Inventory continues to decrease on the residential side. This has led buyers to consider condos, which is now also seeing a decrease in inventory. Showings are up compared to last year.
When inventory (SUPPLY) is down and showings (DEMAND) are up, what comes next?
It seems the real estate and home improvement is the singular bright spot in our economy. There’s an old saying- “Out of sight, out of mind”. If you believe that, then the opposite is also true. We focus and obsess on what we see everyday. This has led to people moving to where they want to be, and investing in their homes if they like where they are.
Looking at the Under $1M Market, our low inventory on August 4th was at 2.6 months for houses and 7.1 months for condos. On September 4th, both of those numbers have been essentially halved. The residential inventory is at 1.3 months, and the condo inventory is at 3.6 months. Even as I write this, looking at the number from September 9th, both are still lower than 5 days previous.
Looking at the Over $1M Market– we are going to look at a longer sample time and compare it to the previous year. In the last 90 days in 2020 compared to 2019 the median price is $1.7M (+10.7%) with 69 transactions closed (+15%) and median days on market at 67 (-30%)
Everything I mentioned last month is still true- the buyers are mostly coming from the mainland. They have cash or equity from current real estate holdings that they can leverage. some are moving here full time to work remotely. I believe we are only starting to see this demographic. Take a look at this link- Pinterest pays $89.5M to terminate office lease. We are hearing of a lot of buyers moving here because their SF Bay area tech job is now a remote job. One thing is for sure- I would not want to be holding commercial real estate right now. And, if I owned Bay Area residential real estate, I would sell as fast as I could. If you need a referral for a Bay area agent (or anywhere else for that matter) let me know and I’ll connect you with a professional.
From last month- Are we positioned to meet an unexpected increase in demand? Not. Even. Close. This is where I get on my soapbox. In 2015 the Hawaii Department of Business, Economic Development & Tourism reported that Hawaii Island needed about 25,000 new homes built between 2015 and 2025. Despite this warning and a steady and improving economy over the last 5 years, our current County administration has worked hard to stifle any building for the people who live and work here. The only construction of any scale over the last decade has been Kohanaiki, where prices start at $2.5M for a condo and go up to $20M for a house. Obviously that’s not going to help the people who call Hawaii home one bit, except for the needed job creation.
We are in the very first phase of what will be a massive shift in the way we live in our homes for a long time. Owners are downsizing, upsizing, moving closer to family, closer to where they want to be, and further from work. It’s Real Estate Musical Chairs.
What About Current Market Conditions
Let’s look at three different measurements for both the residential and condo market under $1M.
Right now there are 94 residential properties in escrow. Compared to March 1, our last clean datapoint, that number was 108. For condos, we have 113. On March 1 we had 130 in escrow.
Current Listing Count
We have 93 houses on the market currently. March 1st it was 122. We have 187 condos listed on the market right now. In March it was 160, showing that condos are lagging a bit.
Inventory CONTINUES TO GO DOWN!
Right now our residential inventory in this market is 1.3 months for residential, down from 1.9 last month. Condo inventory is 3.6 months down from 4.6 from last month. For perspective those numbers were 2.3 for residential and 3.4 for condos before Covid. While houses are the clear winner, the lack of options is beginning to push some people towards condos. I believe we will see the condo market improve, with some exceptions for condos which tend to be primarily used for STVR’s.
Now the bad news
While the entire country is going through economic difficulties, Hawaii’s problems have been amplified due to policy decisions which have proven to damage our economy worse than any other state. This article from Yahoo! Finance shows how Hawaii has the highest unemployment in the country, and is 25% worse than the next worse state. Combine that with the fact that Hawaii is the only state with a prohibition on visitors, while being the state most reliant on visitors, and it becomes difficult to see a path out of this for the people who live and work here. According to CoreLogic, 7.1% of all mortgages are currently deliquent in the US and 8.2% of all Hawaii mortgages are deliquent. Based on deliquency rates and unemployment Hawaii, Nevada, Florida, New York, and New Jersey are poised for the most volitility.
CoreLogic predicts “barring additional government programs and support, serious delinquency rates could nearly double from the June 2020 level by early 2022. Not only could millions of families potentially lose their home, through a short sale or foreclosure, but this also could create downward pressure on home prices — and consequently home equity — as distressed sales are pushed back into the for-sale market.”
Mike Drutar is the Principal Broker and Owner of NextHome Paradise Realty, located on the Big Island of Hawaii.