PERSPECTIVES: Hawaii’s Trade Volume Drop Directly Tied To Inventory Shortage

Three big housing units centered around a clear blue pool.
The allure of buying high-end homes on the islands of Oahu, Hawaii, Maui and Kauai hasn't diminished. (Hawaii Life)

This report is part of PERSPECTIVES, a comprehensive look into the world of prime residential real estate. Access the full report here to discover the latest trends and dynamics shaping the market.

What a difference a year makes. Early in the pandemic, Hawaii’s high-end real estate market shattered almost every record with blow-out sales. The trend lasted, with sales of high-end homes in 2021 and 2022 outpacing nearly every year in the last decade.

But then came the predictable slowdown. How could the luxury market sustain such velocity? The allure of buying high-end homes on the islands of Oahu, Hawaii, Maui and Kauai didn’t diminish, but the number of homes for sale did.

“We’re kind of overexposed,” says, Matt Beall, chief executive of Hawaii Life. “Because so much of our trade volume during Covid was in the high-end market, we sold everything there was to sell.” The lack of supply—not enough luxury properties across the island chain to go around—led to a dip in 2023.

Across the state, the overall volume of home sales (in dollars) dropped 30%, and the number of transactions fell about 28% as of November, Beall says. Two bright spots: A penthouse condo in Honolulu’s Park Lane Ala Moana purchased by Hawaii Life clients for a record-setting $27.5 million, and the $36.5-million sale of Dillingham Ranch on the North Shore of Oahu, in which the brokerage represented both the buyer and seller.

The number of available homes in Kauai stabilized with a slight increase in inventory, and the number of listings on Hawaii Island increased.

A unique building with multiple small blue roofs on it and a sun behind the clouds in the background.

7218-C Koolau Road, Kauai. Presented by Hawaii Life

Oahu home sales showed signs of increasing after a slow start at the beginning of the year. The third quarter of 2023 saw the median sales price of single-family homes rising to $1.05 million and a rise in the price per square foot to $723.

The outlook for Maui remains in flux following the devastating August 2023 wildfires in the Lahaina area. “The impacts of fires will likely lead to continued volatility in Maui’s housing market in the near term—and potentially outsized demand and low supply for years to come,” according to Hawaii Life’s Q3 report.

Hawaii has always been one of the most desirable second-home locations in the country, with roughly a quarter of the state’s homes owned by nonresidents, as of 2021. Most buyers are from the U.S. mainland.

The state has seen a shift among pandemic-era investors that has affected inventory, Beall says. Many work-from-anywhere buyers have sought homes or condos across Hawaii, with strong interest in Waikiki on the south shore of Oahu, Kailua-Kona on the west coast of Hawaii Island and the resort communities of Wailea and Kapalua on Maui.

Before the pandemic, buyers tended to be more transient and considered their second or third homes as flexible assets they could resell.

5515 Weke Rd, Kauai. Presented by Hawaii Life

During and after Covid, families who moved to the islands—mostly from urban areas in California, Texas and New York—enrolled their children in schools, fell in love with the outdoor lifestyle and became enmeshed in the community. “Hawaii has a way of sucking you in,” Beall says.

After the pandemic eased, many property owners didn’t sell their Hawaii homes when they returned to the office in their home states, he says. “We saw a massive uptick in property management, short term, long term or even just caring for the property.”

The geography and landscape of volcanic islands surrounded by the ocean limit the amount of land that can be developed, which Beall says makes luxury projects “almost a zero-sum game.” Aside from some new luxury high-rise condos in Honolulu, the high-end real estate market depends on the resale of existing homes in picturesque parts of the islands.

Many buyers and investors in Hawaii’s luxury market live on the mainland, specifically the West Coast. Their “experience and expectations” of real estate are shaped by what’s happening in their markets—something once viewed as a precursor to changes in Hawaii’s market, Beall says.

“But over the years that’s been less true, in my opinion, largely because Hawaii is such a small market with totally different inputs and impacts than you’d see in a large metro market anywhere on the continent,” he says.

So what happens next? The beauty and lifestyle of the Aloha State is likely to keep demand high, and buyers hoping for more homes to come on the market and interest rates to ease must be patient. “We’re starting to see some inventory but it’s going to take time,” Beall says.


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