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Maui Real Estate Market Report March 2023: Will Prices Go Down This Year?
Looking back at the last 12 months of the real estate market here on Maui, it has certainly been an interesting period full of speculation and diverging opinions about the near-term impacts that rising interest rates would have on home prices and buyer activity. Last year, many were thinking the market would drop precipitously while others believed that the bull market would continue to run.
The results, at least so far, have been a return to normal market behavior and resemble something closer to the soft landing the Fed has been trying to achieve with its incremental rate hike strategies. While most mainland markets have seen considerable softening since rates went up in late Spring of 2022, the Maui real estate market continued to run for a few extra months. The market plateaued a little last Summer/Fall but property values have still been increasing overall given that inventory levels remained below what is necessary to escape the seemingly endless seller’s market and enter into a true buyer’s market.
Maui Has Several Different Real Estate Markets
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On Maui, we have a unique cross-section of property owners and property types. From local residents buying their primary residence to out-of-state investors looking to enhance their portfolio, Maui attracts a variety of property owners. Each group behaves in slightly different ways and the different categories of our market tend to provide strength to each other as well.
When making informed decisions about the market, it's important to dive deeply into the particular niche you are targeting to get the best outcomes rather than rely on generalizations and headlines from major news networks. Real estate on Maui behaves differently than other markets around the US while also following some of the same trends.
Short-Term Rental Condo Market
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One of the sub-markets that receives the most amount of attention on Maui is the short-term rentable condo market. In this category, we are still seeing very low available inventory and many high-demand complexes will see new listings go under contract within a week of being on the market, especially if it is around the median price point. Given the unit is well priced of course.
Buyers don’t have to go way over asking like last year and complexes like Papakea, Maui Vista, and Maui Banyan have all had recent inventory that was scooped up within days of listing.
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The Maui Luxury Real Estate Market
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The luxury real estate market on Maui has still been moving quickly as well. I recently co-listed a condo at Makalii in Wailea at 3.195M, a price well above the most recent comparable sale in the development. Within a month we had the offer we were looking for. We were confident that the market would respond to our pricing as the inventory in the 2.5M-5M range has been almost non-existent in Wailea.
Several market-priced homes in the 5M range have also gone under contract quickly in the Wailea Kialoa neighborhood. In one of the largest sales in recent years, 4572 Makena Road sold for $32,673,491 after being listed for $35M. However, Wailea Point 102 and 9 Bay Drive are still on the market.
Median-Priced Primary Residences and Condos
For residential median-priced homes and condos, the story has been a little different. This market is affected more by interest rates than the luxury market and the short-term condo market. These are properties typically purchased by locals and with a 908k median condo price and a 1,076,000 median single-family home price, financing is most often a necessary component of the purchase.
In complexes like Kihei Villages, there has been a significant increase in inventory and units are not selling quickly or for what they may have had last summer. Single-family neighborhoods like Kehalani and Wailuku Heights are still seeing low inventory and listings go under contract quickly, however.
Maui Real Estate Market By The Numbers
Looking at the raw data, we see a vastly different market than we saw in February of 2023 than we did in February of 2022. Last February things were still going off, buyers were rushing to secure the last of the ultra-low interest rates. This February we saw a 55.4% decrease in the total number of closed sales vs last year. The number of homes for sale is only up 23.8% though.
Surprisingly, the percentage of list prices received remained steady at around 97.2% for single-family homes and 98.4% for condos. Simply put, there were both way more sellers and way more buyers last year. However, until we have an increase in inventory, we can’t expect a drop in prices, and owners have good reasons not to sell.
Maui Properties For Sale
Realtors Association of Maui Statistics for February 2023
Sellers Are Reluctant To Sell (And Will Hold Firm on Prices)
One of the unexpected consequences of the pandemic interest rate lowering is that it actually made housing prices much stickier as the Fed needed to hike rates to reign in inflation. Those who purchased or refinanced at sub 4% and sub 3% interest rates have no interest in selling and finding another similarly priced home as they will ultimately have to pay almost double the interest payments they currently make. This is keeping inventory suppressed and likely will continue to do so until the Fed reverses course, possibly in late 2023 or 2024.
