At the end of May, I did a year to date comparison of Maui’s Luxury real estate market comparing the 2008 numbers to the 2007 numbers. With yesterday being the first day of fall, I figured now would be another good time to take the pulse of the market. Through the first five months of the year, the luxury market showed that it was more resilient than the rest of the Maui Real Estate market. Some segments of luxury were performing better than 2007, others were staying the same and those that had performed worse were still doing better than the overall market. Now that we almost 3/4 of the way through 2008, where do we stand? Let’s check out the numbers and see what they say. As with my May comparison, I broke the luxury market into four categories with two each for homes and condos. Here are the numbers:
- Homes between 1,500,000 and $4,999,999
Sales between January 1, 2007 -> September 22, 2007 = 83
Sales between January 1, 2008 -> September 22, 2008 = 50
- Homes above $5,000,000
Sales between January 1, 2007 -> September 22, 2007 = 12
Sales between January 1, 2008 -> September 22, 2008 = 11
- Condos between $1,500,000 and $4,999,999
Sales between January 1, 2007 -> September 22, 2007 = 75
Sales between January 1, 2008 -> September 22, 2008 = 131
- Condos above $5,000,000
Sales between January 1, 2007 -> September 22, 2007 = 4
Sales between January 1, 2008 -> September 22, 2008 = 1
These are some interesting numbers worth a few thoughts, comments and questions on my part. I wanted to take a look at properties over $5,000,000 first. It appears that this segment of the market has seen the least amount of impact in our changing real estate market. The 11 homes sales to date this year vs. the 12 over the same span in 2007 is basically a wash. People are still buying ultra luxury properties. That being said, the sales this year do not appear to be quite as high profile. There are two sales this year over $9,000,000. That compares to five sales over $9,000,000 over the same span last year. It is also worth noting that there is a little less activity in the Kapalua and West Maui markets. There are four sales on that side of the island year to date vs. seven over the same span last year. Statistically, condo sales are down this year in the ultra luxury market. We have only one sold this year vs. four over the same time frame last year. Then again, it is hard to account for the impact of new luxury condo developments in this market. The new developments at the Ritz in Kapalua, Baccarat, the Villas at Royal Lahaina and Maluaka all are taking reservations on condos in the $5,000,000 to $10,000,000 range. With no data on reservations or contracts on any of these new developments, it is tough to get a true sense of the state of the ultra luxury condo market. I don’t think it is out of line to assume that some of the buyers in this market may be opting to make reservations at one of these new luxury developments.
The market between $1,500,000 and $4,999,999 is particularly interesting statistically. Condo sales are way up and home sales are down. What gives? Let’s take a look at condo sales first. Condo sales are up 82% compared to last year. This is a pretty impressive number. What is the big driver for the increase in sales during a down market? The answer to that question is actually pretty easy. This market is seeing a big boom due to new project sales. Of the 131 sales during this time period, there were 83 new project sales. Sales at Kai Malu, Papali and Ho’olei help bolster sales numbers. This compares to only 26 new project sales over the same time fame in 2007. New project sales are usually based on contracts and reservations made one to two years in advance of closing. This means they can skew your perspective on the current state of the market. When you strip out new project sales, the numbers for 2008 and 2007 are 48 and 49 sales respectively. This changes the picture. It points to a 2008 market that is holding up well, but not surging ahead as the numbers might indicate. As with the $5,000,000 and above range, there are likely to be some buyers who are opting to make reservations at new developments. All of the same new developments have condos available in this range as does Honua Kai resort. These reservations are not reflected in these numbers.
Home sale numbers for 2008 between $1,500,000 and $4,999,999 are not as strong. There is almost a 40% drop in volume. This segment of the market appears to be performing worse than the overall home market for Maui. Home sales volumes have dipped 22% through September 1 vs. the same time last year. Why is this segment doing worse? That is a good question and one I thought might requiring picking at the numbers in a little greater detail. The price range between $1,500,000 and $4,999,999 is pretty broad. Are all segments of this price range performing the same? I thought it might be worth cutting this segment of the market up into smaller segments. The split is somewhat subjective on my part based on my observations on buyers. The $1,500,000-$2,000,000 is generally a separate pool of buyers from the $2,000,000-$3,000,000 buyer which is different from the $3,000,000 – $5,000,000 buyer.
- Homes between $1,500,000 and $1,999,999
Sales between January 1, 2007 -> September 22, 2007 = 33
Sales between January 1, 2008 -> September 22, 2008 = 15
- Home sales between $2,000,000 and $3,000,000
Sales between January 1, 2007 -> September 22, 2007 = 31
Sales between January 1, 2008 -> September 22, 2008 = 20
- Homes between $3,000,000 and $4,999,999
Sales between January 1, 2007 -> September 22, 2007 = 19
Sales between January 1, 2008 -> September 22, 2008 = 14
When you look at these numbers, it is clear that the lower you are in this price range the more drastic the decrease in sales volume. The price range between $1,500,000 and $1,999,999 is seeing the most acute down turn. The big question is why? While I can’t say definitively, I will venture a guess that this price range is feeling the changes in the mortgage market more so than other segments. Not only have the rates for jumbo loans gone up, but qualification standards have increased. Stated income requirements may also have knocked out some buyers. As you go up in this price range, dependency on conventional mortgages decreases. More buyers are either paying cash or using private banking.
Overall, the luxury market continues to be out performing other segments of the Maui Real Estate market. When you compare the current numbers vs. the last luxury real estate update from May, the market has slowed. This is in line with the overall market where the summer stats were the slowest they have been in well over five years. It will be interesting to see how the market performs the rest of the year. Traditionally, fall is a slow time while December will see a smaller flurry of luxury activity. We will keep you up to date on the Maui luxury market on THE Maui Real Estate blog.