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Is the Hawaii Real Estate Market About to Crash?

These days are just full of strangeness and uncertainty, aren’t they? Riots, political upheaval, global pandemic… It’s at best off-putting and at worst downright terrifying. In times like these, it’s no wonder people start looking around and wondering, “is it all going to really be alright?” More and more, especially in the last couple of weeks, I’ve been getting this question; is the housing market in Hawaii about to crash?

typewriter spells out crisis

Ordinarily, I’d answer that question at the end of this article, after providing you with the relevant information. But this is such a huge question for so many people, one that affects them on so many levels, that it deserves a straight-up answer as soon as possible.

Is Hawaii Real Estate Headed for a Crash?

So. Short answer? No. The Hawaii real estate market does not appear to be heading for a crash. In fact, as of the date of this article, the housing market in the islands is booming, and in my opinion, it will continue to do so.

Now that I’ve gotten that out of the way, let me tell you how and why I arrive at that conclusion.

crashing while surfing oahu wave

What is a Real Estate Crash?

First, let’s define some terms. A ‘crash’ in real-estate terms happens when the properties on the market lose value in the extreme, usually due to a glut in the marketplace. Prices plummet, people wind up upside-down on their mortgages, and the supply of houses far outstrips the demand, leading to loss in value across the board. (For more information on housing bubbles and market crashes, this Investopedia article has good information: )

How Do We Know When the Market Will Crash?

There are certain indicators you can look at to try and determine which way the housing market is headed. How many houses are there on the market? How long does a property stay listed, and what kind of interest does it generate? Are houses just sitting lump-like for months at a time, or do they flip early and often?

Hawaii, both historically and currently, typically has a low number of houses (or ‘inventory’) on the market. This is actually a good thing for sellers, as a lower inventory on the market means that less demand is needed to keep prices stable. It’s the old ‘supply and demand’ equation; the less supply there is, the less demand is required. This is not to say that there won’t necessarily be a crash lurking sometime in the future, but if there is a historical trend of low market inventory and a current trend of extremely low market inventory, it is an indication of a strong — or at least stable — real estate market.

There WAS a housing crash in 2008 in Hawaii, along with most of the rest of the USA. That crash began for a variety of reasons, but it became a CRASH simply because the market became over-saturated with inventory; too many houses on the market, not enough demand. The conditions that led to the ’08 crash simply do not exist right now.

What Does the Market Look Like Now?

That’s not to say that COVID-19 doesn’t appear to be having ANY effect on the market, however. I’m seeing a nation-wide trend of people leaving densely-populated areas and looking to purchase property in more rural areas, away from cities and heavily urbanized centers. Most of the islands in the state of Hawaii–Oahu being the possible exception–have low-density population centers. We’re an island chain full of small towns; perhaps not perfectly ‘rural’ but certainly a far cry from the densely packed cities like L.A. or New York. More and more, I’m seeing the demand for property in Hawaii rise from people leaving the larger Mainland cities and settling into permanent remote work situations. Given all that is going on in the world today, and I admit that I might be biased, but I can’t think of anywhere else I’d rather be right now!

big island ocean and lava rocks

Another indication that might suggest the housing market is about to tank would be low interest in properties currently on the market, with those same properties sitting for months or even years without turning over. This is literally the opposite of what appears to be happening in Hawaii. The market is exploding like I’ve never seen before. The last tour I gave to one of my clients was on a house that had 12 showings booked on the very first day, and the sellers had received 15 offers on the property after the first WEEK. This kind of experience isn’t unique to me by any stretch of the imagination. If that isn’t a hot market, I don’t know what is!

Explosive Seller’s Market

In my opinion, Hawaii isn’t heading for a real estate crash. I’m just not seeing any of the indicators that would lead me to believe otherwise. What much of Hawaii is experiencing, at the time of this article, is one of the most explosive seller’s markets I’ve ever seen. Property prices are rising as Mainlanders leave the big cities and look for somewhere a little more peaceful and a lot less populated. If anything, I believe that the market will be stable and strong for at least the next couple of years. I could be wrong, but that’s what I’m seeing.

It’s like the old joke about the young guy coming to his grandpa for investment advice. “Son,” the grandpa says, “Any chance you get, invest in dirt. They just don’t make that stuff anymore.” Hawaii is some of the nicest dirt you’re liable to find in the States, and right now it seems like everyone wants to invest in it.

Want to Know More?

If you have any further questions about the subject matter covered in this article, or if you’re looking to take advantage of the market right now either as a seller or as someone looking to invest in some Hawaiian dirt, please feel free to contact me. Just send me a quick email, call, or text. I love talking real estate, and I’m happy to help, no strings attached.

Don’t miss out; join my email list, and I’ll send my helpful Hawaii real estate blogs directly to you!

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Aloha,
Tom

Further Reading

Beware of Ohanas on Investment Properties in Hawaii
Thinking of Getting a Home Built in Hawaii? Read This First
Are Realtors in Hawaii Really Worth the Money?
Don’t Buy A Vacation Rental In Hawaii Until You Read This
Is Now a Good Time to Buy an Investment Property in Hawaii?
Should I Buy A Vacation Rental Or Long-Term Rental In Hawaii?

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Gillian

January 26, 2021

Aloha . I agree it’s out there trying to hone on a place in my price bracket and yes the market trends seems to be only going up in relocation/2nd homes.
I have been looking in Kauila/Kona area , have an agent there and have lost out on two offerings . I am looking for a studio /one bedroom below 300 and boy do they go fast , in days if priced right. . I will be selling a mtn property in a hot spot in Co this summer so def coming over . Toes are tired of the cold . Miss the ocean. Hate Fla.
I spent a month in Nov traveling all over Oahu and the big island, looked at a ton of areas and housing for sell . Lots of good prices around Pahoa but too wet for me .
I have been to Maui a few times bit find it quite touristy more than KK . Also not much in my price range ,
Trying cash offers but am i better off jus renting and saving my bucks for island junts ? Or build ? Seems building costs are very high there or any island really.
I am a knock on wood healthy active 65 yr old young female . Retired basically.
U r welcomed to send me new listings if not too much trouble . Mahalo

Tom Selman

January 26, 2021

> Hi Gillian, thanks for the comment! I just sent you an email to follow up with you.
Aloha, Tom

StillWaiting

January 31, 2021

During the last home price run up I remember a lot of articles justifying prices and how they can’t possibly go down. It only takes one event to change consumer sentiment.

KAWIKA MARQUARDT

February 1, 2021

How would the market be impacted by significant inflation? Interest rates rise rapidly and buying power declines. The market response would see a decrease in asset values. As asset values decline, people are suddenly under water and the hallmark of a crash that you suggest suddenly comes to past. So the question is, do you not foresee fast rising inflation as a potential risk in the face of unprecedented spending by the fed?

Gabe Venturelli

February 11, 2021

You make some great points Tom!
How about the condo market, especially those dependent on vacation rentals?
Peace ~ GabeV Kauai

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