May 2024: National and Local Headwinds Slow Real Estate Market on Maui

Maui Real Estate Market

Since my last Maui real estate market report in Q4 of 2023 a LOT has happened. The last 4-5 months have been packed full of market impacting events. Many changing variables at the local and national level have contributed to the current market conditions that favor buyers more now than they have in a very long time. I’ll get started with what’s been going on locally. 

May 4th Update: Maui County Seeks To Repeal Minatoya Rights to Apartment-Zoned Short-Term Rentals

Protesters and Hotels Force The Hand of The Mayor to Try to Repeal Property Rights

I originally wrote the rest of this market report about a week prior to the news that Maui County will seek to ban apartment zoned short term rental condos on Maui on the Minatoya List, a law that secured rights for owners of certain apartment-zoned complexes to rent short-term. Almost every single one of these complexes had been built with the purpose of renting short term in mind. They are not built and maintained for long term living.  

This is undoubtedly sending shockwaves through the island and real estate market right now and it is imperative that owners of these units that are being threatened submit testimony to the county to protect their property rights. Most importantly make your concerns known loud and clear to the Maui County Planning Department and send them an email at planning@mauicounty.gov or call them at 808-270-7735. We will need to work very hard to not only ensure property rights are protected on Maui, but to help Maui avoid a broader disaster that will harm local people irreparably. 

Repealing the rights of these short-term rental property owners will unfortunately not produce the desired result of immediately producing more affordable housing. There are 108 condos currently for sale on the market that are not short-term rentable with average days on the market of 70 days. We are not experiencing a shortage of inventory in housing, we are experiencing the same affordability issues that exist across the US.

Our short-term rental condo owners have suffered with all of us after the Lahaina fires, many immediately opening their units up for displaced victims, signing up for the FEMA program, and donating millions of dollars in cash and supplies while also donating much of their time to help in the aftermath. 

Even if 1,000 of these 7,000 units became available for sale at half their current value as a short-term rental, they would still not be affordable for the average household on Maui that has a median combined income of 95,000/year. Condo ownership has become even more expensive and most of these condos that are being threatened have maintenance fees over 1,000/month due to increasing insurance costs, common area maintenance, and building reserves. This could also have a negative affect on property values for all owners on Maui, taking away hard-earned equity from tens of thousands of other residents living and working on Maui. 

Stealing property rights from these owners will also produce approximately 30M less per year just in property tax revenue for the county and countless other millions annually in associated losses to tourism revenue and taxes. Building more affordable and workforce housing with the tax proceeds within our existing property rights is the pragmatic solution. 

At the moment, these A1 and A2 zoned units still have the right to rent short term, and not until the county council approves the bill that the mayor has asked the planning commission to prepare will things potentially change. Even if the bill does pass the council, a class action lawsuit will ultimately follow. The mayor, a former judge, says he expects this and knows that the courts will be the final decision-makers. 

In the meantime, we will have to navigate the sales of A1 and A2 zoned STR properties in a new way and there will certainly be a negative impact on current value with the possibility of a ban looming. Hotel-zoned properties have not been targeted and are not included in the discussion.  Please feel free to reach out with any questions. 

The Minatoya List

Minatory List Page 1

Minatoya List Pg 2

Minatoya List Pg 3

Local Real Estate Market Factors on Maui

Local Maui Real Estate Market

The impact of the Lahaina fires continue to unravel in the market here on Maui. Fortunately, it sounds like the FEMA program that enlisted thousands of property owners to rent their homes to displaced fire victims through FEMA has been a huge success. Both the state and Maui County have indicated that they will be able to move all of the remaining fire victims out of the Ka’anapali hotels and into these properties by June. This is welcome relief for these individuals and families who have been living in a lot of uncertainty while having to go back and forth between rooms at the hotels. This will also be a boost for the West Maui economy as tourists resume coming to these hotels and properties.

Early in the FEMA enlistment program the Governor threatened a ‘moratorium’ on short term rentals on Maui if they were unable to secure enough rentals. Almost like an airline threatening to cancel an overbooked flight if 5 passengers don’t take the credit and get on the next flight. This however proved to be unnecessary, but it did provide some uneasiness amongst STR owners and anyone in the tourism business as that could have a disastrous effect on our local economy. I had many conversations with a lot of my clients about this and from the beginning it seemed like political posturing and it was. 

