Maui Real Estate Blog
Maui Market Musings Volume VII
This week’s market musings takes a look at one sign of resilience evident in the market and the latest Redfin report on the second home market. Without belaboring the intro, here are the latest market musings.
Anecdotal Signs of Market Resilience
Entry level condos in Kihei experienced some of the steepest declines during the last real estate crash. I remember the turning point for that market pretty well. During the Summer and fall of 2005, places like Southpointe, Kihei Villages and Keonekai Villages experienced rapid price increases. Condos in these complexes jumped in value 25% or more in a span of about 6 months. The rise in prices occurred during a period of low rates (for the time) with rates forecast to increase. Inventory during this period was low.
A pretty drastic shift occurred in the market in early 2006. A number of the buyers who purchased the condos in the second half of 2005 were pure speculators. They planned to make some very rudimentary improvements prior to flipping the condos. In some cases, they were just naked flips where they purchased the condo and flipped a few months later with no improvements made. By early 2006, the inventory ballooned from a handful of listings in entry level complexes to as many as 25 units in a single development. A rate increase between .5% and .6% caused demand to cool. Sellers who didn’t have the reserves had to adjust their prices. Thus started a precipitous decline that grew worse as a number of sellers found themselves underwater.
The contrast with present conditions is pretty significant. Recent mortgage rate increases are far more drastic. We are looking at an increase of 1.5% in the span of less than 6 months. That said, inventory levels remain low. At the time of this post, there are only 4 active listings in the “entry level” condo complexes in Kihei. Buyer demand continues for the limited inventory. Four non-vacation rental condos in Kihei went under contract within the last few weeks.
While market conditions may continue to shift depending on further rate increases and/or the overall economy, this segment of the market isn’t the house of cards that it was in the mid 2000s. There are fewer speculators and the financial position and loan terms of borrowers are stronger. The market conditions that caused the calamitous collapse in values just aren’t present currently. That’s why we continue to see buyers despite the significant rate increases and much higher prices.
The Second Home Market Slows Nationally
Recent data presented by Redfin indicates that second home demand hit its lowest point since May of 2020. While it is still up from pre-pandemic levels, the decrease in demand is notable. Redfin cites affordability as one factor in the decreased demand. Some of that stems from price increases and some from rate increases. The Federal Housing Financing Agency also announced an increase on upfront fees on second homes starting on April 1. The fee increase is between 1.125 percent and 3.875 percent, tiered by loan-to-value ratio. That’s a pretty hefty number for those borrowing substantial sums.
Will we start to see this reflected in the Maui market? I haven’t seen signs of a clear decrease in the second home market on Maui. Demand appears to remain strong with inventory limited. We also have a lot of cash in the market. Of the vacation rental condos that sold over the last month, 44% were cash transactions. That might be a low number as it doesn’t include 1031 exchange purchases using cash. The lack of inventory may also make it harder to detect changes in buyer demand. If we start to see anything that shows Maui reflecting national trends, we will report it in the Musings
A Little Bit of Maui Beauty to Brighten Your Day
Contact The Maui Real Estate Team
If you are reading some mixed messages in recent musings, that’s because information on market conditions remains pretty mixed. On the ground, buyers are still facing bidding wars and properties are still selling for premiums. That said, there are more headwinds brewing with the rise in rates. Current market conditions call for quality representation. Contact The Maui Real Estate Team if you are considering entering the Maui market as a buyer or seller.
Maui Real Estate Blog
Official March 2012 Maui Real Estate Statistics
Last week the official March Maui Real Estate Statistics were released by The Realtors Association of Maui (RAM). The numbers that they released mirror what we posted earlier in the month via our Unofficial Stats. The official stats provide a little more granularity with community level data. They also provide monthly data going back to January 2007 for additional context.
If you have read these official posts before, you might know the one other thing that I like to look at with the RAM stats is their inventory tracking. RAM executive Terry Tolman publishes the current volume of listed inventory for homes, condos and land. The general trend has been shrinking inventory. This month, we saw a slight uptick in home inventory and a slight decrease in condo and land inventory. We are seeing the impact of inventory on the low end condo market where there has been a modest in prices. Scarcity and positive rent vs. buy comparisons have finally brought some pricing stability to this hard hit segment of the Maui Real Estate market. Inventory is likely to remain an important factor in market dynamics. There has been some rumbling that we may see an uptick in bank owned inventory coming to the market this summer. It will be interesting to see if this is true, and if it would be sufficient to have an impact on market dynamics. We will continue to monitor market inventory on the Maui Real Estate Blog. Contact The Maui Real Estate Team with questions or the market or for assistance buying or selling Maui Real Estate.
Maui Real Estate Blog
Official January 2012 Maui Real Estate Statistics
It continues to be a busy February for the Maui Real Estate Team. Day to day work has made it a challenge keeping up with the blog of late. While I was able to get out the Unofficial January Maui Real Estate Statistics, I am at least ten days behind schedule in posting the Realtor Association’s official stats. Without further ado, here are the official January Maui sales numbers. There were no big changes when it comes to median prices or sales volumes from what I posted earlier in the month. However, the official stats provide some additional granularity at a community level. I also follow the inventory tracking that is published as part of the RAM stats. It appears as if land and home volumes continue to shrink while condos saw an uptick this month.
While the general trend has been a shrinking of inventory in the Maui Real Estate market, not all segments are equal. There is extremely limited supply for segments like entry level condos. On the other end of the spectrum, the overall land market has five years plus of inventory based on current rates of sales. We are seeing some upward pressure on prices for the segments with very limited inventories. Property types and geographies with more selection are seeing continued downward adjustments. Contact The Maui Real Estate Team for more information on areas of the Maui market that interest you.