Aloha! Happy May Day is Lei Day!
Knowledge is Wealth! So would be a time machine sending us back to year 2003. Should have, could have and would have! Right? Only if I had known at the time I should have, could have and definitely would have bought two more of those condos! At average yearly appreciation rates of 4.5% for condos (4.6% for homes) on Oahu in the last 30 years that $250K condo back in 2003 would be worth almost double that amount now. The main article of this month’s Hawaii Damon Newsletter is an update from last November – please consider it required reading for anyone looking to buy or sell property in Hawaii!
Oahu Buyers & Sellers Markets Details – In this month’s Hawaii Damon Newsletter we will look at several East Oahu neighborhoods while giving a general overview of the market status in the rest of Oahu. Depending on your real estate goals you can then strategize accordingly. If you are in the market for a home or considering selling your home in the near future, this month’s main topic is, again, a must read!
Am I selling in a Sellers’ Market and buying in a Buyers’ Market? Or, vice versa? – Whether you are a Buyer or Seller or both, this is an extremely important piece of information to know. Selling for top dollar in a Sellers’ Market and buying for the best price possible in a Buyers’ Market is the best possible scenario while selling in a competitive Buyers’ Market and buying in a Sellers’ Market would be less favorable with a wide range of scenarios in between. Buyers’ or Sellers’ Market status should, for the most part, dictate buying or selling strategy. In previous Hawaii Damon Newsletters we reviewed strategy so will not delve too much into that topic this month. However, the links to those previous newsletters are now posted on the blog section of the Hawaii Damon website and can be found here: Market Strategies for Buyers and Market Strategies for Sellers. Please check them out. For this month we will simply focus on identifying the actual Buyers’ or Sellers’ Markets themselves on Oahu with some actual data for several neighborhoods. I’ll make it easy to understand and if the neighborhood you are (interested) in is not reviewed this time please do not hesitate to contact me here and I can get you a full analysis on your requested neighborhood – usually by the next day.
Buyers’ & Sellers’ Markets 101, How are they defined? The usual method is to look at inventories of homes on the market. Assuming no change in the monthly sales of homes in a given neighborhood, how many months would it take to sell the inventory of homes currently on the market? Basically, if the remaining inventory is less than 5 months then it is a Sellers’ Market (Seller, for the most part, has the upper-hand) and if it is more than 6 months then it is a Buyers’ Market (buyer, for the most part, has the upper-hand). The “Goldilocks Zone” (market not too hot nor too cold) is considered to be 5 to 6 months of inventory – balanced where neither the Sellers nor the Buyers have the upper-hand. Let’s now look at several areas and neighborhoods:
General Market Status Outside of East Oahu – Besides some areas of Kailua (Lanikai etc.) and the North Shore, most of the Luxury Home neighborhoods (homes over $1.9M and condos over $700K) are in East Oahu. Outside of East Oahu where most of the median neighborhoods are – the median price in April was $790K and $416K respectively for homes and condos. This median price home and condo category is in a hot Sellers’ Market with inventories in the 2 to 3 months range and appreciating prices. In the category just below Luxury Home/Condo from $1.1M to $1.9M which not only covers many other neighborhoods in East Oahu but also all over Oahu – we are just in the Goldilocks zone at 5.1 months of inventory. Last November it was 5.9 months thus it has been decreasing so within another 6 months – this just below luxury home category – could also possibly be in Sellers’ Market territory.
Specific neighborhoods can vary so, again, please do not hesitate to contact me for a full analysis of the neighborhood you are (interested) in. Here is a graphic showing the inventories on Oahu broken down by 8 price categories (click to expand):
Here is the one for Condos:(click to expand):
Now that we know the market status of most of Oahu outside of the luxury home areas and the category just below it ($1.1M to $1.9M or “semi-luxury”) is currently in a Sellers’ Market (or quickly getting there for semi-luxury) – let’s now specifically have a look at a few of the most popular East Oahu luxury home neighborhoods and condo areas. These are arranged in alphabetical order and if you do not find the neighborhood you are interested in please do not hesitate to contact me and I will send you a full comparative market data analysis (I also included below 3 mostly semi-luxury neighborhoods):
Single Family Homes
Hawaii Loa Ridge – After Kahala this would be next renown luxury home neighborhood boasting of some of the most spectacular ocean, Diamond & Koko Heads views on Oahu. Currently it has 11 months of inventory as of this writing and had 12.6 months last November 2017 – inventory increasing and a definite Buyers’ Market. The actual data and a CMA (comparative market analysis) for Hawaii Loa Ridge can be found here.
