Properties are Going Under Contract Fast and Closing Slow
Quick update: Visitors, Roads, Erosion and Taxes
Aloha! According to a report in the Maui News, visitor arrivals for March, yes, I know it's May, were up over arrivals in March of 2020. I know that sounds like a "duh", but March and April really did feel like pre-pandemic times. And I can't quantify it, but it feels like things are slowing down just a tad in the last several days. Click here for a quick video of Front Street on Friday afternoon.
There could be a few reasons for that. Typically, we do have a bit of a slowdown in May after Spring Break and before school lets out, if school is even in. By now a lot of visitors have heard about the lack of rental cars and the supply and demand based rental rates. And now, since Maui had a pretty good spike in COVID cases after Spring Break, we have a new second test system. As of May 4, you need to be fully vaccinated and have a negative COVID test to be set free to roam Maui. Otherwise, you get to line up and take a second test, and hope it comes out negative.
In other news, the Maui County Council has proposed an increase in property taxes for short-term rental properties and non-owner occupied residences, AKA, second homes. This time around a tiered rate is being proposed. As I understand it, the Mayor is threatening to veto it and the Realtors Association is fighting it. Stay tuned.
The county is also proposing relocating part of the highway coming into Lahaina. If you haven't been on the road during high tide or big waves, you might not know that we frequently have ocean water splashing up onto the highway. So, moving the road further inland, or mauka, would be a smart move. However, the current plan is to move only 2 short strips about 12 feet inland. It's being called a band-aide.
And, speaking of erosion, an EIS, environment impact study, for replenishing the beach in Kahana has been completed. The plan envisions bringing in sand from the ocean to create a wide sandy beach and installing 7 T-groins to stabilize the beach. The cost could be up to $40 million and would be funded by a group of condos and one family kuleana along that stretch of oceanfront. This should be interesting.
Sales are the number of properties that actually closed escrow. These properties likely went under contract anywhere from 2 to 8 weeks before closing.
Sales of homes and condos were up again in April. Home sales climbed to 133 which is the highest number of monthly sales I found going in MLS records. Given the current inventory of homes for sale, that is stunning. So, just for fun, I compared the current home market with that of April 2011, ten years ago. Back then we were still recovering from the "great recession". That month there were 87 homes sold...87 compared to 133 now! The median selling price was an even $500,000 and there were 935 homes for sale.
Condo sales also appear to be at or near a record high of 255. The next highest I can find is 2005 with 228 sales. Back in those days there were typically well over 1,000 condos for sale.
How long can Maui sustain this record pace? Read on.
Pending sales represent properties that are under contract but have not yet closed. Pendings are the pipeline that tell us how many sales are likely to happen in the next couple of months.
Pending sales were nuts in April. That explains my headline. The market is hot with buyers who are prepared to act quickly to get the property they want.
However, our real estate eco-system, which includes escrow officers, lenders, inspectors, appraisers and all of the real estate services needed to buy and sell real estate from the time a property goes under contract to getting it actually closed is built fro about 450 - 500 in the pipeline at any time. The highest number of pendings I've seen in recent years is 522 in February of 2018.
In early April, pending sales topped 900. That's just about double what the system is built to handle. And those allied service professionals like loan officers, loan underwriters and property inspectors aren't just people that can be hired off the street. Each one of those specialties takes years of training before they are qualified to provide service.
The results are delays in closing. Banks are telling us they need 75 days to fund a condo-tel loan. It is taking weeks to get an appraiser. Property inspection reports are delayed and lenders are telling us they are underwriting as fast as they can. The escrow officers, loan officers, and Realtors are caught in the middle.
We saw the number of pendings decline in April for homes, condos and land. Could this be the turning point in this hot market or just the calm before the next storm?
Inventory tells us how many units are available for sale in each category.
There is a myth circulating. They myth, as it's being told, is that there is no inventory. There is nothing to buy.
That is absolutely false. If there was nothing to buy, why are we seeing record sales?
One of my Ninja mentors said it best, "there is inventory on the market, it's just not staying on the market very long."
The combination of rising sales, declining pendings and declining inventory may be another sign of this sizzling market slowing. But if it is slowing, it's slowing very gradually.
Selling Prices: Average and median sold prices
We look at Average and Median prices in all categories. A lot of people like to know the average price; however, we tend to use median for most of our analysis, because the median is less likely to be skewed by outliers of a few very high priced or very low priced sales.
If the market is gradually slowing, increasing prices could also be having an impact. The average price for a home on Maui came in just under $2,000,000 in April. The median price was just shy of $1,000,000. Just over 31% of those sales were cash. The median cash sale was $1.6M with the high sale topping out at $2.4 million.
Condos are also on an upward price run. The average condo price is in the mid-$900's and the median is just below $700K. Cash accounted for 41% of condo sales.
Days on Market: (avg-sold listings)
The day on market (DOM) is the number of days a property has been on the market until close of escrow.
Days on market for homes at just 108 days also appears to be a record low indicating that homes are going under contract quickly. Cash purchases can close more quickly as there is no need to wait for appraisals and loans.
The number of days on market for condos is about the only thing in this market that looks normal to me. The 162 number is a nice, normal, boring number. I can't wait to see what happens next month.
Get more information and details
To get more information on property and trends, you can search all properties listed for sale at www.AlohaGroupMaui.com. If you can’t find what you’re looking for there, send us an email to firstname.lastname@example.org, and we’ll do our best to get an answer for you. As we get more requests for information, we’ll add new sections to the website, newsletter or both.
About Aloha Group Maui
Aloha Group Maui was founded by L. Lee Potts, MBA, REALTOR® R(B) and Barbara S. Potts, MBA, REALTOR® R(B) and former California CPA. Our team consists of talented professionals; Cheri Miller R(S), Beau Dyer R(B), Angie Liu R(S), Suni Novotny R(S), Keri Nicholson R(S), Myra Plant R(S), Paul Goodman R(B), Jamie Martin R(S), Anthony Freda R(S), Courtney Stice, R(S), and Tony Brown R(B). We are businesspeople, and we treat our clients with the same care and service attitude that we would like to receive when we do business. We are in business for pleasure and profit. We expect that most of our clients will enjoy the property they own in Maui (pleasure), and it would be nice for everyone if your property performs well for you (profit). Real estate can be highly speculative, and profits are never guaranteed. So if you are buying property in Maui, it’s a good idea to surround yourself with a professional team.
Lee Potts is the former President of an international software company and former Marketing VP of a publicly traded franchise organization. Lee and Barbara are both licensed under Keller Williams Realty Maui.
Barbara Potts was a CPA with Ernst and Young before joining Apple Computer back when both Steve’s were there (Jobs and Woz). She was also Director of Strategic Marketing for Grass Valley Group, a division of Tektronix, and a business broker in California.
Copyright 2021 L. Lee Potts
Statistical information in this newsletter is based on actual sales information reported to the Realtors Association of Maui, Inc. While this information is deemed reliable, it is not guaranteed. This newsletter is for informational purposes only and not intended as advice for investment or any other purposes. Real estate is considered to be highly volatile, and purchasers and sellers of real estate should always seek expert outside advice before investing.