West Hawaii’s real estate market is booming.
Driven by a surge in demand for residential homes, property sales in Kona reached a 15-year high in October and November, marking a significant rebound from a pandemic-induced lull that started in April. According to statistics compiled by Kona Realtor Gretchen Osgood, sales are up 59% over last year’s combined October-November totals.
“People view Kona as a safe place,” said Osgood. “You can eat in a restaurant, you can walk on the beach, you can sit on the beach; we’re not really closed. I think that’s terribly attractive if you live someplace that doesn’t have all those things.”
Condominium sales, however, have not experienced the same type of bounce.
“The one-year declining trend for condos is steep, off 19% from the previous 12 months,” Osgood said. “It is likely that the attractiveness of condo ownership for investors has worn thin due to the lack of tourists.”
Such high numbers for residential homes, not seen since before the Great Recession and housing crisis of 2008, may prompt worries of a market correction to come. Osgood speculates, however, that while housing may become a nationwide issue in the coming months, West Hawaii is better positioned than most to weather such a storm, primarily because of the high portion of cash buyers as of late.
“We’re running at 41% cash buyers last month; that gives us a sustainability in those people that are coming. They’re not going to lose their house if they paid all cash for it,” said Osgood. “That number has been running high for years; at one point in the downturn, it was actually 50% of the buyers. So, Kona is a little bit better positioned at this point in time to weather a downturn. I don’t think our house of cards is going to collapse like it did last time.”
Nationwide, 22% of purchases in the third quarter of 2020 were paid for with cash, according to statistics from ATTOM Data Solutions. For comparison, Kona’s cash sales never exceeded 20% in any of the five years leading up to 2008.
It’s unclear exactly who is buying the homes, however, Osgood said it appears out-of-state buyers are taking a bigger portion of the pie.
“I don’t think we’ve changed the quantity of mainland buyers coming in, but it is diluted because there aren’t as many local buyers,” she said. “The working class in Kona aren’t stepping forward to buy right now.”
Many locals aren’t stepping forward to sell, either; as of the end of November, inventory for residential homes is approximately half of last year’s total at the same time.
“Inventory is at the lowest level for this date since the stats were first reported,” according to Realtor Michael B. Griggs, who writes the monthly Griggs Report. “Pending sales are strong and probably would be higher if it weren’t for the lack of inventory.”
Such a low inventory is likely a combination of multiple factors, most notably Hawaii Island’s low COVID-19 case count, coupled with the mainland’s surging numbers and recent new lockdowns. This combination lends credibility to the notion that those already in West Hawaii have good incentive to stay, and those looking to relocate from areas more affected by COVID see West Hawaii as an enticing option.
Then, add in historically low interest rates, and it leads to West Hawaii homes getting snatched up quickly. How long this trend can last for is uncertain.
The expiration of federal and state protections for foreclosures and evictions in the coming months, coupled with what’s projected to be a sluggish recovery in Hawaii, could result in an exodus of West Hawaii homeowners heading to the mainland in 2021. Such an exodus seems certain to inflate the current depleted inventory of homes.
“They’re already seeing an exodus on Oahu of people headed to the mainland to find work; that’s what happened in the last downturn,” said Osgood.
Exactly how massive of an exodus could West Hawaii see, and how much will such an exodus impact the inventory of homes? How long will sale prices continue to climb? As with nearly everything during the age of coronavirus, the answers simply remain unknown.