“What effects have the US housing issues had on prices? There was another report out today that indicates all 20 major centers have seen another drop?“
In Maui, we’ve definitely seen a downturn similar to California but not as extensive. Maui traditionally tracks most closely with the San Diego market and interestingly enough is ahead of Honolulu. Our residential market peaked in December 2005 and looks like it is bottoming out as the last few months have been nearly level with increases in some areas.
However, the vacation rental market has not seen price declines until recently. For example, in Kihei condos (includes both vacation rentals and not) the median prices have increased 16% in the last year. For a 2 year period, the increase was 10%. Looking at moving averages of the median price, the comparison is $396k 2 years ago compared to $435k today. Looking at the trend charts, the peak looks like it was in November of last year. I do know that the residential condos have been hit harder than the vacation rentals. Unfortunately, this is not a required field in our MLS system so it is hard to gather specific stats on Vacation Rentals.
So the question is, how low will it go? In particular, the drivers for the vacation rental market are:
- Concerns about the airline industry, where we have 20% fewer airline seats than we did 6 months ago. Increased fuel costs are driving the remaining airline tickets prices up. Since many summer travelers buy tickets far in advance, I don’t think that we’ve seen the true impact of this. Visitor arrivals to Maui by air are down about 15% over last year.
- Concern about the US economy. People are tightening their belts, not buying vacation homes and taking vacations closer to home.
- The low value of the dollar against other currencies actually has a positive impact. We have a lot of Canadians buying here now. The legislation changes impacting visa controls and the buying ability of Korean and Chinese residents is bound to have a positive long-term effect. Both as visitors and property owners, they will drive prices up over the next 10 years. We’re already seeing some large Korean companies looking to purchase multiple units. This is anticipated to be a big market driver in future years. In the last year, the number of international visitor arrivals by air to Maui has increased 35%.
- Of less impact but hopefully positive for Maui is the Big Island vog. While seeing the volcano eruption is awesome, many tourists will choose Maui because of the constant vog haze in many areas of Big Island. Under our normal tradewind conditions, the vog blows past Maui but Oahu and Kauai are pretty badly inundated. We don’t know how long the vog conditions will persist, but I’m hoping that Maui continues to see relative increases.
- Generally the number of new building permits has been falling over the last few years. In Maui, it takes years to get a new development going. This year, we’ve seen been several new projects come on the market. But there are very few permits in the works, which means it will be years before we see bunches of “new inventory”. In the next 2-3 years this should start driving prices up.
The data cited is from real estate trend reports generated from the MLS and economic data from the Department of Business, and the Economic Development and Tourism.