Thanks, in large part, to incredible demand, overwhelming international investments, strong employment numbers, and increasing wages, the economy supporting the Hawaii real estate market is nothing less than encouraging. Nonetheless, The Aloha State’s lack of available inventory and increasing levels of demand have created a very competitive marketplace.
Prices have increased almost exponentially, making it difficult for both buyers and sellers to actively participate in the market.
That said, the setback created by the pandemic in the first quarter of 2020 disrupted the market. While home prices are only growing more prohibitively expensive, several indicators favor real estate investors in Hawaii. In particular, interest rates remain historically low and continue to help offset today's prices. As a result, those looking to flip real estate may have better luck in other states, but Hawaii looks to be an excellent place for investors with long-term aspirations.
The Top Hawaii Real Estate Markets
While the best real estate market in Hawaii is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Median Sales Price: $929,500 (+28.54% year over year)
Homes Sold Above List Price: 43.5% (+21.9% year over year)
Homes With Price Drops: 6.3% (+0.6% year over year)
Average Days On Market: 58 (-41 year over year)
Median Rent Price: $2,146 (+11.4% year over year)
Price-To-Rent Ratio: 30.20
Unemployment Rate: 6.6% (latest estimate by the Bureau Of Labor Statistics)
Population: 1,415,872 (latest estimate by the U.S. Census Bureau)
Median Household Income: $81,275 (latest estimate by the U.S. Census Bureau)
Total Foreclosure Filings In Q3: 135 (+58.1% year over year)
Hawaii Median Home Prices
Real estate in Hawaii has become a commodity, which begs the question: How much is the average home in Hawaii? The median home value in Hawaii has undergone some significant changes in a relatively short period. As recently as January 2012, when the Hawaii real estate market bottomed out during the last recession, real estate on the island state boasted a median home value of about $402,000. Today, median home values in the Aloha State have reached $777,762. For those keeping track, today’s prices are approximately 93.4% higher than they were at their lowest point of The Great Recession. As of now, median home values in the Hawaii real estate market have become the beneficiary of nine consecutive years of appreciation.
The most significant increases have taken place in the wake of the pandemic. Since March of last year (when COVID-19 was officially declared a global emergency), the median home value in the Hawaii housing market has increased 18.2%. The increase directly results from a convergence of several indicators: lower interest rates, increasing competition, a lack of inventory, and more savings in people's bank accounts.
However, it should be noted that the percentage of homes with price drops has increased year over year, albeit modestly. With a mere 6.3% of listings exercising price drops in September, the overwhelming majority are still selling above listing prices. However, the modest year-over-year increase could suggest the market is starting to temper. Prices have increased a lot, and this could be a sign that increases are slowing down.
Hawaii Median Rent Prices
Increases in home values across all of the state's islands have impacted rental rates. If for nothing else, higher home values and a lack of listings have prevented a large population of prospective buyers from participating in the market. As a result, many people want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters.
Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. Landlords have found themselves in a position of power in Hawaii, and their asking prices reflect as much.
According to the latest data released by Apartment List, the median rent in Hawaii has increased 11.4% in the last year and now sits around $2,146. The latest increase in rents has lagged behind home value appreciation over the last year. As a result, there's a good chance rent will increase at a faster pace in the near future. For now, renters can expect to pay the following in rents (on average):
For context, the national average rent price is about $1,302, or 11.5% lower than the average renter pays in the Hawaii housing market. The difference is modest, and appreciation forecasts suggest the discrepancy will only grow for the foreseeable future. As long as inventory remains tight, landlords will be able to justify rent increases. That said, the Hawaii real estate investing community still has time to get into the long-term rental space.
Hawaii Foreclosure Trends & Statistics
According to ATTOM Data Solutions’ Q3 2021 U.S. Foreclosure Market Report, "there were a total of 45,517 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — up 34 percent from the previous quarter and 68 percent from a year ago."
Hawaii has seen an increase in foreclosure filings, not unlike the country as a whole. With moratoriums and foreclosure forbearance programs expiring, distressed homeowners are no longer protected. In Hawaii, a total of 135 properties entered into the fourscore process in the third quarter of 2021; that's 69.0% higher than the second quarter and 58.1% higher than the same period last year.
There is no doubt about it: foreclosure filings are on the rise in Hawaii. Perhaps even more importantly, however, are the expectations that foreclosures will continue to rise. As more and more banks are allowed to initiate the foreclosure process, the number of distressed homeowners across the state is likely to increase. That said, Hawaii is one of the slowest states at processing foreclosures. The length of time it takes to see a foreclosure through, from beginning to end, takes about 2,070 days. As a result, it's safe to say foreclosures will increase, but perhaps slightly after many other states.
Tax Lien Investing
Tax Lien or Deed: Redemption Deed State
Interest Rate: 12% after Deed Sale
Redemption Period: Varies by County (6 Months - 1 Year)
Hawaii Housing Market Predictions
The U.S. housing market has followed a fairly predictable ascent for the better part of a decade. However, there’s no guarantee things will continue on the same trajectory, especially in the shadow of a pandemic. There are far too many variables to guess what will happen next without at least some margin of error. Therefore, instead of predicting where the market will be in a year, it is best to use historical data to make an educated guess as to what will most likely transpire. Those with an ear to the ground in the Hawaii housing market will most likely exercise an advantage over everyone else. Having said that, here’s a look at what’s most likely to happen in Hawaii over the next year or so:
Prohibitively expensive housing will make long-term investments more attractive: Median home values in the Hawaii real estate market suggest profit margins are thin at the moment. However, the same high prices preventing many from buying also force many to rent, which bodes incredibly well for landlords. As long as prices remain high and inventory remains low, there’s an excellent chance rental properties will be the best exit strategies for investors to pursue.
Prices will continue to rise: Not unlike everywhere else in the country, real estate in Hawaii has seen its prices increase almost exponentially for nine consecutive years. The jump in home prices is primarily attributed to a lack of inventory. Until the issue is addressed, prices will most likely continue to rise, albeit at a slightly slower pace.
Despite being thousands of miles from the continental United States, the Hawaii real estate market aligns with national trends. Much like the rest of the country, encouraging economic indicators, positive housing sentiment, and a distinct lack of inventory have pushed real estate prices in Hawaii to historic levels. Now higher than before the last recession, home prices are prohibitively high, but that hasn’t stopped the market from remaining active. Investors, in particular, have found refuge in long-term rentals. While they too are expensive, investors may be able to offset high acquisition costs with years of cash flow.
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