Is The Hawaii Real Estate Market About To Crash

These days are just full of strangeness and uncertainty, aren’t they? Riots, political upheaval, global pandemic… It’s at best off-putting and at worst downright terrifying. In times like these, it’s no wonder people start looking around and wondering ‘is it all going to really be alright?’ More and more, especially in the last couple weeks, I’ve been getting this question; is the housing market in Hawaii about to crash?

Ordinarily, I’d answer that question at the end of this article, after providing you with the relevant information. But this is such a huge question for so many people, one that affects them on so many levels, that it deserves a straight-up answer as soon as possible.

So. Short answer? No. The Hawaiian real estate market does not appear to be heading for a crash. In fact, as of the date of this article, the housing market in the islands is booming, and in my opinion it will continue to do so.

Now that I’ve gotten that out of the way, let me tell you how and why I arrive at that conclusion.

— The Facts —

First, let’s define some terms. A ‘crash’ in real-estate terms happens when the properties on the market lose value in the extreme, usually due to a glut in the marketplace. Prices plummet, people wind up upside-down on their mortgages, and the supply of houses far outstrips the demand, leading to loss in value across the board. (For more information on housing bubbles and market crashes, this investopedia article has good information: https://www.investopedia.com/articles/07/housing_bubble.asp)

There are certain indicators you can look at to try and determine which way the housing market is headed. How many houses are there on the market? How long does a property stay listed, and what kind of interest does it generate? Are houses just sitting lump-like for months at a time, or do they flip early and often?

Hawaii, both historically and currently, typically has a low number of houses (or ‘inventory) on the market. This is actually a good thing, as a lower inventory on the market means that less demand is needed to keep prices stable. It’s the old ‘supply and demand’ equation; the less supply there is, the less demand is required. Which is not to say that there won’t necessarily be a crash lurking sometime in the future, but if there is a historical trend of low market inventory and a current trend of low market inventory, it is an indication of a strong — or at least stable — real estate market.

There WAS a crash in 2008 in Hawaii, along with most of the rest of the USA. That crash began for a variety of reasons, but it became a CRASH simply because the market became over-saturated with inventory; too many houses on the market, not enough demand. The conditions that led to the ’08 crash simply do not exist right now. Yes, there’s a pandemic, yes, there’s political unrest, but unless COVID-19 picks up a tiny hammer, slaps on a tiny hard hat, and starts building houses everywhere, it’s not actually going to affect the real estate market in Hawaii all that much. In the negative sense, anyways.

That’s not to say that COVID-19 doesn’t appear to be having ANY effect on the market, however. I’m seeing a nation-wide trend of people leaving densely-populated areas and looking to purchase property in more rural areas, away from cities and heavily urbanized centers. Most of the islands in the state of Hawaii–Oahu being the possible exception–have low-density population centers. We’re an island chain full of small towns; perhaps not perfectly ‘rural’ but certainly a far-cry from the densely packed cities like L.A. or New York. More and more I’m seeing the demand for land in Hawaii rise as people leave the larger Mainland cities.

Another indication that might suggest the housing market is about to tank would be low interest in properties currently on the market; with those same properties sitting for months or even years without turning over. This is literally the opposite of what appears to be happening in Hawaii. The market is exploding like I’ve never seen before. The last tour I gave to one of my clients was on a house that had 12 showings booked on the very first day, and the sellers had received 15 offers on the property after the first WEEK. And that kind of experience isn’t unique to me by any stretch of the imagination. If that isn’t a hot market, I don’t know what is!

— The Conclusion —

In my opinion, Hawaii isn’t heading for a real estate crash. I’m just not seeing any of the indicators that would lead me to believe otherwise. What it IS experiencing, at the time of this article, is one of the most explosive seller’s markets I’ve ever seen. Property prices are rising as Mainlanders leave the big cities and look for somewhere a little more peaceful and a lot less populated. If anything, I believe that the market will be stable and strong for at least the next couple of years. I could be wrong, but that’s what I’m seeing.

It’s like the old joke about the young guy coming to his grandpa for investment advice. “Son,” the grandpa says, “Any chance you get, invest in dirt. They just don’t make that stuff anymore.” Hawaii is some of the nicest dirt you’re liable to find in the States, and right now it seems like everyone wants to invest in it.

If you have any further questions about the subject matter covered in this article, or if you’re looking to take advantage of the market right now either as a seller or as someone looking to invest in some Hawaiian dirt, please feel free to contact me.