These short term rental condos are mainly 1bd and 2bd floor plans and were built for transient accommodations. They cannot comfortably become permanent housing for families and with the increases in insurance, those families cannot also afford the HOA’s, which include complex management, landscaping, amenities, etc. The solution isn’t to cause damage to our second home owners and investors who pay the majority of the property tax collected by Maui county and who also have shown incredible kindness through charitable donations. We need to build more multi-family complexes and  affordable residential neighborhoods, something the state and county has previously been at fault for intentionally delaying and purposefully making difficult for developers. Now, they will seek to expedite the permitting and approval processes to improve conditions for developers. 

Maui Properties For Sale

Legislation to Give Counties More Latitude With STR's

Condos on Maui

A bill is circulating in the senate that will give individual counties more latitude in their approach to short term rental zoning and restrictions. Interestingly, the counties already have latitude and flexibility in this department. Two years ago Maui County decided to put a moratorium on the construction of any new short term rentable condo complexes with Bill 159. This was just Maui County. If you’ve traveled around Hawaii, you’ll see a different climate with STR’s on every island.

The Big Island still allows short term rentals of single family properties, on Maui that was rolled back and only certain properties that went through a lengthy 5 year approval process or were grandfathered in can rent short term. The right also doesn’t transfer at sale on Maui. So, this bill isn’t particularly concerning for us here on Maui. While it is important to acknowledge we have an exacerbated housing crisis on Maui, doing anything with the rights of short term rental condo owners isn’t the silver bullet a small group is hoping it would be. Look, if it were, I would be behind it too, it just doesn't fix anything when you look at the domino effect.

In fact, these short term rental owners and rentals are contributing big time, through the taxes they pay as well as the philanthropic contributions they have been making, as we heal and recover economically. Unfortunately, there is no silver bullet to fix our housing crisis as we are also subject to the same broader economic factors that the rest of the country is facing contributing to the broader housing crisis, we just need to build as efficiently and economically as possible with local families in mind. 

 Market Real Esstate Maui 24

Condo Market on Maui

National Real Estate Market Factors

Many in the real estate and lending communities were celebrating back in December and January when it appeared as if we may see 3-6 rate cuts this year. After last weeks inflation numbers and consumer spending reports, it looks like we may not see any rate cuts until 2025. With this unexpected economic strength in the face of continued inflation we should settle into the idea that we will be in the 6-7% range for the foreseeable future.

Throughout the higher interest rate period, home prices have still been appreciating reliably. This is good news for both buyers and owners. The higher rates haven't been a big problem for buyers on Maui over the past few months either, it has however decreased the total pool of buyers, but it has also given them some power.

What’s Changed in The Maui Real Estate Market

Over the last few months the market has noticeably become a buyer’s market and despite the interest rates, buyers have been very active. Inventory is up significantly to about 4 months supply, up from 1.4 months supply at height of the pandemic frenzy, right before interest rates went back up in early 2022. In general, this has not negatively affected prices, there were some purchases made in 2022 that exceeded the current market at that time and some sellers are seeing that. The median sales price of single family homes is up 9.5% year over year to 1.3M. The reported median sales price of a condo is up 62.9%, but don’t freak out just yet.

This statistic is an anomaly because the brand new Wailea Hills La’i Loa complex had many of its units finish construction and are priced in the 2-3M range. They should not be included in the reporting, but they are. So, don’t read too much into that statistic. The one we should read into is that there are 100% more condos for sale in March of 2024 compared to March of 2023. This is great news for buyers, you now have options! There are now 6.4 months supply of inventory in the condo market, officially broaching the 6 month number to be a strong buyer’s market. 

Closed Sales on Maui April 2024

What I’m Telling My Clients About The Market

Here are the current takeaways from the Maui real estate market data and what I’m seeing in the market. Obviously, the sun is shining on buyers more than sellers right now. Sellers have been needing to be more negotiable on price, they have been accommodating repair requests, and are still cashing in on a great deal of appreciation. It’s really a win-win situation in the market at the moment. Prices haven’t stopped appreciating, on most properties, but buyers don't have to chase them the way they were.

