The talk of a housing bubble in the coming year seems to be at a fever pitch as rising mortgage rates continue to slow down an overheated real estate market. Over the past two years, home prices have appreciated at an unsustainable pace causing many to ask: are things just slowing down, or is a crash coming?

To answer this question, there are two things we want to understand. The first is the reality of the shift in today's housing market. And the second is what experts are saying about home prices in the coming year.

The Reality of the Shift in Today's Housing Market

The reality is we're seeing an inflection point in housing supply and demand. According to realtor.com, active listings have increased more than 26% over last year, while showings from the latest ShowingTime Showing Index have decreased almost 17% from last year (see graph below). This is an inflection point for housing because, over the past two years, we've seen a massive amount of demand (showings) and not enough homes available for sale for the number of people that wanted to buy. That caused the market frenzy.

Today, supply and demand look very different, and the market is slowing down from the pace we've seen. This offers proof of the sudden slowdown so many people are feeling.

What Experts Are Saying About Home Prices in the Coming Year

Right now, most experts are forecasting home price appreciation in 2023, but at a much slower pace than the last two years. The average of the six forecasters below is for national home prices to appreciate by 2.5% in the coming year. Only one of the six is calling for home price depreciation.

When we look at the shift taking place along with what experts are saying, we can conclude the national real estate market is slowing down but is not a bubble getting ready to burst. This isn't to say that a few overheated markets won't experience home price depreciation, but there isn't a case to be made for a national housing bubble.

Bottom Line

The real estate market is slowing down, and that's causing many to fear we're in a housing bubble. What we've experienced in the housing market over the past two years were historic levels of demand and constrained supply. That led to homes going up in value at a record pace. While some overheated markets may experience price depreciation in the short term, according to experts, the national real estate market will appreciate in the coming year.

Keeping Current Matters

Is the real estate market returning to normal? We'll fill you in on that and more, but first the other news in Hawaii and on Maui specifically is...

Sports - Hawaii wins the Little League World Series. Film at 11.

Cuisine - The first Chick-fil-A opened on Maui. The blessing was held on September 1 and they are donating $25,000 to the Maui Food Bank. The notice in The Maui News said the owners will be supporting other charity events and giving back to the community.

Visitors - The first humpback whale of the year was spotted in South Maui last week! It is pretty early, so there may not be another spotting for another month or so, but it marks the start of our favorite season.

Now, what is happening in this crazy real estate market? 

SALES:

It seems the press has all but pronounced the real estate market as dead. That is certainly not the case on Maui for single family homes. Although the sales trend since March is clearly moving in a downward direction, it's not dying, it's just getting back to normal.

Normal! How can you say that?!?

A little recent history is useful. I think most of you will agree that 2019 was the last "normal" year we had. Throughout the first 8 months of 2019 there were 708 homes sold. Throughout the first 8 months of 2022 there have been 743 homes sold. There have been 5% more homes sold during a time when interest rates more than doubled, and we have 66% less inventory, and prices are much higher than in the normal times. Also, the average number of sales per month for the first 8 months of 2019 was 88.5. Look at the average number of sales for the last 3 months of this year. It looks like home sales are on the path to normal.

Condo sales in 2022 are also up over the norm for 2019, however, the number of sales per month for this year dropped significantly, like a proverbial rock, in July. It is difficult to see how condo sales can keep a normal pace of about 130 sales per month when inventory is about half of what it was in 2019 and prices have risen a whopping 65%.

INVENTORY: 

Make no mistake, it is still a sellers' market. Inventory hit bottom in November of 2021 when there were just 163 homes for sale on Maui. In April of this year there were just 165 homes for sale. In August, the number of homes for sale was up 100 homes over that low inventory mark. Yeah!

Well, maybe not "yeah!" In August of 2019, the normal year, there were 459 homes for sale. That was also a sellers' market because the inventory during that time was 4.5 months. A balanced market is 6 months of inventory. We are back up to 3 months of inventory on Maui.

And just for fun, during August of 2008, when the real estate market and everything else crashed, the number of homes for sale was 1,176. What a time!

