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Hawaii industry professionals share their predictions

If you’re looking to buy or sell a home—or even if you’re a current property owner or a first-time investor—it’s important to know where Hawaii’s unique real estate market is headed in the coming years. Our dynamic world includes changing real estate market conditions, so understanding the Hawaii market will help guide future buying, renting or selling decisions.

To help you develop a real estate strategy, we asked local experts about the future of real estate in Hawaii. Here are twelve major trends they predict for the future of Hawaii’s real estate market.

1. Valuation is slowing down, but still growing.

Real estate in Hawaii is always a long-term investment due to the scarcity of land. The question is not whether my property will increase in value, but at what rate. Right now, home values ​​are rising less than they have been in the last ten years, but the pendulum will eventually swing back.

2. Cyclical Fluctuations Affecting Home Values ​​in Hawaii

We are seeing leading indicators that the transition is well underway. When it comes to real estate in Hawaii and Oahu in particular, home prices have reached record levels and continue to put enormous pressure on local buyers. Over the last seven to eight years, we have seen growth of 5 to 10 percent. Without incomes keeping pace, I don’t know how we can maintain upward pressure on home values, especially if/when interest rates spike, further eroding affordability and buyer confidence.

The cost of housing will fluctuate depending on supply and demand in the real estate market. There are a lot of apartments being built on Oahu and this will significantly increase supply over the next 5-10 years. 

Housing prices in Hawaii have always been good because Hawaii is an island and there is always demand for it, but not enough supply. You always have adjustments in different cycles.

3. Real estate remains a long-term investment

Hawaii, like much of the U.S. real estate market, has been in a bull market since the Great Recession. No one can predict future values. Many speculators who think they can predict the lows and highs end up making meager profits. Real estate investing should be considered a long-term investment. On Oahu, statistics show that the average annual increase in median sales price over the past 34 years is 4.84% for single-family homes and 4.64% for condos.

4. Transition from a seller’s market to a buyer’s market

We are currently in a market transition from a seller’s market to a buyer’s market, which will occur in the next year or two. Prices for more expensive homes are declining due to less activity and demand, and because the perception of their value is lower. On Oahu, the number of months of inventory is increasing and currently stands at 3.9 months of inventory; it will change to a buyer’s market when we reach five months’ supply. I point out that the Hawaii market is changing along with the West Coast market and the Maui resort market; this is because sales in the West Coast market will affect sales in the Maui resort market, which will affect the market on Oahu.

5. Consistently low interest rates

I expect interest rates to remain in this general range for the next few years as the government wants to keep the housing market strong and support the economy. Remember, we’re still at historic lows in interest rates, so now is a great time to buy or refinance. 

6. Affordable housing

As prices continue to rise, developers and the government will seek to make housing more “affordable” for people on lower incomes. These developments will occur outside the “city” or area of ​​Honolulu. I also see the luxury condo market slowing down as there is no way it can maintain the same pace as it has in the last decade. 

7. Additions to Existing Homes to Meet Housing Needs

More and more parents are renovating or adding to their existing homes for their children or parents. Hawaii needs to produce about 5,000 units a year, but we only build about 2,000 units. Homes are in demand for purchase and rental.

8. Changes in building laws

The city and state are considering changing some requirements for the building and possibly land owned by the State of Hawaii. Land is limited and the cost of building materials and labor is high. But over the next 10 years, Hawaii will need more affordable housing to buy and rent.

9. The rise of online real estate firms

I believe we will continue to see new tech startups and venture capital investing in the real estate industry over the next 5 years. We are already seeing a number of new, technology-enabled brokerages trying to get on their feet with every intention of disrupting the traditional brokerage model that has been a mainstay for decades.

Technology has paved the way for the growing popularity of “tech-friendly” real estate firms like Redfin. This is a technology model that has gained popularity over the past five years. I’m not going to say traditional real estate is dead, but firms like Redfin will definitely take their share of the market. 

More venture capital is going to more online real estate companies: Compass, Redfin, Open door, Zillow; Amazon just entered into a partnership with Realogy, which owns Coldwell Banker, Century 21, ERA and Sotheby’s. I think other tech companies may also get involved, including Google. 

10. Agents will not become an anomaly

While technology has brought convenience to our daily lives, the real estate industry has not been as dramatic as many thought. Real estate agents have not been replaced by artificial intelligence. As the state where word of mouth thrives the most, Hawaii is no different. Using search sites gives buyers the opportunity to search for properties according to their preferences. However, buyers need the expertise of agents to help verify property disclosures. 

Looking 10+ years out, I tend to believe that we will see a contraction in the real estate industry due to lower commissions, technology and automation; leaving only enough oxygen for the survival of valuable real estate agents and “niche” professionals. 

Large real estate teams and those who can benefit from capturing consumer attention can take the lead in sucking the oxygen out of the space. 

11. Local lenders remain

In the mortgage industry, online lenders like Quicken will continue to have a presence in Hawaii, but many buyers still prefer local lenders who know Hawaii’s unique market and can better serve them. 

12. Data-driven housing decisions

Technology has changed the way buyers and owners receive information. Information is much more accessible. The way information is presented and absorbed has changed. 

Housing data is now available to more people than in the last ten years, allowing a new generation to view neighborhoods and homes before purchasing them. 

Market knowledge and customer service will always remain the great equalizer, but technology can also work in parallel and catalyze more market knowledge and service to those who use it correctly. Technology also puts a number of tools in the hands of consumers, equipping them with knowledge and resources that were once only available to them through consultation with a real estate professional.