By Dan Polimino
The slow season in Hawai`i is May 1 through November 1. There is usually is a little bit of an uptick in activity in the summer months of June, July and August based on summer vacation travel. But, for the most part tourism is down, sales transactions are down, and rental nights are also down for both short-term rentals as well as hotel occupancy. So, what does this mean for you? As I tell the agents in our office as well as our clients in every market, there is always an opportunity. So what market are we in right now?
There are three kinds of markets: a buyer’s market, a seller’s market, and a balanced market. Of the three different types of markets the balanced market is the shortest of all markets. Having the perfect balance of inventory, buyers and sellers is so difficult and so rare because it requires many different economic factors to come together at the right time. For that reason, and that reason alone, we don’t often see a balanced market. If we do, we generally don’t see them for longer than six months to a year. Real estate is always swinging in one direction or the other and rarely stays static in the middle. To better understand what’s going on here in the islands let’s look at each market category.
Condos: You’ve heard me talking about it for a while now – it is a buyer’s market when it comes to condominiums. There is a fair amount of condo inventory on the market right now and this is a direct result of the insurance crisis that has hit condo projects over the last 18 months. Home Owner Association (HOA) fees have risen dramatically, special assessments have been incurred by owners and as a result a lot of condo people have put their property on the market. You may be asking yourself, well why would I want to jump into that pool? The answer is because you could buy a condo at a much lower number; $50,$60, $70,000 or more off of the price will pay for a lot of HOA dues and you’ll be able to get a better deal on a condo, possibly in a fantastic location. Remember, you’re looking for three things potentially in this purchase. 1) a place for you to live the Hawaiian lifestyle either part-time or full-time; 2) you’re looking for cash flow if you’re going to use it as a short-term vacation rental and 3) you’re playing the investor long game. Historically, this island’s real estate has appreciated a minimum of 6% year-over-year for the last 35 years. All you have to do is hold the condo for a while, enjoy it, and then cash it out. Right now, because there is a fair amount of condo inventory on the market, buyers have plenty of choices. Couple that with the market being slow for the next 4 to 5 months and you’ll see the leverage is squarely in favor of buyers.
Single-family homes: This is an entirely different situation than the condo market. In fact, a lot of people who have sold their condo have done so to trade up to a single-family home (lots of reasons for that like HOA dues). Unlike condos there is not a lot of single-family home inventory on the market right now. So, if it’s a good house, in a great location, that is possibly updated, then the house is going to sell for close to the asking price and sell quite quickly. In this case, the leverage is squarely in favor of sellers.
Luxury Market: Currently, there is the highest number of luxury—and especially ultra-luxury—properties I’ve seen on the market at one time on the island and it’s just not moving like in years past. It’s very rare that we have 4,5,6 or even seven homes on the market at the same time priced greater than $20 million. In fact, as I write this, we have 12 properties on the market priced at greater than $20 million and more are coming on the market. I think if you are in this category, this is an excellent opportunity for you to come in and purchase a home at several million dollars off the asking price. I have personally toured most of these homes with clients and know the properties and the developments very well. If this is of interest to you, then I urge you to reach out to me as soon as possible. The leverage here is squarely in favor of the buyer.
Land: The land market is kind of neutral right now. We are not seeing a lot of land come on market for sale and we’re not seeing a lot of price increases or decreases. The problem here is not buying land or finding a piece of land that you would like at a good price. The problem is once you buy the land, trying to build. No one on this island has figured out how to build a house in under three years. It’s a painful and tedious process with architects, the county permitting/regulations, the lack of general contractors, the lack of skilled labor, and the lack of materials.
As I said at the beginning, in every market there is an opportunity and there’s plenty of opportunity right now. The question is for how long? I think the leverage is in favor of the buyer for at least the next 4 to 5 months. Remember, the selling season starts here just before Thanksgiving and runs all the way through the end of April. If by then, there has been a reduction in mortgage rates, the tariff situation is stabilized, the economy is moving in the right direction and there is less global unrest then I think you’ll see a buying boom. Most of the data out there from the trade organizations say there are roughly 7,000,000 buyers sitting on the sideline waiting to jump into the real estate market. What are they waiting for? Easy… they’re waiting for interest rates to reduce and the economy to stabilize.
If you’d like to find out more about the opportunities on the island, then we’d love to hear from you. Our team of professionals is vast, and we are ready to handle every aspect of the transaction from purchase, title, and mortgage, to property management. Contact us to find out more about our one stop shop and our unique proposition value.
Mahalo, Dan.
