â€œLies, damned lies and statistics.â€ Benjamin Disraeli coined the phrase and Mark Twain made it famous. The saying is pretty appropriate when describing the current Maui real estate market. A recent article in the Maui News suggested that the current real estate market is holding ground on Maui. The article states that while price decreases are common around the country, statistically the market in Maui appears to be stable with little or no change from September of 2006. You can make a pretty compelling point with numbers that Maui is weathering the storm when it comes to the downturn in the national real estate market. This is where Mr. Twainâ€™s saying comes into play. A closer look at the market reveals that the statistics do not show the true picture.
The first chink in the statistics is the use of average sales price figures for the island. Maui has always been a small enough market that average sales prices are a poor measure for the local market. Even in a more robust market, average sales price on Maui can show pretty dramatic fluctuations. Median price is a better indicator of pricing as it tends to eliminate the influence of highs and the lows on either end of the market. Even then, median numbers can be skewed in a smaller real estate market like Maui. New developments are notorious for skewing statistics. When a new development comes on line, you may see twenty or more properties close in a month. Depending on where the development falls in sales price, a number of closings in a single development can push the median up or down. We saw this last year with the condo development Wailea Beach Villas. Last May median sales prices for condos went through the roof as over 30 units closed in this exclusive resort. Closes in developments like this also skew the market in the sense that they are not a snapshot of current market demand. Owners in this complex may have entered into contracts up to two years prior to closing.
If median sales price and average sales price can be a poor barometer for the Maui real estate market, what statistics are appropriate for looking at the market? How can one get an objective opinion on the state of the market? The best barometer is to look at comparable properties. For condos, look for sales between comparable units within a complex between this year and last year. How do they stack up? What are condos with nice ocean views and comparable finishing selling for at a single complex this year compared to last year? It also helps to look at what is on the market currently? Sales statistics may not show the full picture. For example, there is a residential condo on the market up in the Kula area right now. It is a short sale as the property has gone into foreclosure. The property is listed for $375,000. This property was purchased in April of 2005 for $429,000. The owner made a number of improvements to the floors and enclosed the lanai. One comparison like this is not a good indicator of the market, but a broader survey shows similar price decreases in other segments of the Maui market. It also shows that some segments of the market are behaving differently than others. Entry level condos, starter homes in particular and homes under $1,000,000 in general seem to show a pattern of price decreases. You can generally get the same house today for less than you did this time last year. High end properties and luxury homes have in fact remained pretty resilient. This was particularly true for the first half of the year. It will be interesting to see what happens with homes between $1,000,000 and $3,000,000. A number of buyers have been using jumbo loans in this market. With the rates for jumbo loans up from the subprime fallout, will this cause price decreases to spread upwards in the market? Will median and average prices start to better reflect the realities of the market?
What does this all mean for buyers and sellers? For buyers, it means that you are in a better position than anytime in the last few years. More sellers are showing motivation and the inventory to choose from is high. If you are looking to own long term on Maui, you will have some good opportunities to purchase homes or condos. Our diligent and patient approach will help you find the magical Maui property youâ€™ve always wanted. For sellers, it is a time to be realistic about pricing. If you want to sell your home quickly, you need to understand the market particular to your home. You may need to sell at a price below what you would have received last year. Contact us for a straight forward market analysis and to create a winning strategy to sell your home.