Continued stress on inventory creates All Time High prices for residential properties in North Kona and South Kohala.
Last month I sounded the alarm with the not-too-astute question: “When inventory (SUPPLY) is down and showings (DEMAND) are up, what comes next?“
This month I am reporting that in September (SEPTEMBER of all months!) we have seen a record high median price for houses in both North Kona and South Kohala. Right now we are poised for the highest median price year in our history by a wide margin. Currently the Year-to-Date median price for houses in North Kona is nearly $100k over last year!
Hey Mike- doesn’t this look like the bubble we saw back in 2005-2007?
Great question! Here’s the difference- In 2006 and 2007 there were 2,468 Fee Simple houses and condos sold in North Kona and South Kohala. 18.2% of those transactions were cash. In 2020, 37.8% of the 1,039 transactions have been for cash, and 39.4% of the transactions from July 1 through September 30 have been cash. With truly crazy-low interest rates, this might be counter intuitive. However, with the massive real estate reshuffling, people are able to sell and access their home equity very quickly. Often these buyers can buy cash and live debt free in Hawaii- which is a pretty sweet spot to be in.
If you read this report on a monthly basis, none of this will come as a surprise. The data is lining up with what we have been seeing on the ground in the pending market, and with what I’ve been predicting.
So what does this all mean for you if you are a potential buyer?
Now more than ever, cash is king. With so low inventory, sellers can really call their shot. They want super clean, super fast, nothing-can-go-wrong offers. It has NOT gotten to the point where sellers are asking people to waive inspections, but I hear that is happening in some parts of the country. Be prepared to buy a property which you have never seen. Sight unseen offers are well over 50% of the buying market.
Looking at the Under $1M Market, our low inventory is holding steady. Houses are at 1.5 months and condos are at 3.75 months. We currently see 121 (+27) houses and 119 (+3) condos in escrow.
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 $1.55M (-8.6%) with 66 transactions closed (+57%) and median days on market at 52 (-54%).
Everything I mentioned last month (and the month before) 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.
From 2 months ago- 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.
Call to Action
Hawaii Island Mayor Harry Kim has indicated that he plans to NOT PARTICIPATE in the State’s October 15th re-opening. I can not begin to tell you how unpopular this decision has been across the board. It seems that the Mayor is one of the only people who does not want to see Hawaii re-open. In fact, every State Representative and Senator have urged the Mayor in writing to abide by the long awaited re-opening of Hawaii.
Hawaii is the only state with a 14 day quarantine. The only exceptions are for some specifically designated workers, doing their work tasks. You can literally take a Covid-19 test every day and be negative every day, and you are still in a quarantine, with the threat of arrest and a $5,00 fine (as well as a public shaming). The result on our economy has been beyond the devastation any of us could have imagined back when were were told “15 days to flatten the curve” back in March. More than half of our restaurants are closed for good. All of our major hotels have been closed. A walk on Alii Drive in the heart of town reveals that 75% of all shops are now closed and empty. Short term rentals have been prohibited from operating. The community has patiently endured the devastating effects of the shut down. But at some point, the restrictions must be lifted.
Let the Mayor know what you think:
Mike Drutar is the Principal Broker and Owner of NextHome Paradise Realty, located on the Big Island of Hawaii.