Before I get into the 2017 Maui Market predictions, let’s look at the November numbers. December is not done yet but my quick look shows no major changes.
The fall market usually shows slowing down in sales, particularly condo sales. We have seen this in West Maui condos where unit sales are down 13% from last year and the median price is trending down about 11%. Everywhere else is either up, steady or not enough data to really determine! Generally, sales in the residential market are stronger than in the past 2 years. And prices are up too.
2017 Maui Market Predictions
The primary market influences are interest rates, new developments, lack of affordable housing and supply and demand.
Interest rates have “skyrocketed” since the election. They are changing daily and changing fast. Generally, I believe the days of uber low rates are over. This rapid change makes people considering purchasing a property be more cautious. I listen to the analysts and a few say the highest rates will get to by the end of 2017 is “pushing 5%”. Most say they will hit 4.5 and hang around there. Historically, 5% is still a very good rate. Here is a chart that shows 30 year mortgage rates in Hawaii over the last 5 years. We’ve been blessed with lower rates but rates right now are still lower than in 2013. Yes, it will possibly make it so that some 1st time homebuyers won’t be able to qualify. There is plenty of money out there to lend, and I think if interest rates go up, the lenders will find more ways to make mortgages work for qualified buyers. One thing that teamed with higher interest rates could make a difference is if the Mortgage Interest Deduction is removed; the threat has been there for awhile. Please support keeping it! It makes a difference – especially to first time homebuyers. If you question that, ask me about my first home! One more factor to recognize is that for Maui almost 39% of purchases are cash. Interest Rate Change Significance to the Market: LOW.
Everyone loves to buy a “Brand New Home“. Right now, Maui has more new developments available than we have seen in years. The lead time from signing for a property until it is ready is usually very long – 18 months is my guess. The developers complain about the county permitting process. Hearing about some of the reasons for delays makes me take the developer’s side. The nature of Maui makes many citizens not want any development which makes it even harder on developers. Will the developers be able to add enough housing to the mix to meet the housing needs? I don’t think so. Nationally growth rates have grown much more than Maui. I don’t encourage all growth but it will happen. It is better to responsibly manage growth than to fight it and have it happen anyway. New Development Significance to Market: Low
Even in the new home “affordable housing” arena, the prices of new builds are higher than similar resale properties. There is some good reasons to consider – better building means more energy efficiency, the “new factor” and better management of associations. The lack of affordable housing on Maui is significant. It will stay significant as there are not enough rentals and rents are going up faster than housing prices. I could write a whole blog post just on affordable housing. I think our government needs to look realistically at the solutions which include attracting better jobs, better education and providing an appropriate mix of affordable housing.
One of the biggest aspects of Affordable Housing is our Jobs Market. Because so much of our real estate market is 2nd homes and vacation properties, jobs don’t play as big of a role as in many markets. That said, it is an impact. There are lots of jobs and unemployment is low. What our state doesn’t report on is “underemployment” as many people need 2-3 jobs to survive. Typically those people are not buying homes. Here is a quote from the State on the County of Maui economic condition.
Maui County saw a net gain of 2,200 jobs or a 3.0 percent increase in the third quarter of 2016 over the same quarter of 2015. Jobs gained the most in Arts, Entertainment & Recreation (500 jobs), followed by Health Care and Social Assistance (400 jobs), Food Services & Drinking Places (300 jobs), Natural Resources, Mining, and Construction (300 jobs), and Transportation, Warehousing, and Utilities (300 jobs). The largest private sector job losses occurred in Accommodation (200 jobs lost). Government added 100 jobs in the quarter.
Affordable Housing Significance to Market: Low
Supply and Demand
There are always people arriving and leaving Maui. It is actually a market that changes fairly fast. Some areas are definitely more isolated with long-time residents. Many renters are tired of escalating rents and/or having to move frequently. Inventories are relatively flat at 8.5 months overall, 5.7 for single family houses. Prices fluctuate a lot but there are no clear trends. Last month the average sales price for all property types was $731,798. The median was $502,000. For the last 2 years, the median range has been $476,750 (Dec 2015) to $565,000 (Oct 2016) without much logic to the ups and downs except that all of 2016 has been in the $500’s except January. So I have to go with the national analysts and say I don’t see a big change coming. Steady markets maybe with a little growth. In general, although there are exceptions, we still aren’t seeing many Canadians buying because the exchange rate is .74 where it has been hovering for months. There are a few more Asian buyers but nothing too drastic. Affordable Housing Significance to Market: Low
Summary Predictions for the Maui Real Estate Market
Mainland markets that Maui tracks with (see California summary) have experienced some slowing meaning growth has slowed however growth is still happening. Many West Coast agents talk that they see the beginning to a decline in markets. We do know that markets shift very quickly; blink and you missed it so stay aware if you are considering a move.
We do see more Gen-X’ers and Millennials getting into the market; here is an interesting chart from Business Insider that shows that many Millennials are unaware that there are some great low-down payment options. I’d also like to share a great chart that shows that you don’t need perfect credit to qualify for a loan. This year is a great year for 1st time homebuyers to buy.
For my prediction for Maui, I see a continued stable market. The spring season of 2nd-home and vacation rental investor will be strong because buyers want to take advantage of interest rates before they creep higher. The summer and fall will be slower but steady. The end of 2017 is truly hard to predict as our nation and the global economies see what happens with the new president and congress in place. I anticipate changes but I’m not sure what direction and how much it will impact Maui.
What other things do you think may impact our real estate markets in 2017? Please share your thoughts and solutions!
Questions or comments? Need help with Buying or Selling or just understanding the market?
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