If you look at real estate nationwide, prices may be seen to be decreasing. Maui, not to be conflated with other markets, is not trending with national averages. In the roller coaster world of real estate, the market here tends to dip last and bounce back first. As such, resilience and demand are two words that define our market. Resilience, yes, to be sure, with fewer homes selling, but, in a uniquely dynamic equation, moving at higher price points than we’ve previously seen. There is, after all, only so much of our island paradise and with scarcity of inventory, the value of owning Maui real estate is as strong as ever. Which brings to mind the relatable quote by Mark Twain, “Buy land, they’re not making it anymore.”
Home Prices Tend To Come Down When Supply Is Up…
…but this just isn’t the case. Contributing to low inventory and a slow down in buying are several key factors.
We simply do not have any new builds currently to correct the imbalance on demand and supply other than what is currently under construction and those units have long been in reserve. In other words, there is no new inventory as everything is already committed.
Existing homeowners who previously financed their home purchase likely locked in at historic low interest rate. They are seeing growing equity with lower carrying costs where purchasing a home today would mean paying at a higher rate. As such, the economy itself is providing owners the reason to remain, for now, in their existing homes. Any anticipated correction is not seeing the surge to sell. Instead we find price resilience in the market.
No doubt some sellers may adjust their price if they have made life changes and decisions depend on the sale of their home, as in any normal market climate, but price reductions to purposefully lower the median price across the board is not a trend that I see today.
Supply and Demand Drive the Market
Because of lean inventory, we typically see the next property come to market higher than the previous listing that goes under contract. The law of supply in demand in action! Data shows sales are down across the board, but median sales prices are still up. It reveals the inventory we have is still selling at higher prices than a year ago.
Simply put there are more buyer clients than sellers when inventory remains down. Nationally, in 2007, there were $3.8-4mil homes on the market, in 2022 we saw a quarter of that supply at just $1-1.2mil homes.
Return to Diligent, Responsible Buying Habits
In the wake of the last two years which proved to be the largest market run in Hawaii’s real estate history, we now see the pace of sales returning to pre-pandemic levels. Maui was highly sought after in the COVID era as a preferred location from which to work remotely boosting the buying urgency. Buyers now, having pressed pause, are exercising a return to diligence. With the pull back on the frenzy of last years’ record high sales, sellers seem more open to negotiating. And that’s good news for buyers.
With the cooling off from the frenetic pace which put buyers on hold and demanded patience of sellers, 6 months later, we do now see a growing activity stirring in the market again as rates come down and buyers hop off the proverbial fence. The slow down gives benefit to a more level-headed approach where terms are not waived in the process. That reintroduces a healthy negotiation to the transaction. The era of waiving contingencies is past.
“Should I, Shouldn’t I?”
As we know, we can’t time the market. Timing for a purchase is always an individual proposition. The buying decision may, however, be prompted along by asking yourself the question, “In 5 years time, if I buy Maui real estate today, will I regret it? Or will I regret if I don’t buy Maui real estate today?”
Just saying…
In England, the Victorian expression “as safe as houses” is still very much used to express certainty about something. It is believed it stems from the old and long standing belief in bricks and mortar as being a sound and sure investment which history proves. Investing in real estate certainly paid off for those who bought from 2018-2020, but… who knew?
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