Hawaii is recognized as one of the most beautiful places in the world. With its white sandy beaches, crystal clear blue waters, and lush green mountains, it’s no wonder that people are still flocking to the island state and looking to buy property here. The Hawaii real estate market has been hot for a while now, but recent changes during the global pandemic have made it an even better time to buy with mortgage rates still near historic lows, a reduction in foreign buyers, and the move toward the Great Resignation. In this article, we will discuss the reasons why, if you’re considering buying property in Hawaii, moving fast is your best bet.
More Buyers than Available Housing
The current demand for housing in Hawaii has always outstripped the available supply and this challenge seems to be at a record high in 2022. Of course, this has caused prices to steadily rise as buyers enter bidding wars that work to drive up the prices of listings. This is especially true for buyers looking in popular tourist areas such as Honolulu and Lahaina. In fact, Hawaii’s luxury housing market is booming with approximately $3.7 billion worth of homes above $3 million sold in 2021. This is double the previous record, which was set in 2018.
One thing is for sure, demand is high. Property prices in Hawaii have risen considerably in the last year with a reported 21.95% overall growth. Hawaii’s Department of Business, Economic Development and Tourism report that “In the fourth quarter of 2021, Honolulu’s median price for single-family resales was $1,050,000, up to $180,000 or 20.7 percent over the same quarter of 2020”. Median days on market for condos in Hawaii have dropped from an average of 25 days in April 2021 to just 16 days in 2022 and the rate is actively dropping. This means that properties are being snatched up fast, with some realtors reporting an influx of buyers purchasing homes sight-unseen i.e., without even viewing the property.
However, the number of sales has dropped for both single family units and condominiums when compared to last year. This is possibly due to there being fewer homes on the market for buyers to choose from. And, as we all know, when demand is high and supply is low, prices are sure to increase. So, if you’re thinking about buying property in Hawaii, now is the time to act fast.
They are Not Making More Land in Paradise
As we’ve mentioned, the current demand for housing in Hawaii far outweighs the available supply. And, with more and more people looking to move to the island state, that demand is only going to increase. The influx of renowned personas like Jeff Bezos and Mark Zuckerberg, purchasing property in Hawaii in the last year is, unfortunately, a double-edged sword, demonstrating the investment potential of purchasing a property in Hawaii while working to drive property prices up even higher.
While the high demand for property has kept Hawaii’s construction industry relatively stable during the pandemic, construction efforts are not nearly enough to meet the demands of all of the potential buyers. And, with the state’s strict building codes and regulations, it is not likely that we will see a huge increase in new developments in the near future. Entitlements in land use parlance refer to the various permissions that must be obtained from governmental units in order to develop a piece of land. The time it takes to obtain all of the entitlements needed to develop land in Hawaii is much longer than on the U.S. mainland and this comes with costs that are then reflected in the end price of housing. County permitting processes are very lengthy, taking years for some projects to come to fruition. The federal, state, and county laws also present many hurdles for developers to overcome and the lengthy approval process often causes projects to be abandoned before they ever start.
The pandemic has seen labor costs rise dramatically globally. While the rise in construction costs has not been as significant in Hawaii, it has still been reported that after New York and San Francisco, Honolulu leads with the highest building costs. Ultimately, the lack of available properties, the lengthy entitlement process, and the high construction costs all lead us to one conclusion – the housing inventory in Hawaii is not going to catch up to demand anytime soon so purchasing property while you have the opportunity to do so is essential.
Reduction of Foreign Buyers in the Market
The pandemic and recent events of global importance have seen a notable drop in foreign property investment, specifically from Japanese, South Korean, Chinese, and Russian buyers. Sales of Hawaii properties to buyers from Japan dropped by 61% in the fourth quarter of 2021. This is also true for South Korean buyers whose numbers dropped by 70% in the same period.
Travel restrictions during the pandemic played a role in these numbers as potential buyers were unable to physically visit properties they were interested in. In addition, many countries put travel bans and advisories in place for their citizens, making it difficult or impossible for foreign buyers to purchase a property. The recent global political climate has also made some investors hesitant to purchase property outside of their home countries.
It’s important to note that while foreign investment has slowed down, it is still happening. And, with many countries having lifted travel restrictions and the vaccine now widely available, we expect to see a rebound in foreign investment in the coming months with prices skyrocketing to even greater heights. This means that now is still a great time to purchase property in Hawaii as there are fewer foreign buyers competing for the same properties – this will not, however, last for long.
Interest Rates Are Still Near Historic Lows
Since the start of the pandemic, mortgage rates have been dropping significantly, with March 2020 seeing an all-time low of 2.65%. By the end of 2020, rates were still under 3%. However, compared to pre-pandemic rates, this is still very low.
What does this mean for potential home buyers in Hawaii? It means that now is still a great time to buy a property. These low rates present a unique opportunity for buyers as they allow you to purchase a property with a lower monthly mortgage payment. Mortgage payments are one of the largest expenses a homeowner will have so this is a significant saving. Higher mortgage rates work to reduce the size of a mortgage that a buyer qualifies for. It’s been said that for every percent that interest goes us, it impacts a buyer by approximately $100,000 in buying power.
In addition, these low rates also present an opportunity to refinance an existing mortgage to take advantage of the lower monthly payments. And, for those who are looking to purchase a property as an investment, these low rates make it an ideal time to buy as you can take out a loan with a lower interest rate, meaning you will have more money to reinvest in your property.
This means that now is still a great time to consider purchasing a property in Hawaii as you will be able to take advantage of the low-interest rates and potentially more favorable terms before the rates start to rise again.
The Bottom Line
If you’re thinking about buying property in Hawaii, you’ll want to act fast before the prices become unattainable. The market is expected to rebound in the coming months as more travel restrictions are lifted and foreign investment starts to flow back into the market. In addition, interest rates are still near historic lows, making now a great time to buy a property with a low monthly mortgage payment.
Additionally, The Great Resignation poses another opportunity for potential home buyers and renters. Many people have been re-evaluating their lives during the pandemic and deciding that they want to live in a place that brings them happiness. For many, this means moving to Hawaii. The state has seen an influx of people moving here over the past year as they look to escape the cold winters, high taxes, and fast-paced lifestyle of places like New York City and Los Angeles. As working from home has become the new norm for many people, it has made it easier for them to relocate to a place like Hawaii where they can enjoy the year-round sunshine and slower pace of life.
If you’re considering buying a home in Hawaii, there’s no time like the present. is here to help you find the perfect property and get the best mortgage rate possible. Contact Elias today to learn more!
