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Why Home Prices Increased During the Shutdown

by Scott Bradley, Partner

On March 21st and 23rd Governor Ige issued his second and third supplementary proclamations. All visitors entering the state would be required to self-quarantine for 14 days and, all residents except essential workers were essentially locked down in our residences. The Hawaii economy quickly took a dive to the bottom of the 50-state economic ladder. A reasonable observer might have easily concluded that the sky is falling for home sales data. And they would have been right, and wrong.

The number of closed home sales did drop by a stunning 25%. However, the average price of a single-family home actually increased 7.5% to $941,000 and the average price of condominiums increased 2.5% to $521,500. Typically, sales volume and average prices roughly track the employment rate. It is logical to assume that sales activity and prices will rise in a strong economy and fall in a weak one. So, what happened last month?

Unlike most downturns, the Governor’s lockdown resulted in a huge number of seller’s deciding to hold off putting their property on the market. Fear of having people in their homes coupled with Realtors being confined to theirs, translated into a 42% decline in new listings coming on to the market.  In other words, while demand dropped, supply dropped further putting upward pressure on prices. 

National statistics have been showing similar trends. The National Association of Realtors reported that the median price for a single-family home rose 8% in March while the number of existing home sales fell 8.5% in the same month.

Sales figures for May are expected to reflect a further decline in sales volume. Pending sales in April (sales into escrow but not closed) declined 19% from the same period last year. This indicates we will see more of the same when May figures are available. Once the economy starts to open up, we expect a slow rise in sales and a market that returns to some semblance of equilibrium.

Richard A Cambe

Realtor Associate, RS-81863

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HI Lic #: RS-81863
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