Maui Market Conditions – July Update

July Housing Market Update

It’s a new month, we’ve transitioned from spring to summer, and the housing market is shifting gears! Based on recent numbers, the Maui market is following right along with national trends.

First, What’s Happening Across the U.S.?

It’s been hard to miss the news coverage about record home prices all over the country in recent months. As we’re all probably also aware by now, the Federal Reserve has adopted a strategy of raising interest rates to try to cool off the incredibly hot housing market, in the hopes that they can slow the overall rate of inflation nationwide. As a result, the average rate on a 30-year fixed mortgage grew from 3.11% in late December 2021 to 5.09% in early June 2022.

If you were paying attention in April and May, you may have heard that new home sales dipped 19% nationally, to the lowest levels we’ve seen since April 2020 (the early days of the pandemic). By the end of the first week of June, we also saw the number of mortgage applications decrease 20.5% year-over-year – and as compared to their peak in pandemic times, they dropped 40%!

So Where Are We Now?

Well, real estate and financial experts are beginning to label our current situation The Great Deceleration. In other words, we’re officially entering a housing market correction, in which ongoing increases in home prices and months of rising interest rates have begun to reduce buyer demand.

Fortunately, those same experts are not predicting the kind of housing bust that happened in 2008. A couple of factors make today’s market different than the one we experienced back then: first, homeowners in general are in better financial shape now, and second, we no longer have a widespread issue with subprime mortgages.

What we’re expecting instead of an actual bust is just the end of a boom. For a scattering of markets around the country that are significantly overvalued at the moment (like Boise and Phoenix, for example), home prices may fall 5% to 10% over the next year or so. But the prediction for the majority of markets is that prices will simply flatten out.

What’s Happening on Maui?

Here on the Valley Isle, we had 203 active home listings at the end of May, and 224 active condo listings. That translated into a 37% decline in our inventory of single-family homes – and a 68% decline in our inventory of condos – since the end of December 2021.

Because inventory has been low but potential buyers have continued to recognize the value of Maui real estate, 61% of homes and 66% of condos sold at or above their list price in May! As compared to May 2021, the median home price rose 19% (to $1.21 million) and the median condo price rose 16.7% (to $715,000).

May marked the fifth consecutive month, though, in which the number of home sales decreased year-over-year. Basic market logic tells us that if demand continues to slow, it creates an opportunity for supply to replenish. If you’re a buyer, this market correction represents long-awaited good news!

It’s my pleasure to keep you informed as market conditions continue to evolve. If you have any questions or need more information in the meantime, please feel free to contact me!

Leslie Mackenzie Smith, REALTOR(S), RS-42147