Everyone can agree that 2020 has been one wild ride of a year. Nobody knew where the market was headed after 9 years of appreciation. As the year started some were wary about what might be on the horizon. Then everything hit the fan. Everyone paused. Naysayers predicted the end was nigh and prices would collapse. But many had reason to believe that wasn’t true. When it came down to it the fundamentals driving the market were still in place. Over the last 8 months, we’ve seen those fundamentals push prices even higher. Residential median sales prices have increased a whopping 18.5% in October and 16.8% in November compared to the same months a year ago. Condo sales have also had a bump with increases of 12.7% in October and 3.7% in November. On a YTD basis prices are up 6.5% for residential and 8.4% for condominiums. Here are the top 4 factors affecting home prices right now.
4 Factors Affecting Home Prices
There is no factor that will drive up prices in an area like demand. This coupled with supply is basic economics, and both are making big ripples in Hawaii. So where is the demand coming from in this age of high unemployment and economic uncertainty? On Maui it’s coming from multiple fronts. Moving up, moving down, moving to Maui or someday moving to Maui. Not to mention second homes and vacation homes. It all plays a part and right now we’re seeing it all.
2. Inventory (or Lack Thereof)
Single-family residential home inventory has been down over 20-30% the last few months compared to a year ago. Of those listed over 40% are $1,000,000 or more. This severe lack of inventory has brought bidding wars to Maui. A well priced, well cared for home is usually pending the first week on market. Condos are another story and a bit more complex puzzle to solve. Inventory is actually up after units started to flood the market in August. It varies by complex, but values have been surprisingly resilient. The lower cost and maintenance compared to residential has been attractive to a broad set of buyers. As the number of pending sales and closed sales continues an upward trajectory that might stifle the increase in supply and keep prices steady.
3. Interest Rates
Rates are at historic lows giving buyers more buying power, or at least keeping them in the game as prices rise. In fact this past week hit another record low, for the 14th time this year. Low interest rates impact prices in two ways. First, by increasing the buyer’s ability to borrow, and at higher amounts. Second, by creating a greater sense of urgency to find a home and lock in a low rate. Fear of missing out is real and some will go to great lengths to secure a property while rates are this low.
Now more than ever this truism of real estate is guiding buyers as they give more thought to where they want to be. And Hawaii is looking pretty good right now. Across the U.S. coastal and “resort” towns are seeing people flock to them as people reassess their quality of life. Couple this with a newfound ability to work from anywhere and you’ve got some major migrations taking place. Due to its remoteness it also holds appeal as a safe harbor from all the stresses that have been escalating in other parts of the country. Now, as always, Hawaii is a great place to visit, and a better place to live.
Have questions about the real estate market in Hawaii or thinking about making the move? Contact me for more information.