Maui Real Estate Blog
Maui Market Musings Volume X
We made it to Volume 10! Our efforts to keep you abreast of the Maui Real Estate Market in these dynamic times continue. As usual, this is something of a grab bag hitting on a variety of topics. We look at some of the recent data points and outlooks for the National Real Estate market. This post also looks at some of the latest numbers regarding inventory, price reductions and the speed at which properties go pending on Maui. Finally, we provide some thoughts for sellers as the subtle shift in market dynamics continues.
A Smattering of National Real Estate Perspectives
We tend to be data geeks at the Maui Real Estate Team. That means we consume a steady diet of information on the local and national real estate market. With change in the air in the real estate market, the tweets, articles and opinions are coming fast and furious. This is a curation of some of the recent articles and tweets we read we thought were worth sharing.
- Redfin came out with their latest look at the second home market a little over ten days ago. It’s worth reading past the headline. Demand for second homes in April is down substantially from its peak during the second half of 2020 and 2021. That said, it is still 9.8% above pre-Covid levels. When looking at articles talking about changes in the market, it is particularly helpful when Pre-Covid numbers are provided for context.
- This is an interesting tweet on a paper highlighting the role of remote work in the role of price increases. This clearly impacted the local market as higher income buyers working remotely entered the Maui market.
- New construction home sales are feeling the impact of rising interest rates across the country. Although John Burns points out in his tweet below that they are still above pre-pandemic levels. Locally, Maui has relatively limited new development occurring at this time. Hoku’ula in Hali’imaile is doing site work and taking reservations on market based housing. Anuhea at Kehalani is partially completed. Some phases are actively in construction with the next phase likely to come to market in late summer or fall. La’i Loa in Wailea is fully reserved with construction ongoing.
- Inventory is increasing nationally. The 8% increase this week is substantial, but not unprecedented. Mike Simonsen’s whole thread is worth a read if you are on Twitter.
- As dynamics in the market shift, the tendency is to look at past markets to find analogues to the current market. Bill McBride from the Calculated Risk Blog argues that we shouldn’t be looking at the last real estate bust for comparisons. He makes a pretty compelling case that the late 70s and early 80s is a more relevant comparison to the current market. Baby Boomer demand then is similar to Millennial demand now. The Federal Reserve found itself in a similar position due to inflationary pressure. While mortgage rates now are still well below rates from that point in time, the year over year change in rates is similar. Will we see similar pricing dynamics?
- I wanted to include this last tweet from one of my favorite real estate follows on twitter to wrap this section up. It points to one of the values of keeping an eye on statistics. I’ve noted quite a few headlines that create a different impression of the market than what they underlying statistics show. Keeping a closer eye on and understanding the stats helps to strip out some of the hyperbole.
Recent Data Points From the Maui Market
The Maui market is influenced by trends in the national market, but it doesn’t necessarily follow in lockstep with national dynamics. The high volume of second home sales and being a literal island can create different market dynamics. Here are some of the latest numbers on local inventory, price reductions and pending sales.
As of May 24th, there are 198 active home listings on the Maui MLS. At the end of April, there were 176. That is a modest 12.5% increase in active home listings for the month to date. For a little perspective, it is worth taking a look at pre-Covid numbers. In the end of May in 2019, there were 445 active listings. We are still less than half of pre-Covid inventory.
Condo inventory remains particularly limited. As of the 24th, there are 160 active condo listings in Maui County. There were 158 at the end of April. Inventory gains for the month to date remain negligible. For further context, there were 487 active listings at the end of April 2019. We are at less than a 1/3 of 2019 inventory.
Clearly, we aren’t seeing the same type of inventory increase that the mainland market is seeing. That said, Maui traditionally doesn’t see the big inventory bump that the National market sees in the late spring. Inventory decreased from the end of April to the end of May in 2017, 2018 and 2019. This modest bump in inventory for homes and condos for the month to date goes against pre-Covid trends. The Maui market’s seasonality may be masking a shift on inventory.
Pending Sales on New Listings
We’ve looked at the percentage of homes going under contract within the first ten days of going to market in Musings II, Musings XIII and Musings IX. In mid February, 56% of new listings went under contract in 10 days or less. In early April, that number decreased to 46%. By mid-late April, the number was down to 43%. Of the 76 listings that came to market between May 7th and May 14th, 27 went under contract within 10 days. That calculates to 35.5%. To give a pre-covid reference point, 21.7% of new listings went under contract in 10 days or less for properties listed between May 7th-May 14th 2019.
