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Maui Real Estate Inventory – Feb 2011…What does it all mean?

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After viewing Pete’s unofficial January 2011 Maui Statistics, I thought I would take a look at a few other indicators over the past 18 months or so to see if I could add anything to the conversation.

In particular I reviewed the total inventory of homes, land and condos for sale on Maui and then determined the remaining months of inventory based on the absorption rate (number of sales versus total inventory).  There are two charts below.  The first chart displays the overall island inventory from August of 2009 to the present.  The second chart represents the remaining months of inventory based on the absorption rate.

A few things I took away from reviewing the inventory chart.

  1. There hasn’t been a very dramatic increase or decrease in the inventory of homes, condos and land for sale on Maui over the last 18 months.  On an absolute basis, there are a lot of condos and homes for sale on Maui right now.
  2. The most substantial inventory reductions correlated with the end of the federal home buyer tax credits and / or a period of seasonal adjustment; inventory rebounded substantially the tax credits expired as sales volume decreased.
  3. The trend in the fall of 2010 appeared to indicate a slightly improved market for sellers. However, a little historical analysis shows that this was really more of the seasonal fall inventory reduction.  The fall on Maui is a time where sellers often “give their properties a rest” prior to re-listing them again in late December, January or February to exploit Maui’s busiest tourism season.

A few things to note regarding the remaining months of inventory chart:

  1. The Y Axis (left hand side) indicates months of inventory for sale.  The X axis indicates the month.
  2. According to the absorption rate, the remaining inventory of land hasn’t dipped below 3 years during the entire period.  The periods where the months of remaining inventory was lowest, correlated almost exactly with the home buyer tax credits and actually dipped below a year for homes and condos.  November and December of 09 and April of 2010 represented the lowest months of remaining inventory in-line with the rush of closings up to and just after expiration of the tax incentives.
  3. Neither of these charts does a breakdown on specific markets such as Wailea or Kaanapali.  They also do not address specific price points, they are meant to be general indicators for the overall market on Maui.

So what does it all mean?  Although inventory can still be measured in years, there are a few signs of daylight.  The months of inventory of condos for sale on Maui based on the absorption rate is substantially lower today than it was 18 months ago.  The months of inventory of homes for sale is almost even with 18 months ago. However, based on the substantial uptick in new escrows opened in January and what appears to be a fairly healthy backlog of sales, the months of remaining homes and condos for sale may continue to decline.

I will revisit the remaining inventory / absorption rate again next month and this spring.  I am pretty confident those numbers will continue to improve.

Now for the caveats and risks:

  1. The “Shadow” inventory that the media continues to remind us of is out there.  We just don’t know how big it is.
  2. There is some interest rate risk.  Mortgage interest rates have continued to increase in spite of QE 2. If rates continue to march upward this will start to put a damper on the highly touted affordability index. (Or in plain English – when mortgage rates go up, buying power decreases).
  3. Exogenous Risks remain, and with the uncertainty in the Middle East their probability seems a bit higher than I would like.

We’ll be watching all 3 very closely.

There is positive momentum in the market, but it still remains a buyer’s market.  We are experiencing some bidding wars on a few homes and condos, but they are basically happening on properties that are clearly priced below recent comparable sales.  Maui remains busy this tourist season and we continue to receive a steady stream of inquiries for properties for sale from around the world.  Will these positive trends continue?

Contact the Maui Real Estate Team for questions, additional information or assistance buying and selling Maui Real Estate.

5 Responses to “Maui Real Estate Inventory – Feb 2011…What does it all mean?”

  1. What can you say about the risks from natural hazards?

  2. Thank you for reading and for your question. We live on a dynamic planet and natural hazard risks exist. When considering oceanfront properties and areas prone to flooding buyers and sellers need to be aware of those risks. Case in point, FEMA has updated flood zones on Maui. There was an article in the Maui News on Sunday February 6 addressing the community meetings. http://www.mauinews.com/page/content.detail/id/545856.html. There is one meeting tonight from 5:30 PM to 8:00 PM at the Velma McWayne Santos Community Center.

  3. Marisco says:

    Pete’s comment on shrinking inventory for the last three months is something I have been a little suspicious of since watching new listings over the last few weeks. Are you saying this is not the case? It is a pattern is see emerging in other similar markets, and I believe needs to be taken seriously by buyers. If buyers are left with left-overs, or re-listings from previously stubborn sales, with not enough fresh listings to offer choice, I think buyers will walk away. If lenders and sellers alike, list their homes without the fear of over-supply, buyers will come forward. A further correction will take place, but it will help clear the back log and bring forward a recovery. It is a risk they will eventually have to take anyway.

  4. I’m a little unclear as to what you are suspicious of…I think your suspicion may be that the inventory on Maui isn’t really shrinking? Let me try to address the inventory issue a bit further here.

    1. I just did a quick comparison between New Listings Added over the last 30 days this year and last year. There were 495 new listings added in 2010 versus 321 over the same period in 2011. That is a 35.2% reduction in new listings, which could have an impact on pricing and buyer behavior.

    2. Some clients and I have been a bit disappointed with the quality of inventory in certain areas and price ranges, which as you stated, will lead to buyers perhaps delaying purchasing decisions. Alternately, it could lead to stabilization or an increase in prices if current demand isn’t satiated. The question remains, how much pent up inventory is there? Does Maui have an enormous shadow inventory problem? I don’t have an answer to that question.

    3. The other aspect of the inventory which absolutely should be noted is that the quality and quantity of inventory varies substantially by location, property type and price range. If you have a specific geographic market that you would like us to focus on…please let us know.

    Finally, we have helped many clients over the years acquire unlisted properties. We work to identify the best properties that we can for our clients whether they are listed on the MLS, FSBO or not listed at all…

    We’ll continue to monitor inventory closely particularly in areas where we have listings and buyers actively searching for properties…Please keep the comments and questions coming.

  5. Marisco says:

    Firstly, I want to express my appreciation for your honest reporting. It is refreshing, and it definitely inclines me as a buyer towards your services.

    On the issues at hand, I was merely trying to reconcile your statement: “There hasn’t been a very dramatic increase or decrease in the inventory of homes, condos and land for sale on Maui over the last 18 months,” with that of your colleagues: “It was good to see the inventory shrink in all three property classes. We are going to need to see that trend continue for prices to stabilize.”

    I can completely relate to your comment about disappointing quality of listings (and low inventory). This has been my experience in southern California, which is why my wife and I decided to look at Maui. However, we became very forlorn when reading Maui may be no different. I think everyone is very frustrated with this situation.

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2/7/2011

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