Hawaii's Real Estate Market Looks To Be Normalizing7/29/2022
BY STEPHANIE SALMONS
PACIFIC BUSINESS NEWS
Following a frenzy over the past two years — where demand for homes in the Islands far outpaced the available supply and sale prices hit record highs — local real estate experts say Hawaii’s housing market looks like it’s returning to pre-Covid activity levels.
Chuck Garrett, principal broker of Corcoran Pacific Properties, told Pacific Business News in late June, that in the several weeks prior the surge that began in the middle of 2020 started to wane, accelerated in part by recent interest rate hikes.
“Demand is definitely cooled by interest rates and consumer uncertainty, I think, in both the high-end and general market, so that does relieve some tension in the supply-demand scenario,” Garrett said. “We’re still seeing multiple offers, but there might be four versus 10. I would say that’s anecdotal, but definitely something we’ve started to see in the second quarter.”
Looking ahead at the rest of 2022, Garrett said he sees “what looks like a return to 2019, or pre-Covid activity.”
“It’s hard without a crystal ball, but we just follow a lot of economists and look at our own numbers,” he said. “That is what we’re projecting and preparing for. While that’s a jolt from this surge period, it’s also a return to what could be called normal and everybody just needs to adjust accordingly. We all were thriving in those pre-Covid markets and we’ll continue to do so, I think particularly on Oahu and Big Island, where there is a pretty even mix of residential sales and off-island investors. I would say the question marks might be Maui and Kauai, where off-island investors and second-home purchasing is more prevalent.”
Keone Ball, president of the Realtors Association of Maui and broker-in-charge at Keller Williams Realty Maui, said he, too, sees a normalization happening in the market.
Ball said listing agents are getting a few showings for properties, and maybe one or two offers instead of five, seven or 10. Even three months ago, he said listings would get multiple offers immediately, but it’s now taking “a little while” to get a few offers.
And during the market frenzy, people were taking out inspection periods and removing contingencies, among other measures, but “all that stuff’s coming back in.”
Comparing the current market to 2020 and 2021, Ball said it’s “definitely yin and yang, but not a collapse. It’s a normalization of how things normally act in real estate.”
Rising interest rates have also affected buying power. According to Ball, those who previously could afford $1 million now have the purchase power of $725,000 or $750,000.
Kevin Inn, president of Better Homes and Gardens Real Estate Advantage Realty, who sits on the Honolulu Board of Realtors Board of Directors, agreed that Hawaii is returning to “more of a normalized, pre-Covid market.
“For sure there’s been a change in the past six months,” he said. “Interest rates ... that definitely has had an impact, although it surprised me at first. Initially when the interest rates went up, I was pretty surprised that most of the agents were reporting back to me that ... [the buyers were] still motivated.
“At least in March and April, everyone was still zooming on ahead, but now, as we get into May and June, I can start to feel the effects of that. ... Everyone will say there’s probably a correlation, of course, to increasing interest rates probably slowing [the sale] of units, but overall, there’s a big inventory problem that’s not going to be solved quickly,” Inn said. “I think that’s what’s working against that tie that keeps us in a still pretty positive territory from a median price standpoint. Unit volume, I think we’re going to see that slow down as we go into the second half of the year.”
On the Mainland, Garrett said there are some areas where the supply exists to almost transition to a buyer’s market, but Hawaii doesn’t have the housing supply to accelerate that transition despite a slight uptick in inventory.
A market transition was expected this year, he said, but understanding the scope and length of the market turn was something “we just have been watching and watching.”
It comes, though, as no surprise to Garrett.
“The surprise was the surge that happened during Covid, those heights of activities that we saw in [the third and fourth quarter] of 2020, and [first and second quarter] of 2021,” he said. “Those were unprecedented. That was a surprise.”
For his part, Inn said he thinks Hawaii will see a lower number of available units, but the median sales price “is probably going to stay pretty healthy. Not at the same levels we have experienced over the past year. ... That’s probably going to settle down into a lower number, but still in a positive territory.”
Similarly, Ball said, some prices are being reduced to match comparable properties, but “by no means are the prices going to drop out, especially on Maui, because our inventory is really low. I do see new listings coming on a lot and I think a lot of sellers think we’re still in the frenzy.”
By the numbers
According to 2021 statewide housing data from Hawaii Realtors, single-family home sales totaled 7,685 in 2018; 7,884 in 2019; 8,093 in 2020 and 9,786 in 2021.
Although condominium sales had declined in recent years, sales climbed nearly 58% in 2021 compared to 2020. Condo sales totaled 8,649 in 2018; 8,284 in 2019; 7,157 in 2020 and 11,304 in 2021.