Aloha, I'm Lahaina Lee, and this is your Maui Real Estate Advisor, January 2025 edition. Welcome to 2025, where the sunsets are still stunning, the ocean still sparkles, and the real estate market is still...well, let's just call it "complicated." So grab your coffee, tea, or mai tai (hey, I'm not judging), and let's dive into the highlights (and lowlights) of 2024, along with what's ahead. 

Looking Back at 2024: A Year of Progress and Head-Scratchers

Cleanup Progress: A Round of Applause for the Army Corps

In 2024, the Army Corps of Engineers worked tirelessly to clean up Lahaina, and wow, did they deliver! By year's end, 100% of residential lots were debris-free, with 97% of commercial properties also cleared. Commercial lot cleanup is set to wrap up next month-so we're calling this a big win. Historical gems like Seaman's Hospital and they Bishop House have been stabilized, awaiting restoration permits. Fingers crossed they'll get to shine again soon.

Construction Milestones

The first new homes in Wahikuli, Kahoma, and Lahainaluna broke ground in 2024. The first permit was issued in May. By November - just 15 months post-fire - the first home was completed.

Meanwhile, the county finally started issuing permits on the ocean (makai) side of the highway and they keep trickling in. One lucky home owner on the ocean side somehow managed to get a permit early on and is making great progress. Others are just in the very beginning stages of getting foundations started. Progress is progress, folks.

The Short-Term Rental Saga: Drama, Anyone?

Early 2024 was marked by threats from the governor and mayor to shut down short-term rentals if owners didn't open their doors to fire-displaced residents. Apparently, they weren't talking to FEMA. FEMA was cutting deals with owners of short-term rentals at ridiculously high monthly prices and even adding a few sweeteners.

And almost as quickly as FEMA started negotiating with short-term owners, they stopped. Why? FEMA stated they had enough to fill the housing needs. 

But wait, there's more! That progress wasn't enough to stop the governor or the mayor from continuing to threaten to shut down short-term rentals, and also continued to ask visitors not to come to Maui.

In May, Mayor Bissen proposed phasing out short-term rentals in apartment zones. If enacted, this plan could cost the county millions in tax revenue and the state over $1 billion. No bill has materialized yet, but the drama? Oh, it's alive and well.

The mayor's proposal has yet to be written as a bill. The proposal did get the approval of the county planning commission. However, the county council commissioned their own economic impact report, which was due in December of 2024. At a meeting earlier this month, a spokesperson said they're now expecting the report in March of this year.

These actions have had a devastating impact on Maui's economy. Maui's West Side has been particularly hard hit. 

Tourism and Economy: Ouch, That Hurt

Visitor numbers remained dismally low. According to the Hawaii tourism authority, the number of visitors to Maui during the first 11 months of 2024 were actually lower than the number of visitors during the first 11 months of 2023. Maui is also down 245 from the first 11 months of 2019.

A local property manager reporting on overall occupancy for short term rentals reported that occupancy was barely above 50% for the year. In previous "normal years" occupancy for STR's would range from around the 705 level during the slowest time of the year to 100% during whale season.

Another set of predictions early in the year had to do with interest rates. Expert after expert predicted that home mortgage rates would drop into the fives, 5%. However, as of January 9, Fanny Mae is reporting the 30 year fixed rate is just barely under 7% at 6.93%

Of course there are plenty of real estate watchers who are hoping that rates still decline for 2025. However, with the recent actions and comments by the FED that doesn't seem likely.

All of that is very concerning for rate sensitive buyers, investors and of course to us realtors. It seems that rates, inventory and the economy have had outsized effects on the Maui real estate market in 2024. It has been a wild ride to say the least. 

So, what exactly did a wild ride look like on the way to 2025? Well, we're going to throw a lot of data at you, so grab another cup of coffee or whatever beverage best suits your mood and let's do the numbers.

Real Estate Numbers: The Wild Ride

Condos: A Market in Flux

Post fire in 2023, real estate sales ground to a virtual halt. Especially on the Westside, the Lahaina, Kaanapali side. So with 2023 behind us, most of us were looking forward to a new beginning in 2024. We were also hoping for more inventory. So if you look at the sales trend, you can see that from January through May the number of sales for condos only dropped below 70 units one time in the first 5 months and exceeded 90 condos per month in 3 of those 5 months.

But...

On May 2, Mayor Bissen announced his proposal to phase out short-term rentals in apartment zones on the so-called Minatoya list. Of course, that frightened owners who had purchased condos with the intent of renting for vacation rentals. After all, those condos had always been short-term rentals. They were built as short-term rentals and they are legally allowed to do short-term rental under the county code. Of course, that has had a chilling effect of buyers contemplating buying a property that might decline in value because of its change in allowed usage.

