The expiration of federal tax credits for home purchases was viewed with some measure of trepidation by real estate market observers. Many were questioning whether the tax credit was the primary engine driving the recovery of sales volume in the real estate market. With a healthy percentage of recent transactions occurring at the entry level to the Maui market, there were good reasons to have questions. As we approach the one month mark after the end of the credit, it is hard to make any definitive statements on Maui market trajectory. Determining the direction of the market is complicated by the fact that May is typically a time of year when we see a lull in new contracts as we are between tourist seasons. That being said, we are seeing some positive signs.
Maui’s real estate market is driven by a combination of local buyers and second home buyers. The second home market was an area that appeared to be slower to recover with a real lull in transactions through much of 2009. We saw vacation rental condominiums pick up in the second half of 2009. We have continued to see that segment gain some momentum through the first quarter of 2010. That is an encouraging sign in that this segment saw next to no benefit from the tax cuts. The luxury second home market was another segment that was lagging. In March, I blogged about anecdotal evidence for improvements in luxury market activity. My Unoffical April Maui Real Estate Statistics documented some actual quantitative evidence for increased activity in the Maui luxury market. Sorting through the Maui Realtor database today, I noticed evidence for additional improvements. There are currently 26 homes, condos and parcels of land priced over $1,500,000.00 that have gone under contract in the last 30 days. This is a pretty healthy bump in activity.
My thoughts at this point is that we may see a decrease in the purchase of primary residences over the next couple of months. The tax credits will have accelerated market demand up until April 30 and caused an ebb in demand post expiration. Second home purchases will help to offset some of the slack in demand among first time buyers. The overall economy remains a wild card. The decline of the Euro may eliminate a limited pool of potential buyers as Europeans have seen their purchasing power decrease significantly in a month’s time. The European economy may also cause a drag in our own economic recovery. There is some good news to the European economic woes. The negative economic news in Europe has caused mortgage rates to drop close to historic lows. These are complex times and my crystal ball comes with a limited warranty. Needless to say, we will continue to keep you updated on market activity through our posts on Maui Real Estate Statistics. Keep your eyes peeled for the Unofficial May statistics some time next week.