My snapshot of the Maui real estate market shows that we are in a typical November slowdown with 30% fewer units sold than in October. We see monthly fluctuations in prices but generally prices are pretty stable. Inventories are trending slowly down again after peaking last year about this time; overall we are in a transition market that could go either way. 43% of sales are cash sales and 14% were over $1 million. Banks are slowly releasing foreclosures into the market. We’ve seen an increase in online auctions. I’ve heard some rumors that the banks have revised short sale processes significantly and we may see that as a more viable solution for underwater sellers.
Priced out of Paradise: Mainland, foreign buyers snapping up Hawaii homes – Kathy’s Commentary
This month the Department of Business, Economic Development & Tourism released a report stating that 47% of Neighbor Island residential sales were out-of-state buyers. The reaction to this Hawaii News Now report was as expected. “We need more affordable housing…people who work here can’t afford to buy…this is a disgrace…we are not taking care of our own”.
WHOA! I haven’t commented yet because I needed time to review the actual report and data to analyze it a bit. My suspicions were pretty much accurate. I only know Maui so this is not a comment on the other islands. For Maui County, the report stated that 48% were mainland buyers and 7.1% were foreign buyers or an amazing 55% of the market.
Is it true that these buyers are pricing local residents out of the market? I don’t see this at all. Here are the facts and my thoughts.
- I went to the MLS data where I can pull up how many sales are “vacation rental condos”. I checked against report numbers and “residential totals” includes vacation rentals. That percentage sold averaged just under 30%! I don’t have info locale of buyers but I bet 90+ percent of these encompass that 47%. Yes, a few vacation rental condos are owned by residents but the majority are not. Generally, a vacation rental condo commands higher value due to it’s views and proximity to the beach. Data from 2008 to now shows that the average sale price of a vacation rentable condo is $742,608 compared to $470,551 for units that don’t allow vacation rentals.
- Vacation rentable condos make up 54% of the condos sold in Maui County. You notice I said “condos sold” not “total condo units”. I don’t have the numbers, but I suspect that the turnover rate is much higher for vacation properties. Generally in real estate, people own property an average of 7 years before selling it. From what I’ve observed, vacation rentals turn over much faster. The same is true when out-of-state second home owners are involved. Why? They realize after a while that they are not able to be here nearly as much as they dreamed of so they sell. On the other side, we have many areas where property rarely turns over.
- For Maui, most foreign buyers are Canadian. We’ve seen only a few Asian buyers return to Maui. While we predict this will change, we’ve seen very little of it. Many people speculate that the Asians like the big city atmosphere of Oahu. Right now, I don’t see this making a huge impact like when the Japanese came to Maui in the late 1980’s.
- The article also doesn’t mention the fact that many mainland buyers purchase with intention to be residents. When Peter and I purchased our home 10 years ago, we were classified as a mainland, second home buyer. That was what worked out best for us while we sold our home in California. But we moved here immediately. It can still take up to 2 years to establish residency. Some people don’t move here immediately but many do become Hawaii residents. And that is not mentioned at all. I have no idea what that number is but based on my clientele, it is at least 20% of mainland buyers.
- Maui growth has been relatively flat for 10+ years. We are seeing some growth now but returning to the mainland on my last visit and driving through the midwest I was shocked by the amount of population growth everywhere. Populations are rising. Some anti-growth groups should be saying thank goodness for our high prices!
Given all of this, I think this report is highly sensationalized. If we eliminated all the of vacation rentals, we’d have a lot less people needed to support. If we eliminated the high-priced developments that typically have part-time owners, we would need a lot few landscapers and home care workers. Many residents seem to think this is the only place in the country with high housing costs. It is not. Prices are set by supply and demand. Non-resident owners tend to pay a lot more in taxes than residents; tax money that we need to support our infrastructure. There is no perfect answer but the problem isn’t nearly as bad as the reporters make it sound. Yes, we need more affordable housing. We need reasonable guidelines so that developers are able to build affordable housing without losing money and waiting 10 years for permits. We also need more high-paying jobs and better educated keiki!
Questions or comments? Need help with Buying or Selling or just understanding the market? Please ask below or call or text Kathy at 808-344-0469.
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