April Data

As April comes to a close, we have a chance to see the first full month of real estate data after Covid, and we can begin to make some statements on where things are going for the near term. I’ll say first of all that nothing we are seeing so far is unexpected. If anything we have a better understanding of the magnitude of the change in the market at this point, and we can see who is impacted the most.

 

North Kona Residential

Starting off with the beacon of our market, we generally saw strength in the median price in this market. That’s the good news. The bad news is that we saw a big drop in the number of houses sold. I also think that we will see this number go down in the coming months. Remember, April sales are for contracts that were written, generally in February and March.

North Kona Condos

This is where we start to see how bad things can be. North Kona Condos are holding steady on price, which is a good sign. However, the units sold is nothing short of a market in near shutdown. In my opinion, a 62% drop in units sold is probably a little beyond what a lot of people expected on April 1. 

South Kohala Residential

Similar to the North Kona Residential market, we saw strong price growth, and a serious drop in units sold. The drop in units sold is not near the level we saw with the North Kona Condos.

South Kohala Condos

This sector is absolutely scary. Again, we saw upwards price trends, but the units sold- Wow! Only 10 condos sold in a month. That’s a 75% drop from a year ago. With this final piece of the puzzle, we can really see what the trends are, and we can make some predictions about the future. I’ll cover that later in this post.

Since we have broken the data down by market segment, let’s make a quick recap- some things that we can say across all markets. Surprisingly, there was price growth across all 4 markets. Combining all 4 markets, we had a 88 fewer sales versus April of 2019. However, condos were hit the hardest. Of those 88 fewer sales, 68 were condos.

What About Current Market Conditions

As you might imagine, things are very different today if you are trying to sell or interested in buying. Let’s look at three different measurements for both the residential and condo market under $1M.

Pending Sales

Right now there are 66 residential properties in escrow. Compared to March 1, our last clean datapoint, that number was 108. For condos, we have 70 properties in escrow. On March 1 we had 130 in escrow.

Current Listing Count

We have 121 houses on the market currently. March 1st it was 122, so no change there. We have 208 condos listed on the market right now. In March it was 160.

Inventory

This brings us to our current inventory. Right now our inventory in this market is 3.0 months for residential and 6.5 months for condos. I think it’s safe to expect those numbers to go up. For perspective those numbers were 2.3 for residential and 3.4 for condos before Covid.

 

Are We Going To See A Fire Sale? Is This 2008 Again?

I think that’s a big question for a lot of people, and it’s a very good one. Let’s start with “Is this 2008 again?”

There are A LOT of differences at a very fundamental level between this crisis and 2008. First and foremost, over the last 10 years we have seen more equity in the housing market than at any time before. People had to come up with significant down payments to get a loan in the last 10 years. Many others paid cash outright for real estate. And while the real estate recovery has not been what people were accustomed to in 2004-2007, that’s a good thing! We enjoyed a long, slow, and highly sustainable recovery for the housing market. The other huge difference is that people were not buying houses that they could not afford in mass like in the years leading up to 2008. That created a downward spiral of foreclosures and decreasing values, which caused more foreclosures, etc. 

The most important difference is that most people don’t have to sell because of finances. People are selling for life reasons, generally, as they will always do. Most people can ride this out for a while either with savings or the different Forebearance programs out there.

Okay, now take everything I said and throw it out the window if we are talking about a Condo, with a loan, where the seller requires the Short Term Vacation Rental income to pay the mortgage.  If this is you, it is my opinion that you should carefully consider selling. This particular segment is going to get beat up for a while. Again, this is if you need the STVR revenue to afford to condo. I do not expect a quick resolution to the Quarantine in Hawaii. I expect that the 14 day quarantine for people traveling to Hawaii to be in place for at least 60 days beyond when things are “opened up”. It could go a lot longer. In any case, people can not book STVR lodging for the forseeable future. The state may very well prohibit STVR’s for a while until they get the hotel industry back up an running. The future is very uncertain. It could easily be 2021 before an STVR owner has another booking.

As for fire sales, I’m not seeing a lot of crazy price reductions, but I am beginning to see some sellers get agressive. If someone needs to sell right away, this is the correct strategy. I expect we will see the median prices decrease over the next few months as some sellers become stressed. When that happens, it’s important to get in front of a declining market, and not chase it down.

 

Mike Drutar is the Principal Broker and Owner of NextHome Paradise Realty, located on the Big Island of Hawaii.