Is Hawaii real estate in a bubble and if so, will it burst anytime soon? The August median price single family home on Oahu was $625,000, on Maui $693,000, on Kauai $700,000 and The Big Island was $370,000. Interest rates have risen slightly and some mainland markets are cooling. Should we be concerned? Let’s examine some fundamentals.
With the exception of second home markets, mainland real estate is driven by local economic conditions, primarily employment. The better the job situation is, the better the real estate market tends to be. Folks have stable employment, start families and buy homes. As their families grow, they move up into larger homes. As families mature and children leave the nest, some parents downsize with most people remaining in the same general area. The local real estate market reflects the local supply and demand.
Hawaii is different. Our real estate demand is global. We are a popular second home spot for not only mainland buyers but Pacific Rim buyers as well. How popular? A recent news article revealed that mainland residents own 20% of Maui County homes. Those are home owners that are not as dependent on local economic conditions but those are also discretionary home owners and investors. If many of them suddenly decided to sell their property, we could have an oversupply situation. The trend seems to be the opposite.
So what about a bubble in Hawaii real estate? The bubble talk I hear most seems to come from the securities industry. Overall, stocks and bonds have not done as well as real estate and perhaps predictions of a burst may send investors back to Wall Street.
What do experts say? Bank of Hawaii’s economist, Paul Brewbaker feels that the market will slow rather than collapse: "Presuming that there is not a major reversal in economic conditions and fundamentals, the worse we can expect is that once we reach those high levels ($700,000-$800,000 on Oahu), home prices will stop rising and just stay there…"
Walt Harvey is a real estate broker with East Oahu Realty and is Quality Service Certified®. Walt partners with his wife Arla and together they specialize in residential, commercial and investment real estate. You can reach them on their Web site: http://www.coastalhawaii.com Real estate question? Email them: mailto:walt@coastalhawaii.com or call 375-8959.
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