Maui Real Estate Blog

Maui Market Musings Volume VIII

There are a couple of reasons why I titled this series of posts Maui Market Musings. The first is that I am a sucker for alliteration. The second is that sometimes I want to explore the thoughts about the market that are popping through my head. A lot of times, that translates to me seeing if the data supports my thinking or reveals me to be just an average human subject to the flaws of biases.

Needless to say, the significant increase in interest rates runs through my mind quite a bit. It’s been a subject of discussion in past musings. With the 5% threshold crossed for 30 year fixed mortgages, some real estate analysts are starting to see signs of cooling in the market. It’s still a seller’s market, but the frenzy is maybe a little less frenetic. Anecdotally, it seems like that may be the case on Maui. With that in mind, I wanted to look at some of the local numbers that I think could help to answer the question of whether there might be cooling buyer demand in the Maui market.

How Quickly Are Things Going Under Contract?

A sign of the strong sellers market this year is the speed at which properties went under contract after being listed. A reasonably priced listing could expect to go under contract fast. Offers due by Monday, seller to respond by Wednesday was a common refrain in listing remarks. I looked at the speed that properties went under contract once before in a past edition of the Musings so I also have a basis for comparison from early winter.

For properties listed between April 6th and April 13th, 29 of the 63 new listings are under contract already. That is still a pretty strong number with 46% under contract. If you are wondering why I am looking at an eight day period, I have a basis for comparison in Market Musings Volume II, I looked at pending sales among newly listed properties for the eight day period between February 9th and February 16th. Over that time, 40 of 71 listings went under contract in 10 days or less. That calculates to 56%.

It is worth noting that in February there were even more listings in the process of either reviewing offers or had a submit all offers by date still to come. Looking at the active listings in April, I saw one listing with a review all offers by date still outstanding. Based on the numbers above, there may be some signs of cooling. That said, the supporting data is based on a small sample size. It will be interesting to see if the data in the coming weeks indicates a more clear trend.

Weekly Pending Sales

As mentioned above, I can’t say that small sample of data is proof of a changing market. I wanted if another metric with a bigger pool of data might provide some additional evidence of cooling. I decided to look at overall weekly pending sales over a little longer time period. Knowing that seasonality is a factor, I looked at Mid-February through Mid-April over four years. I used 2022, 2021, 2019 and 2018. 2020 is omitted since it was completely anomalous. Including two pre-covid years gives a little more of a baseline for a comparison to “normal market conditions”.

I acknowledge two hazards to using pending weekly sales data. The small sample size for Maui tends to mean there is a little more noise in the numbers. This is also a part of the year where you can see subtle shifts in the number of potential buyers on island year to year due changes in school calendars. Changes in the timing of Easter and peak spring break can lead to shifts in when more second home buyers are on island.

When putting the chart above together, I looked at the 2022 data first. When I saw the big dip in new pending sales for the week from 4/13 to 4/19, I thought I had a Eureka moment. A 34% slowdown in new pending sales is a pretty big dip. Low and behold, there was also a pretty big dip during the same seven days of 2021 While the 2021 dip is smaller, it is still a substantial 26%. There are also more modest dips for the same week in 2019 and 2018.

So is there a takeaway from the pending sales? Probably that it is too early say that the data shows a clear sign of a slow down. I will try to revisit this in the near future or so to see if a sharper divergence between 2022 and 2021 emerges.

Other Takeaways

Real Estate economists looking at data on a national level have a much larger data pool. Subtle shifts in the market might be seen over a week or a couple of weeks. With the Maui market, noise and variability from a much smaller pools of data make it harder to detect subtle shifts in the market. Anything but Maui Market shifts are likely to be evident over a little longer time frame.

The Impact of Rising Rates on Sellers

Real estate forecasts throughout most of late 2021 and early 2022 predicted that a gradual increase in mortgage rates would lead to more sellers coming to market. Those sellers would be enticed by the closing window of opportunity to reach buyers taking advantage of lower mortgage rates. These sellers might allow inventory levels to slowly creep back towards normal.

With rates rising faster than most anticipated, some economists are starting to talk about the “lock-in” effect of higher rates. Plain and simple, that means homeowners with rates of 3% or less are less likely to sell their old home and buy a new home at 5% interest. For some, even downsizing could mean higher monthly payments. With that in mind, some would be sellers shelve their plans.

As a counterpoint, consider the following tweet.

Will those google searches translate into actual listings? That remains to be seen.

At this point, I don’t think looking at local data is going to show any clear signs one way or the other of how higher rates are impacting potential sellers. At least not yet. Anecdotally, it doesn’t seem like we are seeing much of an increase in listings on island, but we don’t typically see the influx of spring listings like the overall national market. Brief surges of new listings in certain towns on island this spring often seem to be followed by a couple of weeks of quieter inventory. If and when, I see more anecdotal evidence of a shift in new inventory, I will dig into the data for a future edition of the musings.

Some Maui Scenery to Brighten this Post

Contact The Maui Real Estate Team

Contact The Maui Real Estate Team if there is anything you want us to discuss in the musings. We welcome your feedback and questions. Of course, we also welcome the opportunity to earn your business. Let us know if you need assistance buying or selling property on Maui. We look forward to learning more about your real estate needs.

Pete Jalbert

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