Last month I started a two-part series entitled, “The Shift Has Hit The Mainland.” In that first article, I discuss the changes I’ve seen in the real estate landscape at my office in Denver. Currently, many of the listings are no longer attracting multiple offers or above asking prices. Inventory is starting to climb and homes are staying on the market longer. I discussed the reasons for this and why this may not necessarily be a bad thing. If you’d like to re-read part one of this series, you can click here.
At the end of part one we asked the question – when will the shift hit the Hawaiian Islands? Today we’ll tackle just that question.
First, you must ask yourself if you are a disciple of the six-month, 12-month, or 18-month theory regarding how long the Islands trail the mainland. Most people I’ve spoken to over the years have told me the Hawaiian Islands usually trail the trends on the mainland by 12 months. However, I don’t think that’s true anymore. The news cycle, including the economic news and the plethora of available information via the Internet, has made today’s buyers and sellers more tuned in and savvier than ever.
I now believe the Hawaiian Islands only trail the mainland by six months or less. Whether that’s true is up for debate, but for the sake of this discussion let’s go with the six-month hypothesis. That would mean the slowdown would hit the Hawaiian Islands right around Christmas or the first of next year. However, the holiday season in Hawai`i is known as “festive” and it is the busiest time of the year. This is when most visitors and second homeowners flock to the Hawaiian Islands to buy and sell homes. So, it’s unlikely that we would feel a slow down at that time, even if the mainland had caught up to us, for no other reason, than we’re in the middle of our season. After January we start what we call the snowbird season. This is when everyone from the mainland tries to escape the cold and hang out in Hawai`i for the months of January, February, March, and April. Again, this is a typically busy time of the year and a lot of buying and selling occurs during these winter months; so again, I think it’s unlikely we would feel any type of slow down.
The second reason why I think we are unlikely to feel a slowdown is simply the finite inventory in Hawai`i. As an example, in Denver on any day in that city of 3,000,000+ people, there may be 2,500 homes put on the market in 24 hours. By comparison, on the Big Island of Hawai’i, if we had 20 homes hit the market in a 24-hour period that would be an active day. We simply do not have the inventory of homes to change the trajectory of the market that quickly. In addition, there is very little new construction going on in Hawai’i, so having builders add products to the available inventory is not going to happen. It’s a simple law of supply and demand. There will not be enough homes to meet the demand in a post-Covid era anytime soon. For that reason alone, competition for homes and price appreciation will be great for the foreseeable future.
Finally, Covid has changed the landscape in Hawai`i forever. More and more people are coming to the realization that Covid is not going away, and the threat of lockdown or restrictions will always be looming over their heads. This makes them want to get away from where they currently live and move to a place they perceive to be safer, like Hawai`i. In addition, if you are going to be locked down or there are going to be severe restrictions there may be no better place to weather that storm than Hawai`i.
Working from home or working remotely is here to stay. More and more people now believe that if they are going to work from home they might as well do it from paradise. Then there’s a whole other group of people that have thrown caution to the wind, believe that life is too short so don’t put off your dreams for another day and have decided to make the leap to a lifestyle they have always dreamed of.
For all these reasons and many more my conclusion is that the slowdown in the real estate market will continue to affect the mainland, but Hawai`i will be insulated from it for the foreseeable future. As a buyer, you’ll continue to pay exorbitant prices for a slice of Hawai`i and as a seller, you will continue to see amazing double-digit appreciation.
Dan Polimino is the owner of the Hawaii 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.
