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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.

We continue our series of weekly updates on the Maui Real Estate market during these difficult and dynamic times. After seeing a sharp drop in activity around and immediately after stay at home orders, recent weeks show a steady but slow increase in activity. We provide this week’s numbers as well as a look back at the overall April numbers in this week’s post.

Maui Realtors reported a slight increase in pending sales compared to the week prior. The 36 new pending sales reported are a 9% increase over last week’s 33 new contracts. The 36 pending sales is 43% lower than the number of properties that went under contract over the same seven day period last year. This weeks pending sales included 19 homes, 15 condos and 2 lots.

Notes on This Week’s Pending Sales

• This is now three straight weeks with pending sales increasing over the week prior. This is the slowest week to week growth though.
• Pending home sales outpaced condos for the fifth time in the last six weeks. Condo sales outpaced home sales 11 out of the last 12 months. The shift to more pending home sales appears to be a shift in the market.
• Of the 15 pending condo sales, 8 may be rented legally as vacation rentals. One of the other pending condos is located in a resort area. It appears as if the second home market is still seeing the lion share of the condo activity.

This Week’s Sales Activity

Maui Realtors reported 36 sales between April 29th and May 5th. That is 14% lower than the week prior and the second lowest weekly sales number since the beginning of the pandemic. The 36 closed transactions is 42% lower than the same seven day stretch of 2019. This last week’s closed transactions included 12 homes sold, 16 condos sold and 8 lots sold. Lot sales received a boost from four sales in a new subdivision. The lots went under contract last year.

Looking at the Overall April Numbers

I thought it would be worth looking at monthly numbers now that April is over. With weekly numbers, the trend is positive with more pending sales each week. That’s due in part to how little activity there was towards the beginning of the month. This is really apparent when you look at how low pending sales were for this April compared to last April. While last week’s numbers are down 43%, last month’s numbers are down 66%.

The 45 pending home sales last month were just 41% of the total from last April. Realtors reported only 38 new pending condo sales in April. That is just 28% of last April’s Condo pending sales. The 6 pending land sales reported are just 35% of last April’s land pending sales. While the monthly numbers are a stark sign of the initial impact of Covid-19 on market activity, the weekly numbers are a silver lining with activity slowly, but steadily increasing.

The sales numbers for April 2020 show more than anything else that sales are a lagging indicator when it comes to demand. The bulk of the closes are from contracts that were penned in February and March. Both home and land sales actually outpaced the numbers from March of 2019. This also suggests that not too many deals fell apart due to the impact of Covid-19. To be clear, some transactions cancelled, but many more continued to closing.

Looking Ahead

It appears as if the trajectory of the Maui Real Estate market is following some real estate economists’ predictions for a check mark shaped recovery. What is meant by a check mark is a steep drop in activity with a quick trip to the bottom with a slower pace of recovery. It will be interesting to follow things over the next couple of weeks to see if the rate of recovery continues, slows or stalls.

Earlier this week, the University of Hawaii Economic Research Organization (UHERO) posted a few different scenarios for the rate and time frame of economic recovery. Even UHERO’s optimistic projections point to significant economic headwinds for the Hawaiian Islands with a substantive return of tourism still months away.

Lack of housing inventory remains a significant factor in our housing market. The pace and time frame of the overall economic recovery will be a big driver for the demand side of the equation. Limited supply provides upward pressure on values. Limited demand provides downward pressure on values.

There is still a market for real estate on Maui. Local residents need homes and potential second home owners from all over the world dream of owning a place on island. Contact The Maui Real Estate Team if you are a buyer or seller venturing into the market. We bring experience, negotiating skill and a commitment to provide the latest market data so our buyers and sellers may make truly informed decisions. We look forward to being of service.

Located on the verdant green slopes of Haleakala, this 39 acre ranch in Haiku is a special property. It features a gorgeous cottage and an enormous barn. There are approximately 30 acres of pasture. There is a seasonal stream and even a small Christmas Tree Farm. This property provides options!

Equestrian Property

The property includes six separate pasture areas. Each pasture is watered. It includes a round pen and a tack room. There is plenty of room to add additional horse related infrastructure if you wanted to raise or board your own horses. There is even enough land for a polo field.

Farm

You don’t have to ride a horse to to love the potential of the ranch. This would be an ideal property for other types of farming. The soil is good thanks to its history as pasture land dating back to the mid 1940s. Unlike a lot of land in Haiku, there is no residual plastic residue from cane or pineapple farming. There are citrus trees on the property and plenty of land available to plant additional orchards. There is a dormant Christmas Tree farm, but plenty of inventory available for next year’s holiday season.

The Barn

The massive barn offers plenty of room to store farm equipment or horse trailers. It could also be the ultimate home base for the Maui Adventure Seeker. The current owners took advantage of the high ceilings and oversized doors to store an R-44 Helicopter, a 30 foot surf rescue boat, jet skis, big-wave boards, mountain bikes, cars and trucks.

There is a massive grid tied solar system on the roof of barn to help keep down utility costs for the property.