Real estate brokers expected the proposal to have a significant negative effect on condos in apartment zoning. We did not expect the negative effect it had on the entire condominium market. 

In June 2024, the number of condo sales dropped below 70 units for only the second time during the year. There were never 70 units sold again in any month in 2024.

At the beginning of 2024 we were also expecting to see inventory of condos increase. Back in January 2024, there were 374 condos for sale, and we had 92 sales that month. Since that gave us 4 months of inventory and six months of inventory is considered to be a balanced market, we were still in a sellers' market at the beginning of the year. 

While we were expecting to see some increase in the inventory, what we got was way more than we ever expected to have to deal with. In December, we ended the year with 758 condos for sale, and only 52 sales for the month. That gives us almost 15 months of condo inventory. And in the virtual blink of an eye, we had a buyers' market.

Well, it feels like there is more activity, but we shouldn't expect to see sales increasing significantly in the near future. Along with rising inventory and falling sales, we have seen the number of pendings, condos under contract that have not closed yet, drop to only 67 in December. I have only seen pending drop below 200 condos under contract one time in the last 15 year.s 

And how does all of that affect selling prices? In watching the market very carefully to see what is happening, we see asking prices on existing listings being lowered every day. However, you don't see that reflected in the actual selling prices. In December, the median selling price was $874,000. That was up $144,000 over the previous month's low of $730,000.

The average selling price also bounced back from November's $940,000+ to over $1.15 million in December.

If you have ever dreamed of owning something on Maui, now would be a good time to take a serious look. 

Single-Family Homes: Steady but Shifting

Single-family home sales stayed pretty steady throughout the year. Sales ranged from a high of 73 in May to a low of 51 in September and October. That may seem like a wide range, but if you look at the blue line on the graph, you'll see that there's really not a lot of fluctuation in the number of sales.

Inventory is represented by the red line of the graph. You can see that inventory started fairly low with only 225 homes for sale in January and just steadily increased finishing the year with 373 homes for sale. That indicates that we have over six months of inventory and the single-family home market is tilting slightly in favor of buyers. However, Maui real estate supply and demand is very regional. We can touch on that a bit later.

That brings us to pending sales. If you look at the numbers of the green line on the chart, you can see that there was not much variation in the number of pending per month throughout the year. However, what variation there was seems to be trending downward.

So if inventory - supply - is increasing, and demand represented by pending sales and actual sales is trending down, it is reasonable to conclude that we are headed towards a buyers' market.

The purple line represents the median selling price. And you can see that that has a couple of wiggles in it. However, if you look at the chart showing the median prices across the year, you can see that $1.3 million was pretty consistent.

The average selling price on other hand, shows a bit more of a wild ride throughout the year. Those big fluctuations come from sales and the lack of sales in the luxury end of the market.

As I mentioned above real estate activity in each of Maui's regions is different. And whether you are in a buyers' market or a sellers' market really depends on which region you're in.

West Maui currently has 85 homes for sale. There are only 7 pending. The 7 pending represent the sales for the next month to two months. On average, there are only five sales per month occurring on the West Side. That is very clearly a buyers' market. But, before you get too excited, you might want to know that the median asking price for a home in West Maui, is $4 million and the average asking price is $5.7 million. So if you're looking for a great deal on a luxury home, now is a good time to be shopping. 

Central Maui has 66 homes for sale.

There are currently 36 homes under contract that will close in the next month of so. For the last six months about 21 homes per month have been selling in Central Maui. That means there is roughly 3 months of inventory and puts Central Maui firmly in a sellers' market position.

The median asking price is $1.3 million and the average asking price is just over $1.4 million. That makes Central Maui, Maui's most affordable area. And just an editorial note - there is a lot of newer inventory in Central Maui and there are some very nice homes in that $1.3 to $1.4 million price range.

Looking Ahead to 2025

Ok, that's our look back at 2024. 2024 was a pretty bumpy year and I think we can accurately say that real estate on Maui as a slice of the economy was in recession. Looking forward to 2025, there is a lot of uncertainty and clearly a number of bumps in front of us. However, I think it is also going to be a year when we get a lot more clarity. The new administration should be settling in so we should get some clarity on how new policies will impact interest rates. We should get clarity on what is going to happen with the attempt to remove short-term rental rights for the apartment zoned condos on the Minatoya list. We should get more clarity on the plans for rebuilding Lahaina...or not.

Until next time, this is still Lahaina Lee, still on MAUI, still not in Lahaina, but it's a beautiful day in paradise, enjoy if you are here, come visit if you're not. ALOOOHA!