I spent a little time looking at MLS data over the weekend to come up with the unofficial Maui Real Estate Statistics for September. The results will raise a few eye brows and likely a panicked headline in the Maui News. Before I get ahead of myself, here are the stats which will be followed by comments and analysis.
By my count, there were 65 homes sold at a median price of $535,000. The homes sold averaged 161 days on market. This compares to 2007 numbers of 74 homes sold at a median price of $586,000 and an average of 137 days on market.
The condo numbers are eye catching. The 48 condos that sold had a median price of $388,500, and they averaged 169 days on market. This compares to September 2007 numbers of 84 condos sold at a median of $599,000 and an average of 157 days on market.
The land numbers for September of 2008 were 6 sales at a median price of $272,750 and an average of 115 days on market. This compares to 16 sales at a median of $450,000 and an average of 137 days on market for September of 2007.
Let’s cut to the chase and talk about the condo numbers. This month’s low sales volume is in line with what we have seen over the last couple of months. Fewer island visitors, tougher financing and a struggling economy are contributing to the weakened demand for condos on island. However, it isn’t the volume that makes this month’s condo stats so compelling . The median condo price for September is significantly lower than a year ago and over $244,000 lower than last month’s median. I can see the headlines for the Maui News already. “Maui Median Condo Prices Fall Off Cliff!”
So what happened? Why the big drop in median? Answering this question entails looking at the recent history of the Maui condo market and how median prices have been a poor barometer for market trends. Condo prices started to adjust downward at the low end of the Maui condo market as early as the first quarter of 2006. In 2007, price adjustments were occurring through a broader segment of the market with price decreases spreading to the vacation rental condo market. By 2008, all but the most luxurious condos were seeing modest price decreases while many entry level condos were seeing more substantial price decreases. As condo prices were going down, the median sales prices were holding their ground and in some cases increasing. For example, last month’s median of $632,500 was the highest monthly median sales price for all of 2008. The reason why median sales prices were resilient relates to where the greatest volume of activity was occurring within the market. High end condos saw substantial activity during 2007 and through the first eight months of 2008. Luxury buyers appear to have been less impacted by the credit crunch. There was also a significant volume of sales related to new luxury developments. There was a steady volume of transactions for luxury developments like Ho’olei and Papali Wailea. While market activity was steady at the high end, the low end of the condo market slowed. Many first time home/condo buyers were sitting on the sideline due to market uncertainty and/or tightening credit. More luxury closes combined with lower sales volumes at the bottom third of the market translated to higher median prices despite actual price decreases.
So what changed this month? In September, the number of new luxury development closes was down considerably. There were only 4 new development luxury closes all at Ho’olei Wailea. Conversely, the low end of the market showed a little more activity. Almost one third of the condos that closed last month were for under $300,000. So what does this all mean? First and foremost, the bottom did not drop out last month and the average condo did not decrease in value by almost 40%. While values likely went down, they were nowhere near as substantial a decrease as median numbers suggest. The shift in market activity is notable though. If sales volume continues to be low at the high end of the market, we may be seeing a legitimate shift in the luxury market. That shift will likely be reflected in the median. It will also be interesting to see what happens at the entry level for Maui condos. Is the increase in activity a trend or a one month anomaly?
The home numbers are similar to last month from a volume stand point. Median home values are down. This is due in part to a large volume of affordable housing closes with 17 of 65 closes falling into this category. In a look behind the numbers, it is noteworthy that there continue to be a significant number of new development closes. Many home developers are offering favorable financing and other incentives to attract buyers.
The land market continues its slow pace. Six of nine months this year have seen single digit sales volume. The median is pretty low this month and does not do a good job of reflecting market activity. Four of the sales were below $300,000 while two of the listings sold were over $4,000,000. We are seeing more price adjustments and more realistically priced new listings in the land market as seller’s adjust to the reality of limited demand.
What does all of this mean for Maui Real Estate buyers and sellers. For buyers with capital and/or good credit, there are opportunities in this market. Sellers need to adjust to the market and price their properties at or below recent comparable sales to increase the probability of a successful close. Sellers who are fishing for high prices may be better served by sitting on the sidelines. I imagine that the Realtors Association of Maui will have the official Maui Real Estate Statistics published sometime in the next few days. I will post those numbers as soon as they become available on THE Maui Real Estate Blog.