I recently attended Paul Brewbaker‘s economic forecast talk at the Honolulu Board of Realtors Windward Regional meeting. While we agents feel the fast pace of the market on a daily basis, and are often challenged in competing with multiple offers and various seller demands, does Brewbaker’s forecast match our field time?
Here are a few salient points Brewbaker noted in his presentation:
- State-wide, Hawaii’s economic growth has been healthier on Oahu than neighboring islands.
- Homebuilding trends have been spastic but are currently recovering on Oahu faster than on neighbor islands.
- Sales of existing homes on Oahu are trending upward at a slow and stable rate.
- Property values on Oahu are tending to increase at a 4.5-5% rate per year.
- The increasing U.S. dollar has seen foreign investments decrease.
While some of this information may seem alarming, let’s look at it in context.
First, according to the State of Hawaii Department of Business, Economic Development, and Tourism, the population in Honolulu County is projected to grow by only 8% in the next ten years.¹ Additionally, due to increased life expectancy, the number of younger households will continue to decline, while the number of older households will increase. This, naturally, will drive the types of housing that are in demand. A calculated approach to the quantity of new home construction would be wise so we don’t find ourselves here in a situation like we saw in California and Las Vegas in 2005, where thousands upon thousands of new homes sat (and still, in some places, sit) vacant.
On the other hand, many people recognize the overall shortage of housing on Oahu, but want to make sure we’re building the kind of homes that are needed and desired by local residents. We also know, given our land restrictions and logistical challenges, the overproduction situation experienced in other states is unlikely here.
45-079 Waikalua Road 5, Kaneohe, HI 96744 (MLS# 201615233)
Next, a slower rate of growth for property appraisals may actually work in our buyers’ and sellers’ favor, and it is a sign of a healthy economy rather than a boom and bust situation. As we know, the cost of living on Oahu is high, and increasing. With home values increasing slowly, the bulk of buyers won’t be priced out of the market, especially if wages can keep up.
460 Kamaaha Avenue 8, Kapolei, HI 96707 (MLS# 201618304)
Finally, when we look at the percentage of foreign buyers on Oahu compared to mainland and local buyers, as I did in my recent blog article The Mythical Chinese Buyer, we see that local buyers account for the overwhelming majority of transactions on Oahu – at 86% compared to only 4% international buyers. A decrease in foreign investments may be felt here in small amounts, but certainly won’t crush our market.
2258 Metcalf Street, Manoa, HI 96822 (MLS# 201618447)
In summary, Mr. Brewbaker’s talk highlighted that, while we have some slight obstacles to face, the economic forecast for Oahu looks healthy and promising. Now is the time to get you started living your Hawaii Life!
¹ State of Hawaii Department of Business, Economic Development, and Tourism. (2015). Measuring Housing Demand in Hawaii, 2015-2025.