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Maui 2012 Year End Market Report

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We wanted to take a little bit of a different look at the 2012 year end statistics for Maui County. While we will give a brief look at the broad view. I wanted to hone in on the distribution of sales. While 2012 was a stronger year for sales overall, not all price ranges in the market performed equally. We want to show how different segments of the market performed and compare those segments to the current inventory. That may help us get a better sense of the 2013 outlook for the market. Without further ado, here are the numbers.

A comparison of real estate sales volumes between 2011 and 2012 in Maui County Hawaii

A comparison of real estate sales volumes between 2011 and 2012 in Maui County, Hawaii

There were 933 home sales reported in Maui during 2012 with a median sales price of $470,000. By comparison, there were 901 sales in 2011 with a median sales price of $432,500. That calculates to a 4% increase in sales volume and a 9% increase in median sales price.

During 2012, there were 1,248 condo sales reported on Maui with a median sales price of $358,995. By comparison, the 2011 numbers were 1,157 units sold with a median sales price of $310,000. That calculates to an 8% increase in volume and a 16% increase in median price.

There were 173 land sales reported in Maui County during 2012 with a median price of $350,000. In 2011, the numbers were 134 lots sold with a median price of $310,500. That means that the 2012 land sales increased 29% over and the median increased 13% over 2011.

While the overall market showed improvements in volume for all three types of property, market performance on Maui varied by price point. The chart below compares the sales volume of homes at various price ranges during 2012 and 2011.

Comparison of Home Sales Volumes in Maui County During 2011 and 2012 by price range.

A Comparison of The Sales Volumes of Homes in Different Price Ranges in Maui County During 2011 and 2012

There were a few things that I found noteworthy about the chart above. First and foremost, luxury sales activity decreased in 2012 compared to 2011. There were 41 sales over $2,000,000 in 2012. There were 61 sales over $2,000,000 in 2011. That is a 33% drop in volume. On the other end of the spectrum, it was noteworthy that the activity dropped below $300,000. The reason for the drop in activity at the low end isn’t due to a lack of buyer interest. With record low interest rates, first time home buyers were very active. Instead, we are starting to see the impact of reduced inventory. Prices began to rise at the bottom end of the market and there were fewer bank owned properties in that price range. The middle of the market saw greater variability in performance depending on price range. Some slices of the market saw more activity in 2012 while others saw less. That being said the overall trend in the middle was an increase in activity.

The chart below compares the distribution of sales for condos between 2011 and 2012.

A Comparison of The Sales Volumes of Homes in Different Price Ranges in Maui County During 2011 and 2012

A Comparison of The Sales Volumes of Condos in Different Price Ranges in Maui County During 2011 and 2012

While condo sales were up overall in 2012, we also saw variability in performance by price range. Some of the same trends that were evident in the home market also appeared in the condo market. As with the home market, luxury condo sales were down. There were 46 condos sold above $1,500,000 in 2012. There were 65 sold over $1,500,000 in 2011. That is approximately a 29% drop in volume. The lowest price ranges in the condo market also saw a dip in inventory and a subsequent drop in sales volume. Sales under $200,000 were off 18% below 2011 levels. As with the home market, this wasn’t due to lack of demand. We just saw a shrinking of entry level condo inventory during 2012 due in part to price increases and a big reduction in the number of bank owned listings.

The chart below compares the distribution of land sales on Maui during 2011 and 2012.

A comparison of the distribution of land sales by price range during 2011 and 2012

This chart compares the distribution of land sales by price range during 2011 and 2012 in Maui County, Hawaii

The land market was a little different than the home and condo market in 2012 in that we saw improvements in the vast majority of price ranges. The low end was up and much of the middle of the market was stronger. The luxury market was down slightly with 1 less sale over $1,000,000. The land market was lagging more so than condos and homes going into 2012. It had the greatest inventory and lower levels of demand going into the year. Sales outpaced 2011 levels through much of the year with an added boost in the last couple of months. The lack of interest in this market meant more motivated sellers and comparative values.

While the charts above provide us some historical data on last year’s market, they don’t tell us a whole lot about the current market. I hope the next three charts will help to tell that story. These three charts show the current inventory of properties by price point juxtaposed against the 2012 sales volumes by price point. Assuming that demand is equal to or potentially greater than what we saw last year, this will help to show parts of the market where inventory is really constrained and the other parts of the market where there is a relative abundance of property to choose from. A few things to note about these charts. Current inventory includes active listings as of January 24th. It does not include properties under contract. The active inventory includes all of Maui County including Lanai and Molokai.

A comparison of the current home inventory against 2012 Home sales at assorted price points

This Chart Compares the Distribution of the Current Inventory of Homes for Sale in Maui County Against the Distribution of 2012 Home Sales. The left side of the chart represents units sold. The bottom of the chart represents price ranges by the thousands of dollars.

