The Hawaii Real Estate Market: Everything You Need to Know

Hawaii is home to some of the most sought-after properties in the country- with domestic and international buyers and investors- and top real estate agents fighting for a piece of the paradise pie.

The question is, have the recent economic changes had an impact on the Hawaii real estate market, what are the trends, and is there a chance of a market crash? Here is all you need to know about the Hawaii housing market today.

Must-Know Hawaii Housing Market Trends

Here are the key market trends in Hawaii real estate.

Median House Price in Hawaii

The median price of a house in Hawaii was $730,200 as of March 2023. This figure represents a 2.1% increase from the previous year.

It is significantly higher than the US average- which is predicted to fall to $368,000 by the end of the year.

Hawaii's Housing Supply

There are around 5000 homes for sale in Hawaii- which is a little over a 10% decline compared to March 2022. The drop in newly-listed homes is on an even more significant downward trend- with around 36% fewer.

Number of Hawaii Homes Sold

Sales numbers have dropped significantly in Hawaii. The most significant decline came at the beginning of 2023- with a record 47.9% year-over-year decrease.

It has recovered slightly, with final March figures sitting at 1132 homes sold- which translates to a 32.3% drop from the year before.

Average Time Spent by Properties on the Hawaii Housing Markets

There has been a significant year-over-year increase in the median number of days spent on the market for Hawaii properties.

Recent 2023 figures have the average at 79 days- 26 more than the same period in 2022.

Foreclosure Rates

Hawaii continues as one of the states with the lowest foreclosure rates- ranking 38th overall.

Factors Impacting the Hawaii Market for Housing

Rising Interest Rates on Mortgages

Interest rates across the country have increased to combat inflation, which has influenced house prices and selling power everywhere.

Mortgages are more expensive, so people have less in their buying budget- which causes prices to drop- or houses to spend longer on the market.

Even with inflation-adjusted income, many Hawaiian locals are being priced out of buying property- especially in sought-after areas- because they can't afford the rate of a mortgage.

Low Inventory

Large parts of Hawaii are protected conservation areas- limiting the possibilities for development and housing construction.

That- plus the number of houses owned by part-time residents and for tourism purposes- has left the supply of houses for sale somewhat short.

This is hardly new. Low inventory has been par for the course in Hawaiian real estate for many years- and, as such, has driven house prices up.

Competition from Buyers

With low supply comes high demand- and even higher prices.

A major factor that influences the housing market in Hawaii is the competition- especially for single-family homes in Honolulu, Pearl City, and Maui County.

Having a limited supply of houses for sale makes the Hawaii market tough for buyers but competitive for sellers- with favor falling heavily to the latter party.

Foreign Buyers

The draw and appeal of Hawaii go beyond nationwide- and international investors play a significant role in the real estate market in this state.

Condos are particularly subjected to the foreign buyer market- with prices following the demand.

Above-Average House Prices

What all this means, in a nutshell, is that Hawaiian real estate is expensive. Median price ranges sit well above the national average- and high-value property is a key factor in the Hawaii housing market as a whole.

Because the majority of Hawaiian property for sale has priced out many locals and the average American, it changes the entire dynamic of the market.

Hawaii Real Estate Market Statistics

• The Hawaii sale-to-list price dropped 3.3 points year-over-year to 97.9%.
• 17.2% of home prices dropped in March 2023- compared to just over 10% in March 2022.
• A year ago, roughly 45% of Hawaii Island real estate sales were over the list price, but the most recent figure had propped to only 22.2- a total drop of more than 23 points.
• The number of new homes listed on the Hawaiian islands dropped by 36% year-over-year between early 2022 and early 2023.

What Is the Likelihood of a Hawaii Housing Market Crash?

In short, Hawaii is one of the last states that needs to worry about a potential housing market crash. Experts across the country predict that a US-wide crash could happen again- but not soon- and certainly not in Hawaii.

Rising interest rates on mortgages to combat inflation have thrown supply, selling power, and median home prices into disarray- but there is still a demand for property that helps maintain some semblance of balance.

