Top 5 Takeaways: Economic Impact of COVID-19 and the Hawaii Real Estate Market

Paul Brewbaker, a prominent Hawaii economist, presented insights on the impact of COVID-19 to the Hawaii Island Board of Realtors. Mr. Brewbaker described the COVID-19 pandemic as a “Black Swan” event — rare, unpredictable, and impactful. Because of this, it is difficult to forecast when a “new normal” will stabilize for Hawaii’s economy and real estate market.

Home Prices Prior to Coronavirus

Prior to the pandemic, home prices had been steadily rising on Hawaii Island. We had a slight dip with the Kilauea eruption in May 2018. The 2018 eruption on Hawaii Island caused an immediate drop in tourism and decrease in home valuations, but we saw a quick rebound. It is our hope, the neighboring islands, especially Hawaii Island, will continue to be an attractive investment because of the affordable home prices and rural appeal.

Source: “Hawaii Economy Meets COVID-19” presented by Paul H. Brewbaker Ph.D., CBE on April 9, 2020

Top 5 Takeaways

Mr. Brewbaker’s presentation provides key takeaways about our economy and real estate market:

1. Hawaii COVID-19 case counts are responding to social distancing and sheltering-in-place protocols. “Bending the curve” in successful mitigation is leading to a possible stabilization by May, at which time risks of revived pandemic infection will have to be managed.
2. The sudden emergence of Hawaii’s coronavirus infectious threat precipitously decreased new home listings for sale, international and domestic travel, and interest rates, and has disrupted supply chains and clouded the investment outlook.
3. Big Island regional housing markets were in a relatively stable, extended trajectory of modest, single-digit annual price appreciation and sales volume growth. This trajectory will be disrupted by the sudden stop, but it can still serve as a reasonable longer-term benchmark for housing market returns on investment during the inevitable recovery.
4. Among the lessons from the global influenza pandemic from one century ago (1918-’19) are the facts that recession can be sharp but comparatively brief, that risk of second or subsequent infection waves must be taken seriously.
5. With tourism as Hawaii’s principal export, and primary channel of transmission of the pandemic’s economic effects abroad, prior experience does not compare in magnitude of economic impacts but does offer insights into the V- and U-shaped nature of these experiences.

Read the entire press release from Hawaii Information Services on Paul Brewbaker Ph.D., CBE presentation here.