It is said that a healthy real estate market will have six months of inventory. More than six months supply is thought to be a surplus. Less than six months and you are considered to have a shortage of properties for sale. As you can see from this chart comparing current home inventory against 2012 home sales, the Maui Real Estate market is seeing very different dynamics based on price range. The low end of the market is experiencing extremely low supplies of home inventory. Based on last year’s sales rates, there is about one month of supply of homes in the $300,000-$399,000 price range. The numbers are slightly better under $300,000, but that is somewhat deceiving. The supply on the island of Maui is almost nonexistent. Most of the active homes in this range are located on the neighboring islands of Molokai and Lanai. Supplies are still constrained until you get to the $800-900,000 price range. At that point, the supply is a little more than six months of inventory. As you get higher in price, the tables turn considerably. Once you get over $1,000,000, there is over a year of inventory based on last year’s absorption rates. In the price range from $1,750,000-$2,000,000, the supply of homes exceeds two years of inventory. From that price point and higher, you have anywhere between 2 and seven years of inventory depending on price ranges.

It is clear that home buyers looking at prices below the median price point are going to find that market conditions are tight. Selection is limited and well priced properties are being snatched up extremely quickly. Those that are venturing into this part of the market will need to be prepared to act quickly when well priced properties come on the market. The recipes are in place for price increases to occur on the low end. High demand and low supply will do that. That being said, I think there are some barriers in place that will constrain prices from rising too quickly. The biggest barrier is appraisal. Appraisers are a lot more conservative then when they were in the boom market. We have already seen issues with appraisal on properties that experienced competitive bidding.

The numbers above suggest a buyer’s market for luxury homes on Maui. There should be a few caveats to that statement. Not all communities and price points in Maui have the same level of supply. For example, if you look at a place like Wailea there are three homes for sale between $1,000,000 and $1,500,000. There were eight sales in Wailea at that price point last year. That means less than six months of supply in that price range. Where there is high supply, it doesn’t necessarily mean an abundance of motivated sellers. Many of the luxury home owners have significant staying power and may well be able to ride things out until market conditions improve. While there may be some motivated sellers out there, I think the biggest advantage to being a luxury buyer in this market will be the general quality of selection. Another thing to note is that I am using last year’s absorption rate. We are starting to see some anecdotal evidence of increased activity in the luxury market this year. Luxury markets saw improvement on the mainland last year. Typically, we lag behind mainland trends by a few months. If the luxury market is in fact improving, those “years” of inventory could shrink quickly.

A comparison of the current condo inventory against the 2012 condo sales by price point

A Comparison of the Current Inventory of Condos for Sale on Maui Against Last Year's Condo Sales at a Variety of Price Points. The left side of the chart represents properties sold. The bottom of the chart represents price ranges by the thousands of dollars.

Looking at the chart above, the condo market is seeing some similar dynamics to the home market. There are tight inventories on the lower price ranges and robust inventories in the luxury markets. Currently, there is less than six months of inventory below $400,000. The inventory is even tighter than it appears below $200,000. A third of the properties listed in that price range are leasehold. There are also quite a few properties from Molokai and Lanai included in that inventory. The market dynamics change quite a bit as you go higher in price. Inventory between $400,000 to $1,000,000 range from a little over six months to a little over a year of inventory. Once you get over $1,250,000 and up into the luxury market, the inventory well exceeds last year’s demand. While there are more condos to choose from in this range, it can be a little more challenging finding motivated sellers. Again, many of the high end condo owners have the deep pockets that allow them to hold out for longer on pricing.

A comparison of the current inventory of land for sale in Maui County vs Last years sales by price range

This Chart Compares the Current Inventory of Land for Sale in Maui County vs Last Year's land Sales by Price Point. The left side of the chart represents units sold. The bottom of the chart represents price ranges by the thousands of dollars.

The land market has been far weaker than the home and condo market since 2007. Limited demand has allowed supplies to stay high. That is reflected in the chart above. The only price range with less than six months of inventory is below $200,000. Once you get above $300,000 there is more than a year of inventory. When you get over $500,000, you have two years of inventory or more depending on specific price points. That being said, November and December of 2012 were the two best months of sales since 2007. If the market were to sustain itself at that level, inventories could start to shrink quickly. I would not be surprised if that happened as buyers have started to explore the land market with fewer options available among the inventory of homes for sale. The other thing to note is that scarcity and abundance vary by community.

In general, the charts above suggest that we will have an interesting 2013 for Maui Real Estate. The limited supply at lower price points in the market may lead to a decrease in sales volume. The tight supply also is creating a dynamic that will result in price increases. Tight supplies and high demand are leading to a lot of bidding wars at the low end. As you go up in price, the overall supply of properties should limit the potential for any price increases. That being said, supply and demand in specific geographies may allow for price increases at higher prices. While the sheer volume of inventory suggests that there may be plenty of opportunities for luxury buyers, I would argue that their biggest advantage is going to be the selection of properties to chose from rather than highly motivated sellers. If you are interested in entering the Maui Real Estate market during 2013, we would welcome the opportunity to discuss your needs. Contact The Maui Real Estate Team today to arrange a free consultation.

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1/29/2013

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