This isn’t true for every property though, the prime properties in prime condition will still command a premium and not all of them will budge, but for our average buyer, you’re in the driver’s seat for the most part. The overall climate is improving on Maui. There is some light at the end of the tunnel for Lahaina with the round the clock debris removal and many lots already being cleared for rebuilding. FEMA, the State of Hawaii, and the County of Maui are working together and progress is being made in many departments. Tourism is rebounding and healing is happening. Thank you for your continued support for our beautiful island and if you ever have any questions about the market or anything Maui, I’m here to help. 

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Evan Harlow Maui

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.

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PAST MAUI MARKET REPORT NOVEMBER 2023

Maui Real Estate Market

What we’re seeing in the real estate market at the national and local level here on Maui is something we haven’t really seen before, low supply and low demand simultaneously. Typically, either supply or demand exceeds its counterpart and that tells the story of the market we are in. For example, 

  • Demand exceeds supply=seller’s market. 
  • Supply exceeds demand=buyer’s market. 

This is not the case right now and it's not the only unusual aspect of our current economy. 

How the National Real Estate Market Affects Maui

At the Federal level, the treasury yields are inverted, which is rare. When treasury yields are inverted the yields on shorter-term securities exceed those for some longer-term securities. I only mention that as it relates to mortgage rates, which are obviously the single largest headwind for the real estate market in general at the moment. 

Today, the 30-year fixed average is around 7.5% depending on where you get that information from. Which is about half a point lower than two weeks when the worse-than-expected jobs report sent treasury yields lower, of which mortgage rates follow. Many are quick to assume that one missed jobs report is enough to get the Fed to start dropping rates, but I wouldn't hold my breath for rates to drop very much right now. Chairman Powell has made it clear that we won’t see any easing from the Fed until inflation is completely and undeniably under control and it still isn’t. 

A Weird, But Good Economy

Nationally, we’re in a weird but surprisingly good economy right now. Sure, at the consumer level, no one likes the higher prices of everything, but the higher interest rates haven’t sent us into a recession, yet at least. Inflation has dropped precipitously but still remains above the desired 2%. Compared to other countries around the world dealing with the same inflation challenges we're sitting in a great position. 

Low unemployment, strong GDP, and solid wage growth are all good things macroeconomically. However, the housing market is part of the problem with inflation and it isn't budging one way or the other at the moment. 

The Housing Market is Straining Budgets

The housing market is seriously stretching the budgets of renters and anyone who is currently trying to buy a home. It’s never been less affordable to buy or rent a home. Is this a new normal or will the bubble burst? That’s hard to tell as the real estate market at large isn’t a house of cards as it was back in 2007/2008. 84% of Americans have a mortgage rate at or below 5% while 63% have 4% or better locked in.

Back in August, US mortgage delinquency rates fell to an all-time low. Higher mortgage rates definitely put the brakes on the acceleration of home value appreciation, but we haven’t seen a significant drop. We would need way more sellers for that to happen and it's not happening because of the aptly titled “Golden Handcuffs” that the low interest rates have put on those who might want to sell and move. 

The Golden Handcuffs Syndrome

Selling and losing a sub 4 percent mortgage rate is hard to stomach when you’re only able to buy a comparable home but then have to assume a 7.5% mortgage rate which could mean thousands more a month in payments.

While inventory is growing slightly and is up from the post-pandemic lows of 2021, it's still stuck in neutral.  Along with this, some markets around the country are up a little year-over-year and some are down YOY. Bringing us to Maui. 

How The Lahaina Fire Has Affected the Maui Real Estate Market

Lahaina Harbor Before The Fire

Aside from the downward pressure on the market from the highest mortgage rates in 20 years, we’ve obviously had an unimaginable tragedy happen to our beloved Lahaina Town. The long-term economic implications of which are still being discovered and aren’t yet completely understood. 

The priority here in Maui has been to do our best to help the survivors and victims of the fire, ensuring they have the resources they need to live without their home and/or place of employment. This has caused a very large displacement, both with residents moving out of Maui and with residents moving around the island. It’s generally believed that it will be at least 4 years before any new construction will begin in Lahaina to start rebuilding the town. 

We Will Never Be The Same and So Many Are Displaced

Popular Front Street businesses like Cheeseburger in Paradise have already announced they will not be reopening at their former location and don’t expect to be able to rebuild along the seawall along Front Street. Front Street will never be the place we once knew and it’s still hard to accept that. 

