The recent front page article in the Hilo Tribune-Herald left many with the impression that the housing market is constricting. While the data was correct, there are other factors not noted that influence sales at the end of the year. And to put things in a local perspective, we need to look at the health of our feeder markets, mainly Oahu and California.
Photo courtesy of ddpavumba/freedigitalphotos.net
The article (which was syndicated as I recall) failed to properly emphasize the impact the weather has had on sales throughout the country this winter. After all, if you can’t get to a listing, it won’t sell. Also not mentioned was that investors normally need to close before the end of the year, which typically means those sales do not spill over into January as do normal sales.
Realtors® definitely want sales to close before the end of the year because our commission splits are affected. The slowing of job growth was noted by our NAR economist during our national convention in November. Laurence Yun noted that 8 million jobs were lost during the recession and only 7 million have been replaced. This certainly affects the pool of eligible buyers. Locally, job growth, especially in construction, is expected to vastly improve.
What Does a Shrinking Inventory Mean for the Market?
The article noted fewer existing homes for sale, so inventory is tight. Remember, as existing home inventory decreases, prices will start to rise while new construction starts to filter on the market. Just drive through Hilo and HPP, and you’ll see the construction industry has perked up. According to a Feb. 21st article in Realtor® Mag, our NAR online publication, existing home sales in January were the lowest since July 2012 because of weather and lack of inventory.
Flood insurance rates will continue to wreak havoc on sales, even locally, unless congress quickly finds a fix to astronomical rates affecting any sale in a flood zone. Realtor® Mag noted 40,000 home sale delays and cancellations based on flood insurance rate increases, which went into effect last Oct. This affects much of Kaumana, Keaukaha, and Waiakea-Uka.
How Are We Doing on the Big Island?
Here’s a quick snapshot of how we are faring on Hawaii Island:
- Island-wide, residential sales numbers through Feb. are down 5.17% with prices up 12.9% this year over last
- Vacant land sales were only down slightly (1.85%) with sales prices increasing almost 14%
- Puna residential sales are up over 9% and prices bumped around 27%
- Hilo sales are down 17.65% while prices stayed very steady and showed little change
I can attest to lack of inventory across the board as well as to an increase in the number of sales in the upper price points. Vacant land sale samples and sales in North Hilo and Hamakua were too small to report. We will revisit these later.
Looking back at the issue of our feeder markets, sales on Oahu and California are screaming right along with offers over full price, and multiple offers are common. Interest rates are still low and lenders are making loans, so it’s still a great time to jump into what continues to be a very healthy East Hawaii real estate market! Of course, if things change, I’ll be sure to let you know.