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Kauai

Kauai Real Estate – Summer Report & Thoughts

While the latest projections of the country’s real estate market of 100+ experts are positive, the growth in our Kauai market appears to be slowing down. The Pulseonomics survey of economists, real estate experts, and investment strategists predicted that:

  • Home values will appreciate by 4.4% in 2014
  • The cumulative appreciation will be 19.5% by 2018
  • That means the average annual appreciation will be 3.6% over the next 5 years
  • Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 9.4% by 2018

Price Differences: Then vs. Now

Meanwhile on Kauai, sales from April through June indicated a slowdown in the velocity (number of sales) of our housing market. As in many markets, the single family residential homes segment has recovered the fastest, and prices are at mid-2004 levels and approaching 2005 prices. But price acceleration has also slowed except in small pockets of the market where inventory of homes is scarce.

Condo sales and land sales trail behind in their price recovery. However, the number of condo and land sales have increased significantly in the past year. In any expansion cycle the volume of sales (number of transaction) increases first and then upward price movement follows. 

As an example, the median price of Poipu condos went from $413,000 at the end of 2012, to $442,000 at the end of 2013, and then to $452,000 at the end of June 2014. In Princeville the median price of a condo went from $318,000 at the end of 2012, to $433,000 by the end of 2013, and a slight gain to $445,000 through the end of June 2014.

In the single family residence segment of our market, Princeville median prices rose from $630,000 at the end of 2012 all the way to $868,000 by the end of 2013. The median price rise to $889,000 through the first 6.5 months of 2014 has been more gradual. Similarly in Koloa/Poipu, median prices of homes moved from $818,000 in 2012, to $1,011,000 at 2013’s end, and has risen again to $1,090,000 this year. 

It’s Still a Good Time to Buy

So while price and sales velocity in the Kauai market levels off to more moderate growth, it’s still a good time to buy in paradise.

Why?

Well, the housing and market outlook from Freddie Mac is predicting interest rates could be up to 4.8% by this time next year. If we calculate based on the national rates above, a buyer currently looking at a home priced at $600,000 this year is likely to pay more in the summer of 2015. See below…

Inventory is still constrained in certain parts of the market. So, at the end of the day, our market growth has slowed, but not in market segments where there is little to choose from.

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