Well, we made it to our twentieth Market Musings. This post took me a while to put together. I want to say it’s because it is chock full of tremendous insight. The truth is my last 9-10 days consisted primarily of battling Covid. My symptoms made writing this post a protracted slog. Give me some grace if there are typos and/or a few not so coherent thoughts interspersed throughout the text.
In our last post, I talked about the relative resilience of the Maui market under higher rates. Since that time, rates rose even more. The additional bump in rates or perhaps just a longer duration of time with higher rates is weighing on the Maui market. The single family home market in particular is feeling the burden of higher rates and decreased affordability. Musings 20 takes a look at some of the current market indicators including active and pending inventory, price reductions and how quickly new listings are going under contract.
End of October Maui Single Family Home Inventory
| 8/31/22 | 9/31/22 | 10/31/22 | ||||
| Active | Pending | Active | Pending | Active | Pending | |
| <$750,000 | 11 | 11 | 7 | 14 | 9 (+1) | 15 (+1) |
| $750,000-$999,999 | 31 | 44 | 21 | 46 | 29 (+8) | 29 (-15) |
| $1,000,000-$1,499,999 | 58 | 28 | 45 | 33 | 64 (+19) | 28 (-5) |
| $1,500,000-$1,999,999 | 46 | 13 | 44 | 17 | 41 (-3) | 13 (-4) |
| $2,000,000-$2,999,999 | 36 | 12 | 33 | 12 | 35 (+2) | 10 (-2) |
| $3,000,000-$4,999,999 | 32 | 11 | 35 | 11 | 32 (-3) | 7 (-4) |
| $5,000,000-$9,999,999 | 26 | 5 | 27 | 6 | 26 (-1) | 5 (-1) |
| $10,000,000-$19,999,999 | 11 | 0 | 11 | 0 | 9 (-2) | 0 |
| $20,000,000+ | 5 | 0 | 2 | 1 | 3 (+1) | 1 |
| Totals | 256 | 124 | 225 | 140 | 248 (+23) | 108 (-32) |
| 8/31/22 | 9/30/22 | 10/31/22 | ||||
| Haiku | 20 | 7 | 24 | 7 | 28(+4) | 9 (+2) |
| Hana | 8 | 2 | 9 | 1 | 10 (+1) | 0 (-1) |
| Ka’anapali | 10 | 4 | 10 | 3 | 7 (-3) | 2 (-1) |
| Kahului | 11 | 25 | 7 | 26 | 16 (+9) | 16 (-10) |
| Kapalua | 4 | 1 | 4 | 0 | 6 (+2) | 0 |
| Kihei | 44 | 16 | 35 | 16 | 40 (+5) | 11 (-5) |
| Kula | 24 | 10 | 22 | 11 | 20 (-2) | 11 |
| Lahaina | 23 | 7 | 21 | 10 | 22 (+1) | 13 (+3) |
| Makawao | 15 | 11 | 13 | 11 | 13 | 9(-2) |
| Napili/Kahana/Hono… | 14 | 4 | 9 | 7 | 11 (+2) | 6 (-1) |
| Pukalani | 8 | 5 | 6 | 7 | 8 (+2) | 3 (-4) |
| Spreckelsville/Paia | 15 | 3 | 10 | 4 | 8 (-2) | 2 (-2) |
| Wailea/Makena | 16 | 4 | 10 | 8 | 11 (+1) | 4 (-4) |
| Wailuku | 41 | 22 | 36 | 26 | 40 (+4) | 21 (-5) |
End of October Home Inventory Review
The information above is provided with the usual framework. The home inventory data by price point includes all of the island of Maui, but excludes the islands of Molokai and Lanai. The district information is limited to the districts and community with the most activity.
- After a pretty healthy drop in Inventory in September, active home listings increased by 10.22% by the end of October.
- The bulk of the inventory increased occurred between $750,00 and $1,500,000 with an increase of 27 listings in that range.
- It appears that this increase in inventory stems more from slower activity than an influx of new listings. That is reflected in the pending sales data with 20 fewer pending home sales between $750,000 and $1,500,000.
- This make sense as this is an area of the market where a higher percentage of buyers are using financing. Looking at all of the sales between August 1 and October 30th, 18.93% of the buyers in this price range paid cash. In all other price ranges, 41.77% of buyers used cash. Plain and simple, the increase in mortgage rates is hitting this segment of the market harder.
- Overall, the number of pending home sales decreased 22.86% between the end of September and the end of October. That is a substantial decrease, but worth noting that pending sales typically decline in the fall.
- Looking at the market on a community level, all but three districts increased inventory. The exceptions being Kula, Spreckelsville/Paia and Ka’anapali. Ka’anapali’s decrease stemmed in part due to cancelled listings rather than increased sales.
