But that didn’t stop the rise of home sales in Honolulu. In November 2019 home sales in Honolulu rose by a higher percentage than in markets on the Mainland. Home sales in Honolulu rose by 3.6% in November 2019 compared with the same month in 2018. Sales in mainland markets declined 1% during those 12 months. The median price of homes sold in Honolulu — $577,000 – was more than twice the median price of homes sold on the mainland. Days on the market in Honolulu rose by 8% but were roughly the same as on the mainland.
The main problem for buyers and real estate professionals in Honolulu is the lack of supply of homes for sale. The current inventory of homes for sale in Honolulu is more than 10% lower than a year ago. Hard to complain about except for buyers who are faced with shrinking supply of homes to buy. That situation helps to push up real estate prices and also accelerates the pace of sales, both of which favor sellers. In 2020 it looks like lack real estate inventory in Honolulu will be the main problem facing real estate professionals and buyers.
In general the real estate situation on the mainland is similar to Honolulu. Buyer sentiment remains high. The average rate of 30-year fixed mortgages has fallen to 3.69%, which fuels positive sentiment. Fannie Mae’s 2020 forecast for the US doesn’t break out Hawaii but is generally very positive. As we head into 2020, consumers in the US seem to believe that it will be a good time to buy homes on the mainland and in Hawaii.
Hawaii’s real estate market generally reflects that optimism, but with variations on each island. For example, single-family home sales on Oahu in December went up 19% from the previous year. This pushed single-family home sales on Oahu up by 4% for all of 2019. The median price, however, remained flat at $820,000. Sales of condominiums on Oahu declined by 5% and the median price increased slightly to $425,000. But there were big differences in sales and price increases of condominiums sold elsewhere in the islands in 2019 compared to 2018. The median price of a condominium on Kauai jumped by more than 20% to $565,000 in 2019. But the sales of condos on Kauai declined in 2019. Likewise for single-family homes – both sales and prices declined.
Many vacationers in Hawaii from the mainland and elsewhere will rent vacation rentals. Both supply and demand for vacation rental units throughout Hawaii were up year-over-year but occupancy rates were down. According to the Hawaii Tourism Authority’s (HTA) latest report, supply of vacation rentals in the state was up 17% in 2019 to more than 919,000 units, while demand was up 13% to 630,500. Occupancy was down a few percentage points from a year ago but still close to 70%. The average daily rate (ADR) of vacation rental units in Hawaii – both permitted and unpermitted — remained mostly flat at $181. For hotels throughout the state, according to HTA the occupancy rate in 2019 was nearly 79% with an ADR of about $260.
Oahu experienced a drop in supply and demand of vacation rentals in 2019. At least part of the reason is that a law went into effect Aug. 1, 2019, that bans renting or advertising unpermitted short-term rental units outside of a resort district. The law increased fines for renting or advertising such units from $1,000 per day to a maximum of $10,000 per day. The number of illegal rentals on Oahu has dropped sharply since Oahu passed the law. Honolulu officials say the number of unpermitted vacation rentals listed online has dropped from about 5,000 to 3,000.
Oahu has far fewer vacation rental units than Maui — 252,000 units on Oahu compared to 304,000 on Maui. Vacation rental units have been increasing phenomenally in Maui County – by 33% in 2019 alone. Demand in Maui County also was up 26.5% in 2019 to 231,000 units. The supply of vacation rentals on Kauai also was up 33% in 2019 to 139,000 units. On Hawaii Island, both supply and demand were up by 19% to 224,000 units and 135,000 units, respectively.
What this tell us is that, along with the business of real estate, the vacation rental market in Hawaii is booming. Supply is growing robustly but inevitably occupancy rates are not keeping up and either dropping or staying flat along with average daily rates. This is good news for vacationers in 2020 who will have more choices of vacation rentals on all of the islands while rental rates stay more or less level.