In our last edition of the musings, I started tracking price reductions on Maui. I looked at the percentage of active home and condo listings that reduced the price below their original asking price. On May 24th, 33% of active home listings reduced their price one or more times. That is actually down from May 5th when 37% of active home listings reduced their price one or more time. On May 24th, 18.2% of all active condo listings reduced their price one or more times. That is up from May 5th when 15% reduced their price one or more times.
Thoughts for Sellers
The good news is that by all metrics this is still a seller’s market. Inventory remains well below normal and there is still demand. That said, the dynamics now are not the same that they were six months ago or even three months ago. The “list the property, set a weekend open house schedule and offers due by Monday routine” is not quite the norm that it used to be. Here are some thoughts for prospective sellers entering the market.
It’s been a forgiving market when it came to pricing a property over the last 14 plus months. In some cases, buyers set the pricing. Seemingly well priced properties would be inundated with offers and prices would soar well over asking. In other cases, sellers priced their property at levels that seemed really high based on recent comparable sales. They would still get their number. Sometimes, that would happen quickly and others it would just be a matter of the market catching up. That said, the margin for error on pricing appears to be shrinking. As market conditions become more variable, some of the more aggressive sellers are not getting the market feedback that they hoped for.
Sellers should work closely with their Realtor to look at both recent comparable sales and the level of activity in their segment of the market. There is a lot of heterogeneity in the market so pricing a home can be a challenge. If the market is not responding to your price, you may need to adjust pricing a little more quickly.
Price wasn’t the only area where sellers had a lot of leverage in this more recent market cycle. Sellers rebuffed requests for repairs, tightened timelines and sometimes negotiated post-closing occupancy without buyers batting an eye lash. A high number of back up offers only strengthened sellers hands. Buyers with FOMO (fear of missing out) conceded to seller demands far more often than not.
Anecdotally, I have heard stories of sellers overplaying their hand during negotiations in the current market. While sellers still have some leverage, more buyers are willing to walk away. Concessions, repairs and other negotiations are likely to become more commonplace if the market continues to adjust.
Days on Market
As the numbers above indicate, the number of homes going under contract right after listing is steadily decreasing. We are also seeing more price adjustments compared to earlier in the spring. That of course means that days on market is increasing. It may take a little longer to sell in this market. If your circumstances dictate that you need to sell sooner than later, adjusting to market feedback is important.
A Little Maui Beauty
Contact The Maui Real Estate Team
Contact The Maui Real Estate Team with questions, feedback or if you need assistance buying or selling property on Maui. We look forward to hearing from you.
Maui Real Estate Blog
What Does the end of Forbearance Mean for Borrowers and Maui The Real Estate Market?
The initial economic impacts of Covid-19 included lost jobs and disruption of income for large numbers of people around the globe. With the local Maui economy largely dependent upon tourism, our small island was among the nation’s hardest hit. The original CARES act that passed in the spring of 2020 offered relief to homeowners who struggled to pay their mortgages due to job loss or depressed wages. Those struggling homeowners were able to work with their lender to pause or reduce their mortgage payments for a period time. What started as a 6 month program was extended to 18 months. A total of over 7.25 million borrowers used forbearance as a means of relief for at least some period of time. That number of homeowners in forbearance is down to approximately 2,000,000 by around the end of June.
As of September, some of the borrowers who were among the first to enter the forbearance program will come to the end of their 18 month forbearance period. At this time, it does not appear as if there will be additional extensions of the program. What does the end of forbearance mean for those borrowers and the market as a whole?
The good news is that Fannie, Freddie and FHA are saying the right things about borrowers coming to the end of their forbearance. Recent guidelines released by those entities are focused on loan modifications for borrowers struggling to make their payments due to Covid related financial struggles. If you are a homeowner faced with the end of forbearance in the immediate future, remain proactive in your discussions with your mortgage holder. Ask about loan modification programs.