For condos it is also a sellers' market. Even with inventories up over the last 3 months we still have less than 2 months of condos for sale. Just to give you an idea how different the market is today, in August of 2019, when there were 156 condos sold, there were 459 for sale. Even then, there was just 4 months of inventory.

SELLING PRICES: average and median sold prices

The median selling price for a home dropped below $1,000,000 for the first time since October of last year. In fact, the median price for this August was lower than August of 2021. However, the median selling price year-to-date is still up 15.1% over 2021 and 50% over 2019.

You can look to the luxury market to find the reason for the price decline in August. The luxury market, homes prices $3,000,000 and up, peaked during April and May this year. There were 16 luxury home sales in April followed by 15 in May. The average selling price for a luxury home in May was $7,575,000. And, of the 16 homes sold in April, all but one were sold for cash.

Condos are a different story. Prices and sales are up this month. Inventory is down. More than half, 53 of 103 of the sales, were cash sales.

Overall the median price for a condo is up 20% from the same period last year. The areas with the biggest gains include Lahaina, up 48%, Kaanapali, up 50%, and a bit of a surprise, Molokai, up 51.6% with 38 sales. 

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 lee@alohapotts.com, 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.

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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), Suni Novotny R(S), Keri Nicholson R(S), Myra Plant R(S), Anthony Freda R(S), Courtney Stice, R(S), Kathy Becklin, R(B), 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 2022 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.  

Once we get to about the middle of September, whale enthusiasts start to anxiously await the return of the humpback whales (kohola). The first one was spotted last year at the beginning of October and while "official" whale season doesn't start until December 15, there are plenty that apparently don't check their phones before swimming this way! 

The best time to see these "winter birds" (annual visitors to Maui) however, is usually January and February. 

The humpback whales "summer" in Alaska and about 12,000 whales follow the same migration patterns to Hawaii every year. The whales travel over 3,500 miles in a 4-6 week time frame. Females come to give birth and to raise their calves in the relative predator free, warm waters of Hawaii or to breed (which is why the males come). The gestational period for a humpback whale is 11-12 months, so it is safe to say the calves born one summer where the calves bred the previous summer. The calves are roughly 2,000 pounds at birth (phew!) and gain about 100 pounds a day from their mother's milk, which is 50% fat. 

One of the more phenomenal things to experience during whale season is hearing the male humpbacks sing. Each whale has his own song and wherever he left off singing before he starts his journey to Alaska, is where he'll pick up singing once he is back in Hawaiian waters (don't we all sing more when we're in Hawaii!). Scientists believe the songs are to attract females. If you're lucky, can hold your breath for 30 seconds or so, and are snorkeling on West Maui, you can hear the songs underwater. The songs can travel up to 12 miles underwater, but sound so much closer, almost as if you look over your shoulder, a whale will be right there. It is an otherworldly sound, beautiful and mournful all at the same time. Many whale watch companies have hydrophones, so if you prefer to watch from the boat, you won't have to miss out on the experience. 

One of our favorite things on Maui is going on a whale watch as often as we can, so if you can't find us during whale season, we're likely on the water!

Interest rates have skyrocketed, sellers are dropping prices, we're dangerously close to recession...Is the real estate sky falling?

Um...No, not really, not yet anyway.

Inventory is up, sales are down, and sellers are lowering their asking prices, but the actual selling prices? Well, those are still climbing.

SALES:

Home sales dropped 13% in June to 85 sales. That just happens to be the same number of sales on the island as back in February. The decrease in sales combined with a 28% increase in inventory gives us 3 months' worth of homes for sale. While it is still very much a seller's market for homes, higher inventory should mean more choices for buyers. However, the median selling price still rose again in June.

Condo sales, on the other hand, did not decline during June. There were 150 sales, the same number of sales as in May. The median selling price rose a whopping 16% and the average price was up 11%. Inventory for condos climbed 30%. That sounds like a huge increase, but we still have just 1.4 months of inventory. So, it is still a strong seller's market here on Maui. 