- Kahului experienced the biggest increase in active listings and the biggest decrease in pending sales. With the vast majority of the inventory in this community priced between $750,000 and $1,300,000, this is a market where the increased rates appear to causing a bigger shift in conditions.
End of October Condo Inventory
| 8/31/22 | 9/30/22 | 10/31/22 | ||||
| Active | Pending | Active | Pending | Active | Pending | |
| <$250,000 | 1 | 6 | 1 | 3 | 2 (+1) | 4 (+1) |
| $250,000-$499,999 | 14 | 17 | 11 | 16 | 19 (+8) | 12 (-4) |
| $500,000-$749,999 | 34 | 43 | 28 | 40 | 32 (+4) | 35 (-5) |
| $750,000-$999,999 | 33 | 43 | 33 | 33 | 27 (-6) | 27 (-6) |
| $1,000,000-$1,499,999 | 29 | 31 | 19 | 36 | 21 (+2) | 30 (-6) |
| $1,500,000-$1,999,999 | 24 | 35 | 18 | 34 | 14 (-4) | 33 (-1) |
| $2,000,000-$2,999,999 | 22 | 38 | 14 | 43 | 15 (+1) | 40 (-3) |
| $3,000,000-$4,999,999 | 12 | 19 | 10 | 17 | 10 | 17 |
| $5,000,000-$9,999,999 | 8 | 1 | 7 | 0 | 11 (+4) | 1 (+1) |
| $10,000,000+ | 4 | 0 | 4 | 0 | 3 (-1) | 1 (+1) |
| Total | 181 | 233 | 145 | 222 | 154 (+9) | 200 (-22) |
| 8/31/22 | 9/30/22 | 10/31/22 | ||||
| Active | Pending | Active | Pending | Active | Pending | |
| Ka’anapali | 25 | 16 | 17 | 14 | 18 (+1) | 9 (-5) |
| Kahului | 3 | 7 | 3 | 4 | 5 (+2) | 5 (+1) |
| Kapalua | 11 | 6 | 10 | 4 | 12 (+2) | 4 |
| Kihei | 50 | 63 | 48 | 61 | 43 (-5) | 60 (-1) |
| Lahaina | 9 | 10 | 5 | 7 | 8 (+3) | 4 (-3) |
| Ma’alaea | 3 | 6 | 4 | 4 | 3 (-1) | 6 (+2) |
| Napili/Kahana/Hono… | 45 | 25 | 29 | 30 | 33 (+4) | 17 (-13) |
| Wailea | 24 | 86 | 19 | 86 | 19 | 85 (-1) |
| Wailuku | 9 | 14 | 8 | 12 | 11 (+3) | 10 (-2) |
End of October Condo Inventory Review
Again, the tables above come with the usual framework for our end of month inventory. The table by price point includes all condos on Maui, but it does not include condos on the islands of Molokai or Lanai. The table with districts is limited to the communities with the most activity.
Pending sales at La’i Loa at Wailea Hills skew the data in Wailea and the $1,500,000-$5,000,000 price ranges. There are 75 pending sales in that development based on contracts penned in 2020 and the first quarter of 2021. Pending sales in La’i Loa won’t start to close until sometime in 2023. Paradise Ridge Estates in Kihei also skews the data albeit to a lesser extent. There are 18 pending sales with that development based on contracts penned between 2018 and the first quarter of 2022. Overall, 46.5% of the pending Condo inventory is in La’i Loa or Paradise Ridge Estates.
- After three straight months of decreased inventory, condo inventory increased by a modest 6.2%
- The largest increase in inventory occurred in the $250,000 to $499,999 price range. While this price range has a lower percentage of cash buyers than the overall condo market, the difference isn’t all that substantial.
- Active inventory increased in 6 out of 10 price ranges, decreased in three and stayed the same in one.
- Pending sales decreased 9.91% this month. As with home sales, it isn’t too uncommon to see pending sales decrease this time of year.
- The decrease in pending condo sales by price point was fairly consistent through most ranges, with the exceptions being the very lowest price range and the very highest price points in the market.
- At the community level, modest increases in inventory were common across the board. The two districts that actually saw a decrease in inventory at the community level were Ma’alaea and Kihei. Both are markets with a lot of vacation rentals. This is a market segment that is still seeing decent demand.
- Napili, Kahana and Honokowai experienced the biggest drop in pending sales. This is another big vacation rental condo market. Is the difference in activity levels a case of no clear narrative or just variability? This is something to watch with next month’s numbers.
