Hawaii – Real Estate Update

Picture of Hawaii housing

By: T. Jeffersonian

Despite the economic hardships, Hawaii real estate sales are at an all-time high leading to new low availability. Low-interest rates and no limits on Veterans Affairs loans means tons of Military resident buyers are in the Hawaiian real estate market. Hawaii realtors are practically begging potential sellers to put their properties on the market, because there are masses of buyers that are just looking for a place to live. In the past three years, we have seen more than 3,000 Hawaiians annually are leaving the state because it is simply too expensive to live here.

As the United States continues to grapple with the effects of the pandemic, living anywhere in the U.S. is difficult. Mainlanders likely think Hawaii would be better than their current hometown, especially considering the widespread unrest associated with Black Lives Matter, QAnon, and ANTIFA. To a mainlander, Hawaii probably seems like the ideal location to escape from it all. Unfortunately, mainlanders do not readily know about the aggregated higher expenses associated with living in the world’s most remote island paradise.

The median home price in Hawaii is $883,000 – $950,000 depending on which island within the Hawaiian chain. This figure is well above the affordability index for many Hawaii residents. For those who can afford to purchase these expensive homes, they must move quickly  because homes are averaging nine days on the real estate market before sale. Houses on the market are also seeing multiple competitive bids with the bid count averaging around 30 bids per home. This competition is artificially and exponentially driving up the housing market across the islands.

Reportedly 80% to 90% of the homebuyers on Oahu are Hawaii residents and many are second-time homebuyers taking advantage of cheap rates and looking to upgrade. Oahu residents currently have been working from home and no longer need to spend hours commuting. Coronavirus has indeed transformed the traditional workplace environment, as many companies have decided to remain remote even after laxed pandemic restrictions.

It has been hard for Maui residents to get their foot in the door as well. The median Maui single family home price is now around $950,000. Nearly 30% of homes on Maui have been acquired by mainland buyers with a specific uptick in returning residents and mainland millennials. Wealthier mainland customers are sucking up the market in Hawaii because they have corporate jobs and have the financial means to buy property regardless of the price. 

Average Hawaiians simply do not have the wealth to compete with these buyers. Lack of high-paying jobs and affordable housing is simply pushing locals out of the market. Our tourism-dependent islands shut down during the Coronavirus have left many without jobs. Uncertainty has kept many Hawaiians in their homes, unable to pay their mortgages. Until Hawaii builds more housing and diversifies our economy to increase wages, we will continue to see prices going up and properties bought by non-residents.

Building high-density affordable housing in neighborhoods close to business sectors is an option that enables Hawaiians to purchase more affordable homes. The state endeavors to create more housing at every price point in order to allow Hawaiians families to begin with entry-level housing and upgrade as their families grow. Governor David Ige planned to end homelessness in Hawaii by building 10,000 additional homes by 2020. Though homelessness remains, the goal for 10,000 new homes was met; however, many of these houses are simply too expensive to end homelessness. Just recently,

Governor Ige added a new goal of building 3,000 more homes by the end of 2022. Again, the average Hawaiian family is not going to be able to buy a new home unless the houses being built are more affordable. Construction companies, recovering from Coronavirus slowdowns, tend to start more expensive projects first so they can recover their overheads. Affordable housing is always built last because less profit is made when they are sold.

Short term, there is little the state can do to alleviate the lack of affordable housing. Long term, there are some mitigation efforts that can be pursued. First, the 3,000 homes being built by the end of 2022 all must be affordable. Second, the state must legally enable those who are already permitted to build affordable housing projects by removing roadblocks or restrictions. Third, the state must enforce affordable housing permits on lands used for other purposes – like solar farms. Fourth, the state must compel resistant communities to accept affordable housing projects with open arms. Resistant communities think these projects devalue their properties and increase crime. Fifth, as part of a “build out” strategy, the state must earmark 1-2 percent of land for housing projects.

Earmarking an additional 1-2 percent of land for affordable housing will entail rezoning agriculture and commercial land expressly for housing. Finally, the state must encourage new construction companies to start operating in Hawaii. Innovative construction companies will build homes more efficiently in an effort to penetrate markets and to increase their market shares. The state must move legacy Hawaiian construction companies aside to make room for these new innovative start-ups. Only these six proposed efforts will help Hawaiians to have the ability to buy affordable homes in the long term, but none of them present short term options that alleviate the lack of affordable housing in Hawaii.