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Honolulu: Real Estate and Market Trends

Published on Wednesday - February 11, 2015

In spite of tempering appreciation rates, the Honolulu housing market continues to be one of the most expensive in the country. With a median home price hovering around $677,000, the value of a Honolulu home is roughly three times more than the average home in the United States. Having said that, even with a considerably higher appreciation rate over the last year, the average home in the U.S. is valued just over $216,000.

Over the course of three years, the Honolulu housing market has appreciated to the point where it was able to remove itself from a period of post-recession price weakness. Subsequently, the region has increased in price for three consecutive years. In that time, homes appreciated by 13 percent. Owners in the area are, therefore, the beneficiaries of a lot of new equity. The following highlights how much equity has been gained relative to the year of the home’s purchase:

  • Homes purchased in the Honolulu housing market one year ago have appreciated, on average, by $7,931. The national average was $12,783 over the same period.
  • Homes purchased in the Honolulu housing market three years ago have appreciated, on average, by $106,505. The national average was $55,406 over the same period.
  • Homes purchased in the Honolulu housing market five years ago have appreciated, on average, by $119,414. The national average was $49,675 over the same period.
  • Homes purchased in the Honolulu housing market seven years ago have appreciated, on average, by $84,991. The national average was $9,474 over the same period.
  • Homes purchased in the Honolulu housing market nine years ago have appreciated, on average, by $145,648. The national average increased $3,419 over the same period.

Both supply and demand within the Honolulu real estate market are supported by an equally strong job sector. In fact, Honolulu continues to exhibit one of the healthiest unemployment rates in the country. At 4%, Honolulu’s unemployment rate is nearly 2% lower than the national average, at 5.9 percent. Perhaps even more importantly, Honolulu’s unemployment rate continues to get better. Over the course of one year, it dropped a half of a percentage point. While the decline may not seem significant, it assuredly is. It is only magnified by predictions of a 1.3% increase in job growth. Again, with the Honolulu job market being what it is, supply and demand in real estate sector should remain strong; regardless of how high prices appreciate.

Honolulu Real Estate Market Statistics

Honolulu market infographic

A report issued by Trulia suggests that Honolulu is the fourth most overvalued market by 13 percent. The only markets more overvalued are Austin, Orange County and Los Angeles. For comparisons, Honolulu was overvalued by as much as 87% in 2006, before the bubble burst. In fact, the Honolulu real estate market has been deemed unaffordable form a historical standpoint. The average homeowner in Honolulu actually allocates 48% of their income to monthly mortgage payments.

Despite housing prices reaching historical highs, the entire island of Oahu has set a record for luxury-home sales in 2014. That being said; the number of homes that sold for $1 million or more on Oahu increased 16% from 2013 to 2014. That increase reflects 842 single-family homes and condominiums that came with a price tag of more than $1 million. The closest Oahu has come to reaching those numbers in the past was 2006, when 794 homes sold with a price tag or more than $1 million.

“Single-family homes represented 78 percent and condominiums represented 22 percent of total luxury sales in 2014,” Patti Nakagawa, Previews International director for Coldwell Banker Pacific Properties, said in a statement. “Eighty percent of single-family home sales are in the $1 million to $2 million price range.” Interestingly enough, Honolulu encompasses the top two areas in which home sales exceeded $1 million, Kahala and Diamond head.

The Honolulu real estate market is ripe with popular neighborhoods, as Waikiki is a popular tourist destination. With that in mind, Trulia has identified the following neighborhoods within Honolulu as the most popular:

  • Waikiki
  • Hawaii Kai
  • Makiki
  • Kuliouou
  • Waialae

Again, Waikiki is a popular tourist destination. However, it is also sought after for its growing luxury condominium inventory. It is those condominiums that have increased the average listing price in Waikiki to just over $1 million. Hawaii Kai, on the other hand, has an average listing price at $1, 508,466.

These expensive neighborhoods in the Honolulu real estate market have increased the average price per square foot to $628. No more than a year ago, that price was nearly 15% lower.

Honolulu at dusk

Trulia is currently host to approximately 1,313 resale and new homes in the Honolulu housing market. Those numbers include 48 open houses, in addition to 588 properties that are either in the pre-foreclosure, auction, or bank-owned stages of foreclosure. In fact, those behind on their mortgage represent just 3.7% of all the homes in Honolulu, which is nearly half that of the national average. According to Zillow, not even 5% of the homeowners in the Honolulu real estate market owe more than their home is worth. The recent rate of appreciation has certainly helped a lot of homeowners remove themselves from underwater. Moreover, experts believe Honolulu home values could increase by as much as 3.5% in the coming year, further reducing the amount of underwater homeowners.

For all intents and purposes, the Honolulu real estate market is incredibly healthy. The job sector appears ready to keep up with the coming price increases, fostering more activity than the average market. Even more so, historically low interest rates will continue to encourage buyers to actively pursue purchases. The real winner, however, appears to be the rental market. Buy-and-hold properties are fetching a premium right now. The average price one can expect to pay for rent in the Honolulu real estate market is $2,337. While not as high as areas like San Francisco, landlords cannot complain with the returns.

Honolulu Housing Market Summary:

  • Current Median Home Price: $677,600
  • 1-Year Appreciation Rate: -0.3%
  • Unemployment Rate: 4%
  • 1-Year Job Growth Rate: 1.3%
  • Population: 374,658
  • Median Household Income: $70,093

Honolulu Housing Market Q1 Update:

The Honolulu housing market has turned into one of the best in the country, and appreciation rates are a big reason why. No more than a quarter ago, Honolulu appreciation rates were in the red. Today, they increased dramatically, and now sit at a respectable 4 percent. While still below the national average, they have come a long way from where they were just 4 months ago. With the increase in rates, Honolulu real estate is now one of the priciest markets in the country. With a median home price of $699,300; it is well above the national average. Honolulu real estate investing should see an increase in activity.

Honolulu County Map:

Map of Honolulu neighborhoods

*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.

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