We have all heard it so many times before, “Cash is king” when it comes to real estate. It is no different on Maui. Sellers seek the least of amount of friction when listing their properties. Cash transactions usually result in quicker and easier closings. In a cash transaction, there are rarely paperwork delays, appraisal battles or last minute underwriting issues. Cash is still king in 2014 on Maui. For example, one of my clients recently ended up as the bridesmaid in a multi-bid situation. Even though he made the highest offer with limited contingencies, cash and a quick close proved more compelling to the Seller.
Through the end of July, just under 44% of total transactions on Maui were cash purchases, which is a slightly higher than the national average, and lower than other resort locales on the mainland US. The percentage of cash buyers rose dramatically to over 66% for transactions over $1 million; for transactions under $1 million the number is 37% or modestly lower than the national average. Jumbo loans are still available in the 3% to 4% range, and in some cases it might make sense to utilize investment capital in other areas. Some buyers have elected to utilize cash funds for acquisition, providing them greater negotiating leverage and flexibility, and then financing post purchase.
As is almost always the case, there is more to the numbers if you dig a little deeper. Over the course of the past several months, the percentage of cash transactions on Maui and in the rest of the United States has been trending down. In the first quarter the cash purchases represented almost 47% of sales on Maui. Since then they have been trending down with June and July registering at 35% and 39% respectively. Statisticians and pundits on the mainland have been calling for the percentage of cash sales to shrink as the number of hedge funds, professional investors and bargain hunters shrinks, signs that the real estate market may be starting to “normalize”. It will be interesting to keep an eye on this trend as we close out the year.
If you would like to get a better handle on current market conditions for your neighborhood, Contact The Maui Real Estate Team we’d be delighted to help.