Many of the displaced, enabled with special loan programs and relief funds, have been actively buying homes around the island which has created some competition around the median-priced single-family home market and in the rental market. Given the loss of housing inventory from the fire, our total housing inventory around Maui is now squeezed even tighter.

As competition for rentals rises, so do the costs. Unfortunately, rents are being raised by landlords of long-term rentals as a result of the Lahaina Fire victim displacement to capitalize on the higher demand and competition. 

What's The Solution?

Wailea Hills La'i Loa

The only real market-based solution for this is more new construction. While there are a few new projects in the works on West Maui, Maui has historically been slow to develop and it has good reasons for that, but it is hurting affordability for the average resident. A couple of new developments have been progressing well though.

We have seen the first units at Wailea Hills La’i Loa close recently and the first homes at Hoku’ula in Haiilmaile are nearing completion as well. 

 

Premium Properties Can Still Move Quickly

Wailea Palms

I recently listed Wailea Palms 3201, one of the best units in the Wailea Palms complex, for $2.59M, which is the highest price ever for a condo in that complex. We had a full-price cash offer in one day and closed in less than two weeks. There are buyers waiting in the wings for certain kinds of premium properties and this was certainly one of those scenarios. All of that being said, here are some of the key numbers from the October numbers on the real estate market in Maui.

Maui Real Estate Market By The Numbers

Starting with new listings, the new listings by month are in a historically low trend with only 834 single-family homes and 1,031 condos coming on the market year to date. Compared to the first ten months of  2021 when 1,305 single-family homes and 1,794 condos had been listed, we’re seeing a little more than half of the new listings we were seeing then and a quarter of what we were seeing in 2022. 

The Maui real estate market is not absorbing these new listings quite as quickly though and that has led to an increase in our 'Months Supply of Inventory' which now sits around 4 months for single-family homes and and 3.5 months for condos. Meaning that if no new listings came on the market, the available inventory would be sold in that period of time. 

Single-Family Market Stats

Maui Real Estate Market


Total Sales Are Down

Pending Sales of single-family homes have trended downward year to date and are down about 22% from 2022 while condo sales are down 37.6%. Closed sales are similar, single-family closed sales are around 30% down YOY, and condo closed sales are down about 40%. 

Are Prices Dropping In Maui?

No, prices are not dropping in Maui. The good news for homeowners and the bad news for buyers is that even with the higher interest rates and short supply, prices are still heading upward. The median price for a single-family home is now at 1,269,025 versus 1,075,000 in 2022, an 18% increase. In general, prices have been stable, but with the recent wave of new inventory we could see some sellers need to lower prices some to get their properties sold. 

Condos have cooled though and the median condo price is only up 4.4% YOY. 'Percent of List Price Received' has remained constant for the last three years around 97-99% roughly on average. 

Condo Market Stats

Real estate market on Maui

 

Where Does The Market Go From Here?

I believe that there is pent-up demand both from sellers who want to sell but are waiting and from buyers who want to buy but need rates to be lower or for the dust to settle after the tragedy in Lahaina. I'm not personally expecting to see a lot of easing in rates, but it sounds like we might see a return to low 7's or high 6's soon and that would be enough to unlock some demand

Winter is typically a busier time for the real estate market on Maui and we are likely to see both more sellers and more buyers over the next few months. At any rate, thanks for taking the time to check out this market report, and please let me know if there is ever anything I can help you with. 


Maui Real Estate Market Report March 2023: Will Prices Go Down This Year?

Maui Real Estate Market Report March 2023

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

Real Estate Market Maui Hawaii

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

Kahana Condos

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. 

The Maui Luxury Real Estate Market

Makalii at Wailea

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. 

 

Realtors Association of Maui Statistics for February 2023

Maui Real Estate Market March Statistics

Maui Real Estate Statistics 2023Maui Market ReportMaui Market Real EstatePage 5Real Estate Market on Maui

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!

Evan Harlow Maui

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.

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Maui Real Estate Market Report From July 2022

Maui Real Estate Market

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

Wailea Point Condos For Sale

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?

Mana Kai Maui Condos

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. 

Median Sales Price for a Home on Maui

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?

Maui Real Estate Market Inventory

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

Making Money in the Real Estate Market

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?

Maui real estate market future

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.  

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

Single Family Home Sales MauiCondo Sales Maui 2022

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 Maui

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.

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Posted by Evan Harlow R(S) 82003 on

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