Some of the reasons the Hawaii market is not at risk of crashing include:

• Booming tourism: The tourism market on many Hawaiian islands continues to attract around 10 million visitors each year. Buyers and investors want the property to use for rentals and tourist-related business- or their own piece of paradise- and that is unlikely to change any time soon.
• High demand: There has always been an imbalance of supply and demand in Hawaii- which has helped keep prices high. Changes in the economy may impact affordability and force sellers to reduce costs, but it hasn't caused any problems yet.
• More people are moving to Hawaii than away from Hawaii, and the economy is relatively stable when it comes to real estate.

US Housing Market Predictions

Before discussing the outlook for Hawaii, let's take a quick look at expert predictions for the real estate market and housing in the US, in general.

Climbing Mortgage Rates

Across the country, mortgage rates are rising- thanks to ongoing geopolitical tensions, continued inflation, and the ever-present threat of another recession following the pandemic.

Predictions are that will not change any time soon, and it is sure to have a knock-on effect on the rest of the market.

An Overall Drop in Home Prices (Probably)

The general consensus is that house prices in the US will have to drop because of the rising mortgage interest rates. Sellers may have no option but to lower their asking prices to keep up with them.

On the other hand, some people argue that the national inventory shortage means the prices won't fall- since the demand is higher than the supply.

Reduced Affordability

Overall, houses are set to become generally less affordable for many in the US. Although prices may drop, they are unlikely to drop enough to offset the high mortgage rates and expensive monthly payments.

Even if sellers do take the prices down, the average American could still find the mortgage demands unfeasible.

Fewer Home Sales Nationwide

What does all of this lead to? A drop in sales.

The combination of high mortgage interest rates, lack of housing supply, up-and-down pricing predictions, and affordability issues means home sales in the US are expected to drop- and continue dropping until there is a major shift in the economic indicators.

Hawaii Housing Market Predictions

Next, let's take a closer look at what is expected from the Hawaii housing market in the coming year.

Higher Mortgage Rates

Nowhere in the country is exempt from the climbing mortgage interest rates- not even Hawaii. Mortgages on the islands have already increased significantly, and that is predicted to continue.

Minimal Change to Home and Condo Prices

Where Hawaii does differ from other states is the impact the increased mortgage rates are predicted to have on median home prices.

Although the Hawaii housing market has seen some changes due to rising rates, the average sales prices are not expected to change all that much.

Because so much property on the Hawaiian islands falls into the luxury market, many potential buyers are not impacted by how much or little their mortgage payments will be, so sellers can keep their prices high without alienating buyers.

A Better Outlook for Sales than Most of the Country

Overall, the same trends are predicted to appear in the Hawaii real estate market as most of the country- but the impact they are expected to have is not as significant.

Many buyers in this luxury market are unaffected (or not so much so that it interferes with their property investments), and the strong demand for Hawaii remains.

The Bottom Line

The Hawaii real estate market remains hot- especially for foreign buyers looking for second homes on the luxury market.

With the turbulence of the last few years- including travel restrictions and major economic changes, purchasing property in paradise appeals to those with the buying power to do so.

Even the white sands of Hawaii will feel the impact of inflation, rising mortgages, and low national inventory- but not to the same extent as other parts of the country.

A housing market crash is not on anyone's radar for Hawaii- quite the opposite, in fact.

Although the market has cooled a little since the boom following the pandemic, it is at least as promising popularity-wise as pre-pandemic levels.

Low inventory is no change-nor are the high prices, so those who can pay for this Hawaii real estate can expect consistent growth going forward.

FAQs

Is there a best time to buy property in Hawaii?

Spring is the hot season for the Hawaii housing market when most of the sales activity happens. If you want to get in when most houses are listed, Spring is the time to go- but there are downsides, too.

It is a popular time to buy, which means a lot of competition and generally higher prices.

Buyers looking for a good deal on a home should try the winter. The competition is much lower- as are costs- but things are slower, and you may not find as many options.

Are house prices in Hawaii likely to drop?

Urban Honolulu is the other area that ranked as likely to see prices drop with any significance. Although some decreases have been seen year over year in parts of Honolulu and Oahu, Kauai and Maui have actually seen growth.