There’s an old saying in real estate that buyers are “six months ahead of the curve and sellers are six months behind the curve.” And in many respects, that’s true. Buyers do tend to be able to predict what’s coming around the corner as far as the market is concerned. The reason for this is because the buyer has done the most research in the real estate equation. Think about it. Who’s seen more homes than a particular buyer? Answer, no one; and in many cases the buyer has seen more homes than even their real estate agent. Buyers do a ton of exhaustive research, from spending hours online to seeing all the available inventory in person. By the time a buyer closes on a house they generally know what every house sold for in that neighborhood, the price per square foot, the average beds/baths, lot size and the purchase price to asking price ratio. Because they do this exhaustive research, they likely have a good idea of where the market is headed.
On the other side of the equation, many times sellers come to the party late. You see, by the time they realize the market has shifted it’s sometimes too late to capitalize on getting the premium prize. Then sellers tend to go into denial for a period; they’re not quite sure why their house isn’t getting a lot more showings or offers. Sometimes it could take a seller six months to realize that the market has shifted, and they need to shift with it.
So, has the market in Hawai`i shifted? Have we hit the peak? You could ask 10 realtors and get 10 different answers, but in my professional opinion I believe we have hit the peak with one caveat. We have not hit the peak in all areas of the island. For example, if you’re looking at homes that are for sale in primary subdivisions, meaning in subdivisions where people live on the island full-time, then we HAVE hit the peak in those areas. If you’re looking in the resorts and your goal is to have a secondary home or a vacation rental, then the answer is we have NOT hit the peak. You see, most of the buyers contacting us are looking for secondary vacation homes or short-term rentals. Those are hard to come by and as such when they do come on the market, they tend to go very quickly, have multiple offers, and go for over asking price. It’s just the old law of supply and demand. Great homes with terrific locations and fantastic finishes will always sell well and that has not changed. Homes in the resorts that qualify as short-term vacation rentals will continue to see double digit appreciation for the foreseeable future.
What I want to make clear in this article is that although we have hit the peak in some places around the island, I’m not ready to say that we’re going to start seeing price declines. What I think we can expect is what I call “price stabilization.” Prices will level off in those primary subdivisions and probably remain stable or have a slight incline for the rest of the year. Prices in the resorts will still climb, but not at the meteoric rate that we have seen over the last year. I think we’re well past the 25 or 30% appreciation we’ve seen over the last 12 to 18 months. I would expect the island in 2023 and beyond to return to a more normal appreciation rate of 5 to 10%, which is still phenomenal.
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