INVENTORY:

Inventory tells us how many properties are available for sale in each category. We started seeing some growth in inventory in May for homes and condos. However, even the combination of increased inventory and increased interest rates are not yet impacting selling prices. 

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.

So while the average home price declined in June, the median still increased. We also saw increases in both the average and the median selling prices for condos.

Where is real estate going? What's the news and what can you expect?

The reporters are talking doom and gloom. In fact, the Wall Street Journal reported that three-quarters of global CEO's say we are in a recession or will be in the next 12-18 months. Corelogic, one of the largest real estate data firms, points out that a recession doesn't equal a housing crisis.

It may be counter intuitive, but in the last 6 recessions, home prices actually increased.

Why? People are still going to get married and have babies. They'll need a bigger house. The babies will grow up and move out. People will need smaller houses. There will still be divorces, and houses will be sold and bought, and people who come to Maui will still likely want to own on Maui.

While interest rates are up, double those in 2021, they were down this week. And, as it relates to recession, rates tend to decline as recessions reach their end. According to Fortune Magazine, in the last 5 recessions mortgage rates fell an average of 1.8% from peak to trough.

I'm not saying the shifting market won't be stressful. Many of us went through a very hard time during the housing crash of 2007 and the next few years following. But the fundamentals today are very different than in 2007. We are in a seller's market today; '07 was a buyers' market and lenders were giving loans away to anyone who could fog a mirror.

So, if you are having second thoughts about buying you might take some comfort in what the experts are forecasting. 100 economist forecast that 2022 prices will be up 9.3% compared to 2021. You can see in the chart below that the increase in home selling prices is decelerating through 2024. It is very important to understand that deceleration does not mean stopping or declining. The expectation is that prices will continue to rise at a "normal" pace for the foreseeable future. 

If you are thinking about selling, it's still a seller's market. While interest rates are up, we are still seeing multiple offers, and 30% of June home sales were cash offers. For condos 40% of the transactions were cash offers. I do offer a word of caution. If you are thinking of selling, don't dawdle. While we don't see a downward trend in the numbers, headlines of gloom and doom tend to become self-fulfilling prophecies.

If you are thinking of buying, let's talk about your goals. If it's the right time to your goals can be met, great. If the timing and the market aren't right for you, then let's see if we can help you develop Plan B. We understand what's at stake, and there will never be pressure or overselling from our team.

______________________________________

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 lee@alohapotts.com, 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), Suni Novotny R(S), Keri Nicholson R(S), Myra Plant R(S), Anthony Freda R(S), Courtney Stice, R(S), Kathy Becklin, R(B), 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 2022 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.  

Aina Nalu News

Presented by Aloha Group Maui

Issue 67, Q2 - 2022

Aloha from your resident experts!

The second quarter of 2022 has felt like a return to the days of yore...or at least the days before COVID. We have enjoyed community events again: the King Kamehameha parade, fireworks on Front Street, concerts at the MACC and even just simple things like being able to go to a movie. Even real estate seems to be settling a little bit.

Though perhaps that isn't exactly the case at Aina Nalu. Units continue to sell before they are even listed and prices only continue to increase. Days of market ranges from 15 to 72 days, with a low average of 36 DOM. Everyone wants to own at the best resort in Lahaina!

Here is a summary of what happened in Q1 2022 vs. Q2 2022: 

As of July 5, there are two units in escrow, B101 was in escrow at quarter's end and D103 went into escrow as of July 5. B101 is listed at $800,000 and D103 is listed at $850,000. We closed the quarter with the highest sold price in Aina Nalu history.

Overall, real estate does seem to be slowing down, overall number of escrows is down and inventory is up a little bit. However, what hasn't changed is prices, it is still a seller's market!

From April 1 - June 30 there were 5 listings and 4 closed sales. There were 0 cancelled listings, and 0 expired listings at the end of the quarter. There were 0 active listings and 1 pending sale at the end of the quarter.

 For more details on current Maui real estate prices and sales, go to the Maui Real Estate Advisor for all the stats.