Future Proof Investments

As a real estate professional, one of the jobs that I take very seriously is to take an advisory role with respect to my clients and building their wealth through real estate. Vehicles such as a Self Directed IRA, a 1031 exchange from the sale of one investment property into a different market or multiple units, or to simply move assets out of the stock market and into real estate investments. These are what most of my clients have been involved in. Myself included. So it’s very important for me to be on top of emerging trends in RE, and to be able to advise my clients, and with their consent act on them.

Competitive Market on Oahu

Low-interest rates and short supply have made for a competitive real estate market on Oahu. Not necessarily a Buyers market, and generally not a friendly Investor market. But there are silver linings where one can take advantage of the current situation. Specifically in the Waikiki market.

Because of COVID-19, we have had a 100% beat down of tourism. That and the fact that many are seeking single-family homes rather than condos (for obvious reasons) has made Waikiki the sleeper during this time of COVID for the investor. I believe this will be short-lived, where we have investor buying opportunities and low-interest rates combined, as easing traveling restrictions along with getting back to normal life will bring people back to Waikiki to buy. Keeping in mind that a favorable rental return rate in Hawaii takes a little more money to essentially “buy down” the equity. For this reason, I have had clients invest in other markets if they don’t have the 30-50% down to make this happen. In general Portland, Oregon is one of those markets that are more favorable to a smaller down while retaining a good rental return. But if Oahu is your place, read on!

Let’s look at the numbers to validate this idea. Just a heads up, we will be looking at just condos on Oahu comparing the whole market to Waikiki. Also keep in mind that these embedded graphs are live, meaning whenever you come back to this post, the graphs will have the latest info. A week from now or 3 months from now, or 3 years from now, you will be able to see if my predictions really had merit. You can hold my feet to the fire!

OK, let’s get to it.

Waikiki Market Statistics

Percentage of List Price is a good indicator of where the final offers are coming in. I took the 5-year long view, and even though the percentage is in a small range, the percentage of list price in Waikiki is below all of Oahu and continuing to get smaller while all of Oahu has leveled off.

I took a 12-month look at Days On Market (DOM) and as you can see Waikiki in March was above Oahu at 40 DOM to Oahu’s 24 DOM, spiking in June to 78 DOM, and heading back down in August to 34 DOM. Are people starting to react to the buying opportunities?

The median price over the last 12 months also supports the idea that there are buys. Especially in May where Waikiki’s condos had a median sales price of $333,000 to all of Oahu’s $402,178. Trending down in August. Interest rates holding at record lows mean the buys are still out there.

Months Supply really tells the tale though. Months Supply looks at how long it would take to sell out of all the inventory if nothing else came on. A low number means properties are selling fast, a high number means they are hanging out for a while. It is clear that Waikiki is well above the entire Oahu market at 12.1 months compared to Oahu’s 4.8 months.

One has to remember that it’s not just tourists that frequent Waikiki, there are year-round residents. In fact, Waikiki has one of the most vocal neighborhood boards in Honolulu! This also helps strengthen a  good long term rental market.

Any investment has its inherent risks and that no one has a crystal ball to tell the future. What we can do is to add data into the equation and make sound investment decisions.

Want to Know More?

If you have any questions or comments or need examples of listings that would work for the investor in Waikiki, don’t hesitate to reach out. I am at your service.