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Summer is officially here and the O'ahu Real Estate market is hot and moving forward. Despite what is happening in the world, in general, year over year and month over month stats are positive and show that people are still buying and selling property. We are especially seeing increased activity in communities considered the “Suburbs” as people realize new ways of living and working while spending more time at home over the past few months.
It is a great time to review your real estate goals, consider it as a solid form of investment and evaluate if spending more time at home has inspired you to make make a change.
Let's discuss what the current market means for you.
Market Map: Residential Sales Volatility Continues
By Scott Bradley, Partner
Every day, someone asks us, “How is the market?” As we face the monumental impacts of COVID-19 on our economy, several trends have become clear. To begin to understand them, let’s take a look back. After an initial slow down caused by stay-at-home restrictions, sales activity rebounded in June and has been surprisingly robust. Total residential transactions on Oahu soared 22 percent higher than the prior month. And a shortage in inventory has resulted in a frenzy of activity on well-priced listings. The quick shift in total sales volume paired with a trend toward multiple offers on some listings has created a sense that we are in a seller’s market.
Despite the market rebound, a deeper dive into the numbers is important to understand the total picture. While a 22 percent surge in transactions month-to-month is impressive, we also need to note that sales in June dropped a nearly equal percentage when compared to the same month last year. That drop consisted of a nearly 8 percent decline in the number of single family sales and a 35 percent decline in condominium sales. Along with the lower year to year transaction numbers, average prices were also lower in June 2020. The average price for a single-family home on Oahu fell nearly 6 percent to $899,271 while the average price of a condominium fell 9 percent to $481,220. In other words, the market is up … and down. We are experiencing a rebound in sales volume along with a modest softening in prices.
To predict the future we often look to pending sales – listings with an accepted purchase contract. Total pending sales in June 2020 were down by less than 1 percent from June 2019. So sales volume in June bounced back to the same level as 2019. A closer look reveals that all segments were not equal. Pending sales in June for single-family homes actually rose more than 15 percent while sales of condominiums fell 10 percent. Both past and future sales data are showing us that there is a rare divergence between the current single-family home and condominium markets.
The relative weakness in the condominium market can be attributed to several factors. Nationally, there has been a movement away from condominiums and dense urban centers towards less dense suburban settings in reaction to COVID-19. In Hawaii, two other factors may be contributing to the weakness of the condominium market. Bill 89 placing restrictions on vacation rentals disproportionately impacted the condominium market. And the limitations placed on tourism do to COVID-19 have virtually eliminated a large segment of the second home buyer pool. This group of buyers will have better access to listings after the August resumption of some tourism.
On the other hand, renewed strength in the market can be attributed to three factors. First, the slow loosening of the shutdown restrictions and massive infusion of stimulus funds have helped build confidence in the real estate market. Second, the surge in sales is partially a result of pent-up demand and changing preferences due to the time we have been forced to remain at home. And third, historically low interest rates have made real estate purchases and investments extremely attractive for those in a position to take advantage of the opportunities.