There is even potential to convert the barn into the main residence on the property. The high ceilings, design features and big views make the structure well suited to conversion while still still retaining plenty of garage and storage space.

The Cottage

The two bedroom, one and a half bath cottage is picture perfect. Highlights include reclaimed pine flooring, vaulted ceilings, a cupola roof, an outdoor shower and a large covered lanai. The covered lanai helps the home live larger, and it offers a great space to take in the ocean views. The spacious kitchen included concrete counter tops, a farm sink and a beautiful Monkeypod wood bar top. Other nice touches include a claw foot tub in the bathroom.

Other Options

This is a truly stunning property. Our hope is that someone makes this the farm, ranch of equestrian property of their dreams. That said, the 39 acres are subdividable. There are also three remnant parcels in the title report which could make it easier to develop.

The asking price for the 39 Acre Ranch in Haiku is $3,950,000. Check out the 1949 West Kuiaha listing page for additional photos and details. Take a 3D tour of the cottage to see the floor plan and more details.

Our office has a fantastic home listed in the Island at Maui Lani. The owners recently completed a comprehensive remodel of its interior. The newly remodeled interior and the very private back yard pool area make this four bedroom, three bathroom home a compelling offering for someone looking for an upscale property in a convenient location.

A Remodel Done Right

The interior remodel was beyond an extreme makeover. They installed “wood-look” porcelain tile. The sellers reconfigured the stairwell. The home has new blue tooth controlled lighting and ceiling fans. New African Mahogany Doors provide distinguished entry into the home. Other doors received new hardware. The seller replaced all of the baseboards in the home.

New Caesarstone Counter Tops throughout the house combined with a new backsplash help to give the kitchen more pop.

Bathrooms were updates with new Kohler Shower enclosures, new tile, new mirrors and Baldwin Fixtures.

Other interior amenities include Dual Zone A/C’s with Nest Thermostats to keep you cool on the warmest Maui Days. A new Ring Doorbell system offers additional security. There is also an EV charger in the three car garage if you have or are considering an electric car. The seller is including high end furnishings such as leather couches and chairs and solid Acacia wood tables with the sale.

The Backyard

The backyard was one of the big draws when the owners purchased the property. The pool area also includes a spa tub and waterfall. A number of very large Areca Palms frame the back yard providing plenty of privacy. There is a barbecue area and a covered seating area with a lazy susan table that converts to a firepit. The collective result of all of these elements is a back yard space well suited to entertaining friends and family.

The Island is a gated subdivision within the master planned community of Maui Lani. The subdivision abuts against the Dunes at Maui Lani Golf Course. It is close to shopping, restaurants, movie theaters and more. The neighborhood is centrally located with easy access to beaches on both the North Shore, South Maui and West Maui.

The list price of this beautiful home in the Island at Maui Lani is $1,195,000. Check out the 11 Meleana Listing page for more photos and details of the home. Not on island? Take a 3D tour to get a better sense of the layout and the finish of the home.

Published on September 7, 2019

Our office just listed a great home in the New Traditions at Maui Lani. This four bedroom, three bathroom home is well maintained and has a whole lot of curb appeal. The comfortable floor plan features three bedrooms and two bathrooms upstairs including the master suite. The fourth bedroom and bathroom is on the first floor. It could make an excellent guest space, office or a room for tutu.

The kitchen features stainless steel appliances and upgraded cherry cabinets. The living room has new vinyl flooring. The master bedroom and a number of other rooms in the home have big views of the verdant peaks of the West Maui Mountains. Three split system a/c systems help to keep the home cool on the warmest days. A solar hot water heater reduces energy bills.

The outdoor spaces of the home include a tastefully landscaped front yard, a fenced back yard and a separate fenced side area on the side of the house usable for outdoor storage.

The New Traditions neighborhood has its own small park with a water feature. It is within walking distance of Pomaika’i Elementary School. Residents of Maui Lani appreciate the easy access to so much of Central Maui. The Central Maui Sports Complex, the Dunes at Maui Lani Golf Course, restaurants, shopping, movie theaters and medical care are all located within five minutes drive of the neighborhood.

This great new listing in the Traditions at Maui Lani is offered for $639,000. Check out the 134 Meheu Circle listing page for additional photos and details. Contact The Maui Real Estate Team to arrange a showing, or if you have questions about the property.

Everywhere you turn these days, you are bound to see an ad for Airbnb or VRBO. These businesses are changing where people stay on vacation. They are also leading to an increase in the number of buyers looking for single family homes that they can buy to rent on Airbnb. That said, Hawaii is similar to a lot of other locales in that they are increasing regulations on single family home vacation rentals.

The goal of this post is to delve into the rules and regulations that one might face if they have ambitions to vacation rent. It should be a prerequisite so that you can make an informed decision as to whether or not pursuing a home to vacation rent ultimately makes sense for your needs.

To be clear, this post is applicable to homes and not condos. There are a large number of condos on Maui zoned to allow short term rentals.