For those that may not be able to get a loan modification or the terms of a modification are too onerous, selling may be the only option. During the mortgage meltdown of the 2000s, borrowers struggled with the dual challenge of economic hardship and plunging prices. The result was a wave of foreclosures. Current market conditions couldn’t be more different as prices on island and for much of the continent climbed steadily over the last twelve months. The good news is that the recent appreciation should allow the majority of borrowers who need to sell to pay off the balance of their loan. That should significantly curtail the number of foreclosures. Feel free to Contact The Maui Real Estate Team if you are trying to get a sense of the current market value of your property. We would be more than willing to help out with a free broker’s price opinion.
Based on the above, it seems unlikely that the end of forbearance will significantly change the Maui market. The impact of the end of forbearance in the Canadian market seems to reinforce that notion. About 17% of the mortgages in Canada went into forbearance. As of February, 98% of the forbearance programs expired. As of the end of June, the average home price in Canada was up 25.9% year over year.
While the end of forbearance might lead to a small bump in inventory, a drastic influx of distressed property seems less likely. Real Estate economists are predicting a gradual increase in inventories as the year progresses. Post forbearance properties should be one component of that increase.
Maui Real Estate Blog
Maui County Property Tax Rates for the 2021/2022 Fiscal Year
July 1 marks the start of the new fiscal year and that means updated property tax rates for Maui County. While there are quite a few rates that stayed the same this year, there were also a few notable changes.
Here are a couple of things to note about our tax rates before detailing the changes by property classification. Tax rates are impacted by the use and zoning of the property. The county has a tiered tax system based on the value of the property. Tier 1 is for properties assessed at a price of upto $800,000. Tier 2 is for properties assessed between $800,001 to $1,500,000. Tier 3 is for properties assessed for more than $1,500,000.
All tax rates below are per $1,000 of assessed value. Here are the tax rates for 21/22 with notes on any change in rate from the last fiscal year.
- Owner occupied Tier 1 $2.41 (down .10), Tier 2 $2.51 (down .10), Tier 3 $2.71 (up .10)
- Non-owner Occupied Tier 1 $5.45, Tier 2 $6.05, Tier 3 $8.00 (up $1.10)
- Apartment $5.55
- Short Term Rental Tier 1 $11.11 (up .03), Tier 2 $11.15 (up .07), Tier 3 $11.20 (up .12)
- Hotel & Resort $11.75 (up $1.05)
- Agricultural $5.94
- Conservation $6.43
- Timeshare $14.60 (up .20)
- Commercial $6.29
- Industrial $7.20
- Commercialized Residential $4.40
Property taxes are paid biannually in Maui county with payments due on August 20th and February 20th. Check out the Maui County Property Tax Frequently Asked Questions pages if you have additional questions on assessments and classifications.
Maui Real Estate Blog
A Quick Follow Up to Our Mortgage Relief Post
This is just a quick follow up on the mortgage relief post I wrote on April 4th. Yesterday, I read an NPR article about issues with mortgage relief . It featured a couple from Maui. Like many island residents, the couple is experiencing a massive loss of income due to the impact on COVID-19. They are one of the many homeowners pursuing mortgage relief that are finding the terms offered by their lenders to be onerous.
In the case of the Maui couple, their loan is through Freedom Mortgage. While the lender offered to defer their loan payments for three months, Freedom Mortgage required a balloon payment at the end of that period. Even under the most optimistic scenarios, it seems unlikely that the borrowers would be able to come up with that balloon payment.
The Consumer Finance Protection Bureau website indicates that federally backed mortgages should be able request forbearance for up to six months. The CARES Act creates mechanisms to move deferred payments to to the end of the mortgage. Freedom Mortgage originally claimed that the balloon payment was the only option they could offer for deferred payments. They claimed they could not defer the amount of the forbearance to the end of the loan. NPR brought this to the attention of federal regulators. On a subsequent follow up, Freedom Mortgage changed its tune with NPR. The Maui Couple is still trying to get clarification on their options.
To be clear, not all borrowers are running into the roadblocks encountered by this Maui couple. A number of lenders are making adjustments that allow for six month deferments with deferred payments at the end of the mortgage. That said, borrowers should expect prolonged long wait times and filing an application to get the forbearance. Forbearance terms can also vary depending on your loan program.
The biggest takeaway is that borrowers should be cautious if they are seeking mortgage relief. Make sure you read the terms of any relief offer closely. Reach out to a housing councilor (800) 569-4287 if the terms offered by your lender are confusing or not financially feasible.
