Maui Real Estate Inventory – Feb 2011…What does it all mean?

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After viewing Pete’s unofficial January 2011 Maui Statistics, I thought I would take a look at a few other indicators over the past 18 months or so to see if I could add anything to the conversation.

In particular I reviewed the total inventory of homes, land and condos for sale on Maui and then determined the remaining months of inventory based on the absorption rate (number of sales versus total inventory).  There are two charts below.  The first chart displays the overall island inventory from August of 2009 to the present.  The second chart represents the remaining months of inventory based on the absorption rate.

A few things I took away from reviewing the inventory chart.

  1. There hasn’t been a very dramatic increase or decrease in the inventory of homes, condos and land for sale on Maui over the last 18 months.On an absolute basis, there are a lot of condos and homes for sale on Maui right now.
  2. The most substantial inventory reductions correlated with the end of the federal home buyer tax credits and / or a period of seasonal adjustment; inventory rebounded substantially the tax credits expired as sales volume decreased.
  3. The trend in the fall of 2010 appeared to indicate a slightly improved market for sellers. However, a little historical analysis shows that this was really more of the seasonal fall inventory reduction.  The fall on Maui is a time where sellers often “give their properties a rest” prior to re-listing them again in late December, January or February to exploit Maui’s busiest tourism season.

A few things to note regarding the remaining months of inventory chart:

  1. The Y Axis (left hand side) indicates months of inventory for sale.  The X axis indicates the month.
  2. According to the absorption rate, the remaining inventory of land hasn’t dipped below 3 years during the entire period.  The periods where the months of remaining inventory was lowest, correlated almost exactly with the home buyer tax credits and actually dipped below a year for homes and condos.  November and December of 09 and April of 2010 represented the lowest months of remaining inventory in-line with the rush of closings up to and just after expiration of the tax incentives.
  3. Neither of these charts does a breakdown on specific markets such as Wailea or Kaanapali.  They also do not address specific price points, they are meant to be general indicators for the overall market on Maui.

So what does it all mean?  Although inventory can still be measured in years, there are a few signs of daylight.  The months of inventory of condos for sale on Maui based on the absorption rate is substantially lower today than it was 18 months ago.  The months of inventory of homes for sale is almost even with 18 months ago. However, based on the substantial uptick in new escrows opened in January and what appears to be a fairly healthy backlog of sales, the months of remaining homes and condos for sale may continue to decline.

I will revisit the remaining inventory / absorption rate again next month and this spring.  I am pretty confident those numbers will continue to improve.

Now for the caveats and risks:

  1. The “Shadow” inventory that the media continues to remind us of is out there.  We just don’t know how big it is.
  2. There is some interest rate risk.  Mortgage interest rates have continued to increase in spite of QE 2. If rates continue to march upward this will start to put a damper on the highly touted affordability index. (Or in plain English – when mortgage rates go up, buying power decreases).
  3. Exogenous Risks remain, and with the uncertainty in the Middle East their probability seems a bit higher than I would like.

We’ll be watching all 3 very closely.

There is positive momentum in the market, but it still remains a buyer’s market.  We are experiencing some bidding wars on a few homes and condos, but they are basically happening on properties that are clearly priced below recent comparable sales.  Maui remains busy this tourist season and we continue to receive a steady stream of inquiries for properties for sale from around the world.  Will these positive trends continue?

Contact the Maui Real Estate Team for questions, additional information or assistance buying and selling Maui Real Estate.

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