transactions in Ka’anapali’s Pinnacle neighborhood and no homes sold in Ka’anapali Coffee Farms. Further, no homes are listed below $3 million, and only two are under contract.
The resulting shortage of housing inventory is expected to limit sales in 2021. However, the recent recovery in the United States has boosted interest in buying property in Hawaii. In addition, the trend toward remote working will continue to benefit the real estate market. However, the low number of rental units may deter this trend. Additionally, the return of the vacation market may help support the short-term rental market.
While the Hawaii real estate market has experienced some ups and downs in the past few years, the market is looking positive for the next few years. While foreign buyers have been bullish on the Hawaiian Islands, domestic buyers have found the islands irresistible and will likely continue to drive prices higher for the foreseeable future.
Home values on Oahu are higher than in other areas of the country, and it has become difficult to buy a property without extensive renovations. The median price of a home on the island is already three times the national median. In addition, the state has had a devastating economic crisis that has impacted the housing market.
Prices continue to rise in Honolulu. This is primarily due to increasing demand, lower inventory levels, and low borrowing costs. Hawaii real estate prices have increased by 18.8% over the past year. The market is expected to continue to rise, and a 12.4% increase is forecasted for next year.
The housing market is projected to remain stable in Kuau and Paia through 2023, which is a bright spot for homebuyers. However, buyers should be wary of the market’s potential pitfalls. For starters, mortgage rates are rising again. And while the housing market has cooled in recent years, prices are expected to increase again.
There is limited available inventory in the luxury home market, which will likely hamper sales in the coming years. While new inventory may increase sales, the current lack of rental units will limit sales volume. In addition, rising borrowing costs will make Hawaii real estate unaffordable for some homebuyers. Furthermore, negative economic news and declining equity markets may cause second-home buyers to delay their purchases.
Despite the limited supply, the vacation rental and second-home condo market is still strong. As of September 26, there were 17 active condo listings in Ka’anapali. The limited inventory will continue to exert upward pressure on pricing. This limited supply will eventually balance out with demand. Moreover, cash buyers are less sensitive to interest rates, making this a more attractive market for sellers.