Kahala – The oldest and most well known luxury home area on Oahu has 9.6 months of inventory as of this writing and had 7.9 months as of last November 2017 – inventory decreasing but still a moderate Buyers’ Market. The actual data and a CMA (comparative market analysis) for Kahala can be found here.
Kailua – This is a very popular semi-luxury home neighborhood on the Windward side. Like its more upscale neighbor, Lanikai, this part of Oahu has some die-hard residents who could not live anywhere else on the planet. The beaches here are protected by an outer reef ring rendering the sea-shore and waves comparatively calm and small compared to the South, West & North Shores. As of this writing this neighborhood has just under 5 months of inventory – putting it in a mild Sellers’ Market. The actual data and a CMA (comparative market analysis) for Kailua can be found here.
Lanikai – This is the jewel of the Windward side of Oahu. Smaller surf on the beautiful beaches nearby make this neighborhood a must live spot for the rich and sometimes famous! Currently it has 14.4 months of inventory and had 8.8 months last November 2017 – increasing significantly to also put this neighborhood in extreme Buyers’ Market territory. The actual data and a CMA for Lanikai can be found here.
Maunalani Heights – Although this neighborhood is not quite in the luxury home range, in general it falls into the category just below ($1.1M to $1.9M). The homes on this ridge and in this older neighborhood also boast some of the best (and unique!) ocean, Diamond and Koko Head views. Currently it has 5.5 months of inventory whereas last November it had 7.2 months of inventory – decreasing from slightly Buyers’ Market and entering in the “Goldilocks Zone.” What’s interesting though is if you eliminate all homes over $1.9M from the data (there are not that many) we down to 2.4 months of inventory making it a Hot sellers’ Market! The actual data and a CMA for Maunalani Heights can be found here.
Napali Haweo – This is the newest luxury home neighborhood on Oahu which some say is the most well planned with wide streets and a HOA (home owners’ association) with fairly strict building and upkeep guidelines (strict on one hand but on the other less worry of a neighbor bringing down your home value!). Some of the homes, in price, dip just below the luxury home level ($1.9M). Families in this neighborhood can send their children to Kamiloiki Elementary School which recently implemented the IB (International Baccalaureate similar to some of the private schools in town yet this is a public school – read more about it here). Currently there is 15.5 months of inventory which was 9 months last November 2017 – increasing significantly putting it in extreme Buyers’ Market territory. The actual data and a CMA (comparative market analysis) for Napali Haweo can be found here.
Portlock & Koko Kai – After Kahala and Hawaii Loa this would be the number 3 luxury home area on Oahu located in Hawaii Kai offering luxury with beautiful ocean views from many of the homes. Families in this neighborhood can send their children to Koko Head Elementary School which recently implemented the IB (International Baccalaureate similar to some of the private schools in town yet this is a public school – read more about it here). Currently it has 14 months of inventory as of this writing and had 15 months last November 2017 – inventory decreasing a little but still in extreme Buyers’ Market territory. The actual data and a CMA (comparative market analysis) for Portlock & Koko Kai can be found here.
Upper Hahaione – Although this neighborhood is not quite in the luxury home range, in general it falls into the category just below ($1.1M to $1.9M). The many homes perched and ringed around the upper furthest end of this beautiful valley sport spectacular ocean and Koko Head views. Families in this neighborhood can send their children to Hahaione Elementary School which recently implemented the IB (International Baccalaureate similar to some of the private schools in town yet this is a public school – read more about it here). As of this writing this neighborhood has 6 months of inventory putting it in the Goldilocks Zone. However, one would expect this neighborhood to experience ever-growing demand in the future due to the IB Public School System. I just recently listed and sold a home in this neighborhood, please check out the video here. The actual data and a CMA (comparative market analysis) for Upper Hahaione can be found here.
Waialae Iki – This beautiful neighborhood on the adjacent ridge to the West of Hawaii Loa – also with beautiful ocean views – straddles the price range between luxury home and just one level below (in the last 12 months about 28% of the homes sold above $1.9M and 72% below). Currently it has just under 5 months of inventory and had 7.5 months last November – decreasing quite significantly taking it from a mild Buyers’ Market to just dipping into Sellers’ Market territory. What’s interesting though is if you eliminate all homes over $1.9M from the data (25%) we are then at only 3 months of inventory – very much a Sellers’ Market! The actual data and a CMA for Waialae Iki can be found here.