Along with this, owners of Maui real estate know what they hold and won’t sell for less than what they believe it is worth. Only certain circumstances create the need for a quick sale for an owner and usually only in those situations can a buyer find any type of a deal. Owners of short-term rentable condos are also making more revenue than ever as nightly rates have skyrocketed over the past few years.
If you have any questions about the Maui real estate market, I’d be happy to answer them for you. Feel free to give me a call at 808-214-4799 or shoot me a message through the form below.
Get In Touch!
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Evan Harlow is a Realtor on Maui who has the expertise, experience, and work ethic to help you achieve all of your real estate buying or selling goals. We promise exceptional service and support from the beginning of the process through closing and beyond.
Maui Real Estate Market Report From July 2022
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I had to take a break from writing market reports! It was just too redundant, it was the same story month after month for the past year and a half with terms like ‘pent-up demand’, ‘historic low inventory’, ‘multiple offers/200k over ask’ and ‘historic low-interest rates’. If you were as tired of reading them as I was of writing them, this market report is going to be a breath of fresh air.
We finally have something new to share and analyze. After about 18 months of running itself to death, the real estate market itself has finally taken a much-needed breath of fresh air and we can pronounce the market as shifted.
The Maui Market is Still a Seller's Market, But It Is Beginning to Favor Buyers More
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As the macro-economic conditions in the US change the broader housing market, the market on Maui is also seeing its own changes. The breath that the market is taking is, of course, brought on by a long-awaited rise in interest rates as well as prices that have risen too rapidly. Since about mid-April, when rates really began to creep into the high 4’s and mid 5’s, many buyers have either been priced out of the type of property they had their hopes on or are taking a calculated recess from making a buying decision. Many are hoping to catch lower prices on the other side of this, but that doesn’t appear to be in the forecast, just the return to a more traditional, more balanced market.
Maui is unique in its real estate market stratification because such a large part of our broader market is the luxury, second-home, and investor sector that influences the primary homebuyer market. This luxury, second home, and investment sector is, of course, responding slightly differently to the interest rate hike. These clients are less affected by rates and less has changed with these buyers and sellers.
The micro-market most affected by rates is of course the primary homeowner market. Many buyers around our median price point around 1.2M are just getting priced out, unfortunately. The appreciation combined with rates is taking them out of the market. There are still many who haven’t been, but fortunately for them, and less fortunately for sellers, there is less available demand making it easier for capable buyers to get an accepted offer.
Are Real Estate Prices Going Up or Down?
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Declining prices and decelerating appreciation are two similar, but distinctly different functions in the market. As of June 2022, the median price for a single-family home on Maui is $1,255,000 ( A 13.6% increase from June 2021) and for a condo, it's $832,500 (A 34.3% increase from June 2021).
The reason we are seeing price reductions and some listings sitting longer than usual is that many sellers who listed in the last two and half months didn’t have good data. It's not always easy to see a shift coming, or want to believe it's coming. Prior to the shift, you could just slap 20% over the last sold price in a complex and still get multiple offers, over ask, without an inspection, because that’s how things were going for a while.
Fortunately, for buyers, the market is balancing back in their favor.
So, in order for sellers to get their properties sold (unless it's priced perfectly, or in the top 10%-20% of desirability), they have had to either do a price reduction or continue sitting on the market. They may have had to accept an offer that had an inspection contingency (that’s so 2019) and they may have had to take a little less than their ask. But, the sold prices support the notion that we aren’t seeing a big price drop, just decelerating appreciation, hopefully back to something more sustainable. On Maui, that’s 7% a year and up, unlike the wild 20% and 30% average we’ve seen in the last 12 months.
Why Isn't Inventory Rising Significantly?
Even in light of the reduced buyer demand, inventory has yet to show signs of any significant increase. For prices to actually decrease, we would need to see a significant increase in inventory. Any increase in inventory like this is typically precluded by some national or international event that requires a certain percentage of property owners to get out of their mortgage and secure their equity to stave off a financial threat elsewhere. This is not the case right now and even a full-blown recession wouldn’t necessarily create that event.
Inventory has been growing ever so slightly on Maui, out of buyer hesitation rather than there being an increase in sellers. Since the mortgage crisis of the late 2000s, lenders have had to ensure that they are writing loans that can get paid, imagine that. Thereby reducing the chances of a broad mortgage default, which isn’t happening. One of the main things that’s holding back an increase in inventory on Maui is that the short-term rentable condo market is outperforming almost every other investment in the world, except maybe oil over the last few months.