Are There Any Legal Vacation Rental Homes on Maui?

Hotel/Resort is the only type of zoning on Maui that allows for vacation/rentals. The bulk of the properties located within this zoning are hotels or vacation rental condominiums. There are literally a handful of homes around the island that have hotel/resort zoning. It is extremely rare that you will see the a hotel/resort zoned home on the market.

If a property does not have hotel/resort zoning, a homeowner could seek one of two different types of permits. 1. Short term rental 2. Bed and Breakfast.

Short Term Rental Permits

The short term rental permit is applicable to those who want to own a second home that they vacation rent. Maui County has legislation in place to regulate vacation rentals of single-family homes and agriculturally zoned properties. The application/licensing process is lengthy. The County does not approve all applications. If there are multiple short term rental homes in a neighborhood, new applications are subject to a formal review and public hearing by the Maui Planning Commission. For those that want to take a deep dive into the short term rental legislation, it is available online via the county website.

Some important things to know about the short term rental rules include the following:

1. There is a five year ownership requirement to be eligible to apply for a short term rental permit. In other words, you cannot apply until you have owned the home for five years.
2. The short term rental permits do not transfer with the sale of the property. New owners must wait five years and then apply for a new permit.
3. Any short term rental on agriculturally zoned land requires Maui Planning Commission Approval.
4. Accessory dwellings, also known as ohanas or cottages, may not be rented on short term basis.
5. There are geographic caps for permits. In non-planning speak, that means there are limits to the number of vacation rentals in a community. As of this date (April 2019), no areas on Maui have met their caps.

Bed and Breakfast Permit

The Bed and Breakfast permit process is similar to the Short Term Rental Permit process in that there are no guarantees that a permit will be approved. The ordinance is available for review in its entirety online. Here are some key components of the Bed and Breakfast legislation:

1. To obtain a bed and breakfast license, the owner needs to be an owner occupant. They need to live on the property.
2. You do not need to own the property for five years to apply for a permit. A new owner may submit an application for a permit right after the purchase of the property.
3. As with short term rentals, there a caps on the number of bed and breakfasts in a community.
4. Like short term rentals, Bed and Breakfasts on agriculturally zoned properties require Maui Planning Commission Approval.
5. Like short term rental permits, the county ordinance prohibits the transfer of bed and breakfast permits with a sale.
6. Bed and Breakfast owners may serve simple breakfasts, but any more formal cooking would require a separate commercial kitchen license.

Subdivision Restrictions

The County isn’t the only entity that regulates vacation rentals in a community. Prior to applying for a short term rental or bed and breakfast permit, applicants should check the rules of their homeowner’s association. That is particularly true for the resort communities. All of the subdivisions in Wailea and Kapalua prohibit vacation rentals. All but one of the subdivisions in Ka’anapali prohibit vacation rentals.

Additional Rules and Regulations

The State of Hawaii recently passed a law requiring that any owner renting their property on short-term basis (a duration less than 6 months) must:

• A. Register and obtain a state tax id. 

• B. Have an on-island representative. 

• C. Include your license and permit information in all advertising (media, web etc).

Taxes on Rentals

State law requires the payment of two state taxes on any rental income from bed and breakfasts or vacation rentals. Most landlords / owners accomplish this by making it a pass through tax (For Example: You advertise your rental as $500 / night plus applicable fees and taxes). These taxes are currently 14.42%, the same amount as guests would pay a hotel or a vacation rental condominium.

Additional Taxes

Although Maui County has some of the lowest property tax rates in the Country, vacation rental properties are subject to higher property tax rates.  Here are the tax rates for 2019:

Residential Rate – $5.52 / $1,000 of assessed value. 

Homeowner Rate – $2.85 / $1,000 of assessed value with a homeowner’s exemption of $200,000. 

Bed and Breakfast Rate – Commercial residential (plus no exemption) – $4.55 / $1,000 of assessed value. 

Short Term Rental Homes – Commercial – $7.28 / $1,000 of assessed value.

Vacation Rentable Condominiums – Hotel Resort –  $9.28 / $1,000 of assessed value.  

Maui County Property Tax Rates

These rates are reviewed on an annual basis and may be subject to change. The changes usually are not very drastic.

Penalties and Fines

There are quite a few properties on island that are being vacation rented illegally without permits. We can neither condone or recommend this practice. The county of Maui recently raised the stakes for vacation renting illegally. Voters recently voted to raise the penalty for illegal rentals to $20,000. The fines combined with advanced enforcement efforts make illegal rentals a particularly risky proposition.

Is it Worth it?

When we present clients with the information provided above, most have refocused their efforts on vacation rental condos. We have a fair number of buyers who want to buy now and move to Maui in the long term. If that is the case, they may decide to buy a home and rent it long term until they are ready to relocate. Those that want to open a Bed and Breakfast have a less strenuous path than those who want a short term rental permit. That said, the permit process isn’t easy. We do not assist with this process, but we may be able to line you up with some resources who could help. Contact the Maui Real Estate Team with questions or for additional assistance.