Maui Real Estate Blog
Potential Mortgage Relief
Maui depends on tourism for a significant part of its economy. Covid-19 and the ensuing shut down means a big loss of income for a number of Maui homeowners. If you are a Maui resident unable to pay your mortgage, there may be some mortgage relief options for you based on the CARES act.
To be eligible, your mortgage needs to be federally owned or backed by a federal agency. Relevant federal agencies include:
- Fannie Mae
- Freddie Mac
It’s pretty clear when your loan is HUD, USDA, FHA or VA. Fannie and Freddie back over 50% of the nation’s mortgages, but not all homeowners know or remember who backs their loan. You can check to see if your loan is backed by Fannie or if it is backed by Freddie.
If you are unable to pay your mortgage due to financial difficulties related to Covid-19, you can contact your mortgage servicer to request forbearance for 180 days. Forbearance allows you to pause or reduce your mortgage for that 180 day period. To be clear, this does not reduce the principal on your loan. You would still need to pay off the missed payments or the difference on the reduced payment in the future. You may apply for an additional 180 day forbearance if your financial situation does not improve by the end of the first 180 days. Your forebearance options may depend in part on your loan program. If you are concerned by impacts on your credit score, servicers must not report to the credit agencies a Borrower who is on an active forbearance, repayment, or trial period plan due to COVID-19 related hardship.
If you are facing foreclosure due to existing loan challenges, your loan servicer or lender may not foreclose on you for 60 days after March 18th. The CARES Act forbids beginning either judicial or non-judicial foreclosure proceedings. The Act also prohibits finalizing a foreclosure judgement or sale during this period.
Still Confused or Need Help?
The Consumer Finance Protection Board offers a guide to Coronavirus mortgage relief options that gives advice and provides a lot more detail. They provide important suggestions like questions to ask your mortgage servicer. You may also find your nearest housing councilor by calling by calling (800) 569-4287. If you don’t have a federally backed mortgage and you are not able to pay your mortgage, you should still contact your mortgage servicer to see what options they may have available to you. Last, but not least be wary of scams. Unscrupulous Sleazeballs will try to take advantage of the current situation. Lean heavily on the advice of the CFPB.
Maui Real Estate Blog
The New Hawaii Purchase Contract and its impact on Buyers and Sellers
The new Hawaii Association of Realtors purchase contract that goes into effect on May 1, 2012 is dramatically different than the current purchase contract. The new purchase contract is meant to flow and read more naturally; groups like contingencies and provisions together; and more clearly defines roles, responsibilities, time frames and obligations of Buyers, Sellers and their Realtors.
I would imagine that the first 30 to 60 days after implementation will involve some back and forth between brokerages as we adapt to the new purchase contracts. The Maui Real Estate Team is taking a proactive approach to understanding how the new purchase contract impacts Buyers and Sellers by taking the following actions:
- Attending the Realtors Association of Maui training session the other day.
- Discussing the implications of the new purchase contract with our corporate attorney.
- Spending several hours this weekend analyzing the changes.
- We will have a company meeting / training session regarding the new purchase contract.
- We will create a Buyer’s Guide to the New Hawaii Purchase Contract and a Seller’s Guide to the New Hawaii Purchase Contract which will be available to registered users of The Maui Real Estate Team’s website in the next 30 days.
As with any document that has undergone a major revision/ re-write, the new document isn’t perfect. In fact, in some ways it is more complex and requires more written communications between Realtors, Buyers and Sellers. The new Hawaii Purchase Contract requires Sellers to be more organized and diligent in their approach to selling their Maui properties. For instance, upon closing, under the “cleaning clause”, carpets are now designated as needing to be professionally cleaned. An odd addition, but one to be aware of. Did someone on the purchase contract committee have a cousin in the carpet cleaning business?
As for Buyers there are potentially additional “Buyer safeguards”, some of which require intimate knowledge of the new purchase contract. However, there are also different “options” for cash transactions which need to be carefully handled. There is also the mention of several types of resources that Buyers should use whenever purchasing a home, condo or land on Maui. We are in the process of updating our list of resources.
If you are thinking of buying or selling Maui property at this time, please consider contacting The Maui Real Estate Team for a free consultation regarding how the new Hawaii Purchase Contract will impact your purchase or sale. Our experience and insights will help you minimize headaches and surprises and help you execute your real estate transaction without a hitch.