When Realizing Massive Gains Doesn't Make Sense
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A great example of the value of a successful short-term rentable condo is from a client that I helped purchase a unit in the Kapalua Golf Villas in 2021. He closed on that unit in April of 2021 for 950k with an interest rate of somewhere in the mid-3 % range. A few months back in February of 2022, I brought him an off-market offer for 1.8M. That’s a nearly 100% ROI in less than 12 months.
He is, of course, an extremely wise individual, savvy investor, and all-around smart businessman. So, he said no thanks to the offer. He says, “What am I supposed to do with this money? I wanted a condo on Maui where I could come and spend time with my family, I wanted to do that with a unit that would generate positive cash flow, and I’ve accomplished that. If I sell and make 850k, what do I do with it? Buy another unit using a 1031 tax-deferred exchange or pay taxes and hold cash. Neither really makes any sense. I think I’ll actually buy a second unit after seeing the rental revenue this one generates, I’m a buyer, Evan, not a seller.”
I was certainly understanding of his position and we politely declined their offer. He turned down realizing his gains on that type of appreciation because he genuinely loves his time on Maui, generates a healthy positive cash flow YOY, and sees the long-term value of holding. The fact that you can invest in a market where the other investors have this type of foresight, poise, and confidence is a great sign of its continued strength.
We all see what happens in more liquid and volatile equity markets where ‘flash crashes’ and ‘panic selling’ regularly happen. In the short-term rentable condo category on Maui, owners are very reluctant to give up their home away from home which makes them money when they are away. So, they just kick up their feet on the lanai, watch the sunset and enjoy another Mai Tai. This is likely what most of these owners are doing today while inventory remains scarce and they have no thoughts of selling.
Back To The Future: What's in The Forecast?
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Well, if I knew the future I probably wouldn’t be in real estate, I’d follow my true passion of sports betting! Just kidding.
We do have a few ideas of what the near forecast for the Maui real estate market for the rest of 2022 may hold. I had an interesting conversation with one of my lenders recently and he believes interest rates may be heading back down by the end of the year. This caught me off guard because most of what we’ve been told in the news is that we should expect them to keep going up based on the Fed's recent comments.
He indicated that we passed the sweet spot for rates and given the recessionary models, rates will need to come down to soften that blow. While we may initially need to have rates raised in the near term, high rates are not necessarily here to stay. Most economists would agree that taking the rates down to 0 during the pandemic was an overcorrection at the time and if the Fed does execute the next .75 rate hike, that could be the overcorrection that drives us into a recession. Historically, rates always drop during a recession.
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A Confluence of Events Like Never Before
Weathering the pandemic's economic storm has created some very unique economic circumstances. When was there a recession where unemployment was below 4%? We’ve had declining GDP for two consecutive quarters, but many corporations are posting all-time high profits? The stock market took a significant correction, but that’s on the heels of an incredible bull market. The media needs to generate headlines that get our attention, but they are not motivated by expressing a calculated and sober view of the economy, they need to generate buzz and nothing generates buzz like fear.
I have a client who happens to be an esteemed global economist, who I won’t name, but he is kind of a big deal in certain circles. His belief is that this inflationary period won’t lead to a protracted recession, that it is primarily the result of the pandemic supply chain issues that existed prior to the Russian/Ukrainian war and are now exacerbated by that conflict. His assertion was that when these constraints begin to ease, so will inflation.
It Pays To Know The Maui Real Estate Market
While we are still waiting to see how everything plays out completely, what we do know for sure is that the real estate market has shifted, will shift again in the future, and will keep doing so periodically. Studying the market is one of my biggest responsibilities as a Realtor and navigating these shifts successfully for my clients is something I take a lot of pride in.
I appreciate my clients more than they could know, mainly for the plethora of things I have learned from them and continue to learn from them. I’m always happy to share my own Mana’o (The Hawaiian word for knowledge), so, if you have any questions, I’d be honored to be a resource for you.
Get In Touch!
Evan Harlow is a Realtor on Maui who has the expertise, experience, and work ethic to help you achieve all of your real estate buying or selling goals. We promise exceptional service and support from the beginning of the process through closing and beyond.
Posted by Evan Harlow R(S) 82003 on
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