I believe, and have been telling all my buyers, that we are poised to have another run-on real estate right after the November election. Will it be as robust as 2021? I’m not quite sure. But there will be a real estate spike after the election, and what I mean by a spike is home sales will accelerate and so will price appreciation.
Since we have an extremely limited inventory on the island, I believe the appreciation will be far greater here than it will be on the mainland. The Hawaiian Islands see about a 6% appreciation on average year over year, so we are poised to see something more to the effect of 10, 12 or 15% right after the November election. The reason for this is threefold:
1) Pent up demand!
Most people don’t realize we’ve been in a real estate recession for almost 2 ½ years. The market switched from a full-blown seller’s market to a buyer’s market in May 2022. So do the math. It’s been almost 2 ½ years since we’ve had a market slow down. And not just a little slow down, a major slow down. In 2023, across the nation, we only sold 4.1 million homes. That was the worst sales year in 35 years. In 2024, we are only projected to sell 4.1 or maybe 4.2 million homes. So again, no real difference. I know for a fact that millions of buyers have been sidelined on the couch waiting for the market to turn. These buyers represent a huge pent-up demand, and they are ready to purchase real estate. They are waiting for a signal that the political situation in this country has stabilized, and that interest rates, as well as inflation, are falling. In addition to buyers jumping into the market, I believe sellers will be eager to put their homes up for sale as they now see a path to either upgrade or downsize.
2) Political unrest!
Everybody’s uneasy about purchasing real estate in an election year. Particularly when it comes to second homes and anything in the high-end luxury market. Nobody needs to buy a second home before they know who their elected officials will be and what direction the country is headed. As such, the wealthy tend to put their hands in their pockets and wait until the political season is over and a new administration is in place in Washington. One thing is guaranteed going into November, we will have a new administration. Although the vision for the direction of the country is vastly different for both candidates, just the political season being over will be enough to turn the real estate faucet back on.
3) Inflation and interest rates are going down!
There’s no question that inflation is starting to come down towards the target of 2%. There are more jobless claims, and the economy is slowing, which is what the Fed was looking for. Federal Reserve Chairman Powell is indicating he will drop interest rates by a quarter of a point in September and I think there’s a great likelihood they’ll drop another half percent in November or December. This will be one of the biggest incentives for people to jump back into the market. Buyers will be anxious about exactly when to jump in, but interest rates in the low six’s and possibly in the high fives will launch sales and appreciation.
Nothing affects people’s ability to buy like price and if prices jump six, 10, 12% then you may be priced out of the market. This is why I’ve been telling people for the last several months that you need to pull the trigger now and buy before the election. This is the last chance to purchase a property at, and most likely well below, the asking price. A run on real estate will affect your affordability a lot more than a 7% interest rate. Imagine having to compete for properties again and paying $50,000 over asking price. We are headed that way. You don’t have to believe me, but the last time I sounded the alarm was 2020. Some of my clients understood that and took advantage of the market, but most didn’t. I can’t tell you how many times I’ve heard someone say, “I wish I would have taken your advice and bought something in 2020”. Let’s hope that’s not you.
Dan Polimino is the owner of the Hawai`i Team in Kailua-Kona, Hawai`i. He and his team are the luxury residential experts for the Big Island. If you are thinking about buying or selling in Hawai’i, then please reach out to us at team@thehawaiiteam.com or call 808-913-0899.
