Hawaii Real Estate Trends

Apr 13, 2018 | General Information

Hawaii is a hot place, not just the temperature at the beach but even moreso the real estate market. Sellers usually receive multiple bids on their property. And buyers feel the heat, too, as they often are outbid. Housing inventory for sale in various parts of Hawaii too often is low while demand stays high. Not just US buyers but also foreign buyers have been pouring billions into Hawaii real estate.

So what is likely to happen to the real estate market in Hawaii 2020 and the future? Whose forecasts and analysis of real estate trends can we believe and rely on to make offers and purchase decisions for single-family homes and condos?

The month to month fluctuations in single-family home, condo and townhouse sales, listings, prices, time on the market, inventory, domestic and international demand actually, perhaps surprisingly, contribute little to guidance for future Hawaii real estate trends. For example, single-family home sales on Oahu declined in 2019 but, oddly, prices increased. In Honolulu condo prices also rose as sales dropped. Those statistics are counter-intuitive. In 2018-19, the average single-family sales price was almost $1 million; for condos almost a half million.

All of the economic metrics of importance for a strong real estate market seem to be improving: visitor arrivals have been increasing along with visitor days, expenditures, personal income, wages, employment and unemployment rates, and such. No question that the Hawaiian economy is strong, which also has resulted in solid demand for rental units. But rental prices have been falling. Rental prices are too high for many Hawaiians. Hawaii continues to be, and will remain, one of the least affordable places in the US to rent or buy rental property. Condo prices have been skyrocketing in some counties. That much we know for future real estate forecasting.

We also know that Hawaii has been losing population to other states in recent years. Job opportunities and a lower cost of living on the mainland have been strong attractions. The University of Hawaii Economic Research Organization (UHERO) tells us that the statewide population has declined for two years in a row. Looking at growth rates in employment and income, Hawaii is near the bottom for the whole U.S. One result is that fewer babies are being born in Hawaii and, at the same time, migration into Hawaii is not keeping pace with people moving away. Uncertainty also accompanies predictions about foreign investment in real estate, especially from China and Hong Kong. Turmoil in US-China relations, in China-Hong Kong relations and within Hong Kong itself make it extremely difficult to predict future investment from the Far East in Hawaii’s real estate.

Part of the problem forecasting real estate trends is variations in predictions about the most important factors, for example, population growth. As I just said, the University of Hawaii’s UHERO is seeing both past and future population decline. The Hawaii state government, however, has produced a report that suggests 19% growth in the state’s population by 2025. They forecast increases of 19% – 29% in Kauai, Maui and Hawaii counties in the next five years. The state’s forecast for housing demand in equally optimistic: 25,847 units for Honolulu, 19,610 units for Hawaii, 13,949 units for Maui, and 5,287 units for Kauai during the 2015-2025 period.

Another source of uncertainty is past economic and real estate predictions from authoritative sources that have been wrong. A prime example is a real state blog published in 2013 by the previously mentioned, and highly respected, UHERO. UNHERO predicted that the median home price in Honolulu would climb to $650,000 through 2013, then would increase to $724,000 in 2014, hitting $815,000 by 2015. This prediction did not seem unreasonable at the time. From 1985 to 2011 the price of single-family homes in Hawaii had increased 262 percent or just over 5 percent annually on average. Some of that real estate price momentum was driven by the 1985-1990 Japanese investment bubble when the median price of a Honolulu home doubled in four years from $188,900 to $498,500. Where does the median home price in Honolulu stand today? According to Zillow, the median home price in Honolulu in November 2019 is $631,300, much lower than UHERO’s projection for 2015.

Of course changes in supply and demand fuel fluctuations in the real estate market everywhere including in Hawaii. Housing starts over the past four years have been the lowest Hawaii has seen for any four-year period since the end of World War II. New construction in Hawaii is at a historically low level. The prices of single-family homes and condos coming up for sale have been dropping precipitously. Resale inventory is at the lowest level since 2005. However, according to the Honolulu Board of Realtors, demand for real estate continues to boom thanks to the military, construction, tourism and the government. How strong are these past Hawaii growth factors for fueling future real estate trends? That’s very difficult to know.


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