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

A quick clip from Maui’s North Shore. If you are on twitter, @maui is worth a follow for more local eye candy, travel tips to the island and more.

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.

Pete Jalbert

Maui Real Estate Blog

August 2014 Maui Real Estate Statistics

September on Maui marks the start of the quiet season for visitors. The beaches and restaurants are a little quieter. Most years the real estate market slows as well. September also brings the first Northwest Swells of the season much to the delight of island wave riders. The air also starts to get a little cooler at night. I live Upcountry and I have found myself reaching for a sweater at night over the last week. The start of September also means it is time to look at the August Maui Real Estate Statistics. As usual, this post features a comparison of the number of sales and median prices verses what we saw in August a year ago. I also highlight some of the interesting notes and numbers that I came across while compiling the stats. I give my thoughts on the state of the market and what it means for buyers and sellers. This post also gives some insight into what we might expect to see in terms of sales in the coming months by looking at the pending sales for August. Without further ado, here are the numbers for August.

August 2014 Maui Real Estate Sales Volumes and Median Prices

This table shows the real estate sales volumes in Maui County, Hawaii during August 2013 and August 2014

This chart compares real estate sales volumes in August of 2013 and August of 2014 in Maui County, Hawaii

There were 68 homes sold in Maui County during August with a median sales price of $567,500. Last August, there were 81 homes sold with a median price of $585,000. That is a 16% drop in volume and a 3% drop in median when comparing this August to last August.

During August, there were a total of 94 condo sales reported by Realtors in Maui County with a median price $410,000. The August 2013 condo sales figures were 113 transactions closed with a median price of $420,000. That is a 17% drop in volume and a 2% drop in median comparing this August to last August.

The August 2014 land transactions in Maui County totaled 14 with a median price of $395,000. Last August, there were 25 sales with a median price of $350,000. That is a 44% drop in volume and a 13% increase in median price comparing this August to last August.

Other Interesting Notes and Numbers from the August Maui Real Estate Stats

While compiling these numbers, I found a few other numbers that I thought were worth passing along.

  • The highest priced home sale last month was $2,500,000 for a 5,222 square foot home on 2.58 acres in the Launiupoko subdivision in Lahaina.
  • It was a quiet month for luxury home sales with only one other transaction recorded above $2,000,000. That home was located in Ka’anapali Hillside.
  • Believe it or not, the lowest priced home sale in Maui County for month and this year for that matter was $1. The leasehold home in Molokai was bank owned. Its lease is set to expire in December when the property will revert back to the lessor who owns the underlying land.
  • While luxury home sales were relatively slow, luxury condo sales were strong in August. The high sale for the month was $8,250,000 for a four bedroom condo at Montage in Kapalua. That is the highest ever sales price for a condo in West Maui.
  • That was one of eight condo sales last month priced over $1,500,000. There were three additional big sales at Montage including closes of $7,750,000 and $7,500,000. There is a buzz about Montage and we recently looked at the resort’s impact on the market in our Kapalua Real Estate Update. There were also two sales at Papali in Wailea, one sale at Wailea Elua and one at Honua Kai.
  • There were only 8 bank owned sales this year compared to 14 sold last year. This isn’t necessarily due to a lack of inventory. June and July saw more bank owned inventory hit the market than what we had seen at any time in the last 24 months. However, the banks have different pricing strategies at this stage of the market. Many of the bank owned listings are being priced above market values.
  • There were six successful short sales completed last month compared to 14 completed in August of 2013.
  • While land sales were relatively quiet, there were 2 transactions that closed for over $2,000,000 in Kapalua.

Thoughts on the August Stats

This was not exactly a robust month for sales on Maui. This is the fifth straight month where condo sales have been lower than same month in 2013. Home sales have been a little stronger than condos, but we have still seen fewer sales overall compared to last year. Land sales are also down compared to last year after two straight months of lower sales. Inventory or lack thereof is clearly playing a part in the reduced activity. Prices are higher and the selection at the entry levels of the market is limited. That is leaving some buyers on the sideline. A reduction in the percentage of cash purchases on Maui suggests that we may be seeing fewer institutional and professional investors buying properties as well.

There are also some sellers who have overshot the market. They are pricing well above what the market is willing to pay. That may also be reducing the volume of sales. Prices in some parts of Maui have surged from market lows at high rates of appreciation. Limited inventory and pent up demand helped bring prices up rapidly. However, the initial rates of appreciation weren’t sustainable over the long haul. The memories of the last real estate bubble are a little too fresh in the minds of some buyers. This phenomenon is apparent in the Kihei entry level condo market. Places like Kihei Villages and Southpointe were selling in the low $100,000s at the bottom of the market with a handful of units in particularly poor shape closing below $100,000. We started to see sales prices as high as the low to mid $200,000s by the second half of 2013. Prices have since held in that range with little or no upward appreciation. Inventory has increased and days on market has gone up significantly. We are seeing this in other parts of the market as well. Kapalua Golf Villas is a nice vacation rental friendly property in the Kapalua Resort. It saw prices bottom out in 2012 when a large assessment was required to address a big maintenance project. Prices began to rise again rapidly in 2013 with the median price rising from $480,000 to $650,000. The median for this year’s sales has pushed all the way into the $700s. Each significant increase in median has been accompanied by a decrease in sales volume.

Are there any other factors at play with the decrease in sales volumes? That is tough to say at this point. The broader economic picture appears to be good at this time. National sales of existing homes continue to increase as of the last National Association of Realtors report in July. However, California saw a decrease in the number of properties sold compared to the same period last year. That is a continuation of a trend for that state. California is far and away the biggest feeder state for Maui Real Estate buyers. Maui tends to follow the same trends as the California market albeit a few months behind.

August Pending Sales

In addition to tracking closed sales. We also like to keep tabs on the number of properties that went under contract during any one month. This gives us some sense of what the stats might look like in the next couple of months.

This chart compares the number of properties that went pending in August of 2014 in Maui County with the number that went pending in August 2013.

After seeing an uptick in land and condo pending sales in July, the pending sales are down again. It appears as if the continued trend of lower sales activity will continue in the September and October sales numbers for Maui.

What Buyers and Sellers can expect under Current Market Conditions

While the market has slowed in terms of sales volume, buyers will find that well priced properties remain competitive. This is particularly true with lower priced homes. Buyers looking in this market should be pre-approved by a qualified mortgage professional as they are starting their home search. When the right property comes on the market that meets their needs, buyers will need to be decisive and act quickly to improve their odds of a successful offer. Sellers can see some of the cautionary tales reflected in the paragraphs above. Buyers are balking at overpriced properties and rates of appreciation appear to be slowing. That makes determining your go to market pricing that much more important. Both buyers and sellers should also be aware that market dynamics vary throughout the island depending on price points and neighborhoods. If you are a buyer or seller interested in Maui Property, we would welcome the chance to sit down with you for a free consultation. Contact The Maui Real Estate Team today to discuss your real estate needs.

Pete Jalbert