Hawaii’s Ever-changing Real Estate Market

Happy Holidays!!!

The year of 2023 has been one of change. The conflicts in both the Middle East and Eastern Europe make us wonder why humans cannot get along together.

Rising tensions with China remind us we are not completely immune from potential conflict. We must pray for those families affected by the ongoing military conflicts and be thankful that we live in the United States, where we are somewhat insulated from the dangers of war, at least for now.

Locally, the unprecedented wildfires in Maui have resulted in unimaginable damage and suffering to the residents. The people of Maui have banded together and, with the assistance of people both within Hawaii and outside the state, have begun the healing process. Maui is such a wonderful island full of natural beauty and incredible people.

Tourists will again flock to Maui for their dream island getaway, and the Maui economy will recover to be stronger than ever.

The Hawaii real estate market in 2023 took one of the most dramatic turns we have seen in recent history. Fueled by the Federal Reserve’s dogged attempts to stem inflation, the 30-year mortgage interest rates went from below 3% to 7.5% in a little over a year. This caused a slowdown in the number of sales as buyers could no longer afford as much. What is interesting is that although the number of sales dropped, the sales prices stayed relatively stable. The year-to-date median sales prices for single-family homes as of Nov. 30, dropped about 4.5% year over year to $1,060,000, while year-to-date median sales price for condominiums dropped only .3% to $508,500. Prices stayed relatively flat due to a lack of inventory to sell.

When homeowners have mortgages at interest rates lower than 3%, they have very little incentive to sell.

The higher interest rates have reduced the competition for homes, resulting in listings staying on the market longer before selling. The median days on the market for a home has increased from 18 days to 29 days, comparing November 2023 to November 2022. Similarly, condominiums have increased from 18 days to 23 days on the market. In addition to the increased days on the market for a home to sell, both homes and condominiums are selling for a higher discount to the list price in 2023 compared to 2022.

The good news is that 2024 appears to be a recovery year for real estate.

Most experts feel that the Federal Reserve is done increasing interest rates and may start dropping interest rates in the first half of 2024. This optimistic outlook is reflected in the significant lowering of 30-year mortgage interest rates in late November and early December of 2023. As interest rates decrease, we will see more buyers enter the market. Additionally, those homeowners who need to sell to (a) buy larger homes or (b) relocate are more likely to give up their current low-interest mortgages to buy a new home if the current interest rates are more reasonable. Thus, creating more inventory to sell as interest rates drop.

Here’s to the new year!

Let’s pray that 2024 will be a year of peace for the world, healing for the people of Maui, and a return to a normal Hawaii real estate market and world economy.