O'ahu Market Update - June 2023

Where is the Summer Sizzle? In past years, the market fires up in June, July and August, caused by people moving in and out of Hawai'i and those who want to upsize into a different home. The first month of the summer results are in and they are less than inspiring but with hidden potential.

Closed sales (-30% homes, -25% condos), pending sales (-24% homes, -17% condos), inventory in escrow (-27% homes, -15% condos) and new listings for sale (-17%, homes, -22% condos) all continue to fall compared to the same month last year. A trend that has become too familiar over the past 12 months whereby both demand for housing and the willingness to sell a home has been negatively affected by another increase in mortgage interest rates. The puzzling part is inflation is back under control, job growth is steady, the median income is rising and housing starts (the building of new homes) is increasing, yet the Federal Reserve continues to let interest rates remain at this level.

Could the market simply be warming the pan to prepare for the summer sizzle? While the indicators mentioned above are negative, they are less negative than, previous months which could signal a slow turnaround. Additionally, the overall inventory for sale increased for both homes (15%) and condos (16%) which offers more choices for buyers who have been waiting for options to hit the market. Prices have also come down slightly as the average price ($1,300,456 homes, $589,587 condos) and median price for homes ($1,100,000) and condos ($510,000) dropped by around 5% as compared to last year.

The recipe for the summer sizzle could be lower prices, more choices, and a drop in mortgage interest rates. The market is missing the last ingredient. If the Federal Reserve sprinkles in a slight drop in rates, it could be similar to adding some oil into the pan, turning up the fire or adding lighter fluid to the grille.

Read the full report from the Honolulu Board of REALTORS® here.

How Comparables are Chosen

Whether you’re selling your home or buying a home, your Berkshire Hathaway HomeServices network professional will provide you with a comparative market analysis (CMA), a computer-generated report that shows you what homes similar to yours are selling for in your area, or how the home you’re interested in buying compares to other homes on the market.

CMAs are only available to members of the local multiple listing service, which includes licensed real estate agents, brokers, appraisers, real estate attorneys, and local property tax authorities. It takes skill and experience to create a report that can help you choose a listing price range for your home or to help you make an offer on one of the homes you’re seeing. 

A CMA can be as narrow as a city block or as broad as a zip code. It can include data on homes for the latest week, month, or six-month period. It can show you homes for sale and those that have recently been sold. CMAs can be made specific with search parameters that show only one-story homes, condos, or homes with swimming pools.

Occasionally, you’ll find that the CMA doesn’t have a nearby comparable. In that case, the search parameters must be widened, which may not give as true a picture of value for the neighborhood.

You may be pleased or dismayed by what the CMA shows, but you should know that it’s an accurate depiction in real time of current market conditions—until a new comparable changes the results.

Is Home Flipping a Good Idea?

They make it look so easy on TV. Buy a house, fix it up, and resell it for a big profit. But that’s easier said than done. Here’s what you’ll really need to be a successful home flipper:

Cash – Most flippers pay cash for properties. You can get a loan, but you’ll need good credit to qualify for enough to cover the costs of both the purchase and resale transactions, renovations, utilities, homeowner’s insurance, and to cover unexpected expenses. You should have cash to cover your carrying costs throughout the timeline of the project and a tax plan to pay for or defer capital gains.

Experience – Successful flippers follow a formula—an undervalued, distressed, or unimproved and dated property that can be purchased using the 70% rule. If you plan to sell the property for $500,000 after renovations, you should pay no more than $350,000 to acquire it, plus the costs to make repairs and updates, allowing you to make a typical profit of $67,000. If the property looks as though it will cost you too much to make it sellable at $500K and still make a profit, it’s not a good candidate for flipping.

Labor and Materials – Most flippers do the work themselves, but you may need skilled labor such as electricians and plumbers. Working without a license can expose you to fines and lawsuits for faulty construction. You must be savvy about the costs of materials needed, supply chains, and have the correct equipment and insurance to work safely.