Condos
Gold Coast – Finally, let’s look at one of Oahu’s most prestigious luxury condo areas, the Gold Coast between Diamond Head and Waikiki which boasts some of the most expensive real estate per square foot on the planet. Currently it has 8 months of inventory and had 9.4 months as of last November – somewhat decreasing but still putting it in somewhat of a Buyer’s Market territory. However, if inventories decrease by the same amount in the next few months it will enter the “Goldilocks Zone.” The actual data and a CMA for the Gold Coast can be found here (fee simple properties only).
Hawaii Kai – Not only does Hawaii Kai have beautiful luxury and semi-luxury home neighborhoods (Portlock & Koko Kai, Napali Haweo & Upper Hahaione – see above), it also has a plethora of condos and townhouses to choose from mostly in the Lower Hahaione and West Marina neighborhoods. Families in these neighborhood can also send their children to either Hahaione or Koko Head Elementary Schools both of which recently implemented the IB (International Baccalaureate similar to some of the private schools in town yet this is a public school – read more about it here). Currently the Hawaii Kai condo neighborhoods have about 3.5 months of inventory placing them, on average, in somewhat Sellers’ Market territory with pockets of “Goldilocks Zones” in certain buildings approaching the luxury condo category. The actual data and a CMA for Hawaii Kai condos can be found here (fee simple properties only).
Kakaako, Waikiki & Ala Moana – There are so many condo buildings in these areas with a wide gamut of prices that they surely deserve to be the main topic of another newsletter. Nevertheless, many of the upper end luxury condos mostly in Kakaako (please see my previous newsletter covering Ward Village here) are in Buyers’ Market territory with some really good value to be found. The average inventory for all of Waikiki condos is just under 7 months putting it in a very mild Buyers’ territory (again 5 to 6 months inventory is the “Goldilocks Zone” – not too hot and not too cold). I have a lot of expertise in these condo areas having experience working with many investors so please do not hesitate to contact me for details on various potential possibilities.
The Take Away – The lines have really been drawn between Sellers’ & Buyers’ Real Estate Markets on Oahu. Above $1.9M we are in Buyers’ Market territory. At one level below luxury homes ($1.1M to $1.9M) and though we are seeing inventories decreasing, we are still in the “Goldilocks” zone – “not too hot, not too cold but just right” at 5 to 6 months of inventory. All the next levels down including the median ($760,000) are steamy Sellers’ Markets. As mentioned in previous Hawaii Damon Newsletters, now would be a great time to consider trading up from a median neighborhood to a luxury home neighborhood. Trading up from a Sellers’ Market to a Buyers’ Market is as good as it gets. For those on the sidelines perhaps considering investing in the luxury home/condo market, please take note that we are starting to see inventories tighten up just a little now above the $1.9M level (though still squarely in Buyers’ Market territory). For Buyers facing a steamy median market please see my Market Strategies for Buyers. For Sellers facing a cool luxury home market please see my Market Strategies for Sellers.
Conclusion – In conclusion I think it would first be appropriate to talk about reasons why the luxury home market above $1.9M has been having a Buyers’ Market inventory of homes for such a prolonged period – all in an expanding economy. I believe here are two very good reasons:
1) Kakaako Condos – Although there will always be a very large % of home owners that will always want to own their own piece of dirt and a single family home, there is a growing % of families that are opting for the low maintenance life that luxury condos can afford. There is no doubt Kakaako has been taking a bite out of the Luxury Home (single family) market. However, as the inventory of luxury condos in Kakaako become depleted the pendulum could swing back to single family luxury homes. I talk about these subjects in previous newsletters, Air vs. Dirt and Kakaako Rising.
2) Stock Market – It has been on a roll reaching unprecedented P/E (price to earnings) ratios. It has to some degree been holding captive a lot of investment money which might otherwise be invested elsewhere (bonds, precious metals and, of course, higher end real estate). When we eventually see the stock market slow down (I predict in 2019) we should see more investment in high end properties as the wealthy look for safe places to “park” their money. I discuss this subject in a previous month’s newsletter, QT(Quantitative Tightening) is Here!
Finally, if you are currently in a median neighborhood in Hawaii (Sellers’ Market) and are thinking of trading up to a luxury neighborhood (Buyers’ Market), it does not get any better than this. If you are an off-shore buyer, Hawaii is an investment paradise. If you are a first time home Buyer interest rates are still very good. If you have any questions regarding real estate strategy please do not hesitate to contact me as it would be my pleasure to serve you in your Hawaii Real Estate needs. Please pass this newsletter along to any friends and family or they/you can sign (them) up here.
Aloha & Happy May Day!
Damon
