With the year coming to an end, I wanted to take a few minutes to highlight four trends that I saw in the 2014 Maui real estate market. I also wanted to give a few thoughts on what was the driving force behind those trends and my predictions on what trends may continue or emerge in 2015.
Shrinking Inventory at The Entry Level
Housing options at the lowest price points of the market have been steadily shrinking over the last 18 months. There are fewer lower priced distressed properties and rapid appreciation during 2013 meant a lot fewer options for buyers interested in getting their foot in the door. For those looking for a home, inventory under $400,000 is becoming exceedingly rare with limited options all the way up to $500,000. In the condo market, the options under $200,000 are becoming increasingly scarce. It is getting harder to find vacation rental condos under $300,000.
Slowing Condo Sales Volume
The total number of condos sold this year is going to be down roughly 12% below what we saw last year. After a couple of particularly slow sales months earlier this fall, I took a look at what may be driving the drop. In my September Maui Real Estate Statistics, I analyzed the distribution of sales via price point and found that the biggest drop in sales was occurring at the bottom of the market. This would appear to suggest that the drop in sales activity has been largely driven by an absence of inventory.
Slowing Rates of Price Appreciation
During 2013, the Maui Real Estate market saw segments that experienced extremely strong rates of appreciation. There were some entry level condos that rose in value as much as 80% over bottom of the market prices. Entry level homes saw more modest appreciation, but there were some communities that saw prices jump 20% or more in 2013 alone. With the last downturn still fresh in many buyers minds, I think some buyers are wary the market won’t be able to sustain the same levels of appreciation. I also think the jump in values of 2013 pushed the market beyond some buyers means. That makes it not much of a surprise that we saw slower rates of appreciation this year. That was most evident in entry level condos where prices have seen very limited increases in value this year.
Continued Strength in the Luxury Market
The luxury home and condo market saw continued improvement in 2014. Condo sales over $1,500,000 were up 9% over 2013. The luxury condo market was bolstered by heightened activity at the Honua Kai Resort and the popularity of the Montage Residences on Kapalua Bay. Luxury home sales over $2,000,000 had an even stronger year with roughly a 30% increase in sales activity. Another strong year in the stock market and overall improved economic conditions helped bolster luxury market activity.
Now that we have covered the four major trends that I saw in 2014, what trends do I expect to see in 2015? I expect all four trends noted above continuing into 2015. Entry market buyers are unlikely to see an influx of new listings to satiate the considerable demand for more affordable housing options. I would imagine that limited entry level inventory will keep continue to impact condo sales volumes. I am not sure if that will result in a continued decrease in activity or similar demand to what we saw this year. I would lean towards the latter. I don’t expect 2015 to be a year of double digit price increases. The one X factor could be the introduction of a broader pool of buyers due to lowered down payment requirements by Fannie and Freddie. That may boost demand a little which in turn could impact pricing.
I would expect that the luxury market will continue to perform well based on positive economic forecasts. Luxury buyers should have lots of new inventory to choose from with more units available at Montage and Honua Kai. There are two new condo developments expected to hit the market in Wailea. Last but not least, Discovery Development should be starting sales of their properties down in Makena.
One last thing that I think will be worth watching in 2015 is the impact of foreign buyers on the market. In particular, I suspect that we are likely to see fewer Canadians buying in the Maui market. Maui has been an extremely popular locale for Canadian second home buyers due to the recent strength of the Canadian Dollar. With the Looney slipping in value and the Alberta oil economy slowing due to shrinking gas prices, I would expect we may see a few less Canadian buyers.
It will be interesting to take a look back at the end of 2015 to see if my predictions come to fruition. In the interim, stay tuned to the Maui Real Estate Blog. I will have a whole lot more stats and market analysis for the island as a whole, specific communities and even neighborhoods. Contact The Maui Real Estate Team if you have questions about the market or you would like to discuss your real estate needs.