How Quickly Are Properties Going Under Contract
One other metric we use on the blog to track market demand is how quickly properties are going under contract. Specifically, what percentage of new listings are going under contract in ten days or less. The very first time we started documenting this metric was back in February. At that point, 56% of all new listings went under contract within 10 days or less. Between September 12th and 19th, that number shrank to 34%. Between October 11th-18th, the number of properties that went under contract within 10 days or less fell further to 25.58%.
When you break it down by homes and condos, you can see that condos continue to show some measure of resilience. For condos listed between October 11th and 18th, 40% went under contract with buyers in ten days or less. That’s actually up from mid September when the number was 36.66%. For additional context, 66.67% of condos went under contract in 10 days or less between October 11th and 18th, 2021. Going back to 2019, 26% of all condos listed between October 11th and 18th went under contract in 10 days or less.
The numbers for the home market point to a more pronounced cooling. Only 13.04% of all homes listed between October 11th and 18th went under contract in 10 days or less. In mid-September, that number was 32.14%. For additional context, 54.17% of homes listed between October 11th and October 18th, 2021 went under contract in tend days or less. Going back to 2019, 9.09% of all homes listed between October 11th and October 18th, went under contract in ten days or less.
Price Reductions
One market indicator that surprised this month is the number of active listings with price reductions. Nationally, price reductions continue to rise as the real estate market slows under the weight of higher interest rates. Based on the numbers above, one might expect to see more price reductions, particularly with the home market. With fewer properties going under contract quickly and fewer properties going under contract in general, shouldn’t sellers be adjusting to the market?
As of the the 31st, 90 of 248 active home listings or 39.92% reduced their price one or more times. On September 29th, 42.41% of homes went under contract in 10 days or less. On September 2nd, 42.97% of all active listings had one or more price reduction.
On the condo front, 45 of 153 or 29.41% of active condo listings on October 31, 2022 reduced their price one or more times. That’s up from 25% on September 29th. On September 2nd, 27.84% of all active condo listings had price reductions.
Some General Thoughts on the Numbers Above and The State of The Market
It’s been an interesting last six months in the Maui Real Estate market. The first quarter of the year was largely a continuation of 2021. Strong demand combined with limited inventory to fuel strong price growth. Demand slowly started to taper in the second quarter. That said, inventory remained low. While the frenzy of the first quarter subsided, there was a balance between limited supply and just enough demand to make for a competitive market for buyers. While we were well below the frenzy of earlier in the year, homes and condos in particular sold faster and at a higher percentage of asking price than they would in a normal market.
This trend of a balanced ratio between buyers and sellers continued through the summer. Inventory actually contracted through most of the summer, but we lost FOMO (fear of missing out) buyers from the market. The lack of FOMO buyers had an impact. We started to see some downward pressure on values in limited parts of the market. With a discerning buyer pool, flawed properties that would have sold easily in the first quarter weren’t getting any love from buyers.
In my last musings, I showed stats that pointed to the relative resilience of this market despite rates well over 6%. The stats above point to a further shift downward in the market . Or at least two out of three did. The third is a reflection of Maui as a real estate market as a whole.
The increase in inventory and the decrease in pendings show a market where the balance in supply and demand is starting to shift. This is less due to an influx of new inventory as much as it is to decreased demand. When you look at the number of homes going under contract within 10 days or less, you can see where the push above 7% rates is starting to decrease the number of buyers. I am sure the more negative national real estate news is also having an impact on the buying decisions of some. Fomo has been replaced by wait and see.
The decrease in price reductions is the one anomaly in this market. As the market cools, you would expect sellers to adjust. Prior to Covid, Maui’s market dynamics were different than the typical mainland market. Sellers took time to adjust prices and days on market could really pile up before a listing was considered stale. It’s also worth remembering that this shift is pretty recent. We may need to see these conditions persist for a longer before more sellers begin to adjust prices.
The one other thing to note is that while we saw a shift in market conditions in these most recent stats, conditions remain variable. That’s pretty clear when we look at the difference between homes and condos. As of mid-October, new condo listings still went under contract much faster than they did pre-Covid. Condo inventory remains tight compared to demand and the volume of cash buyers blunts the impact of higher rates.There is variability in the home market too. The luxury market, which again includes a higher percentage of cash buyers, appears to be moving relatively well.
Looking forward, it will be interesting to see where the market goes from here. Since it’s taken me longer to write this blog post, I have the advantage of watching market conditions over the first ten days of November. While I haven’t crunched the numbers in any detail, pending sales stabilized to start the month. Yesterday’s inflation print out caused a shift in the bond market and mortgage rates to drop a half a point.Will that persist or will higher rates return? Needless to say, it’s too early tell. If anything, this points to continued weird market dynamics with a lot of variability in conditions.
A Little Maui Beauty to Brighten Your Day
It may not be Monday but…
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