The Hawaii vacation home market is troubled by a double whammy, slower home and condo sales and a drop in the tourist industry in what is likely to be the most critical decline in real estate prices in generations.
Home prices are slowly declining in most of Hawaii, once the top destination for vacationers. Maui, Kauai and Hawaii are seeing lower prices for homes. But Kauai is experiencing some pricing gains in the condo market as buyer demand for units’ pressures pricing.
On the Island of Hawaii, where Hilo is the county seat the number of home sales is higher than year ago levels, but housing prices are plummeting and are forecast to decline an additional 8.2% in 2012. The Big Island as it’s also known should experience an increase in home sales over the New Year thanks to near record low mortgage rates.
The expiration of the federal tax credit for buyers and tougher mortgage lending requirements has sent jitters through the real estate market in Honolulu, where few new construction projects are underway. The market is transforming into a new sort of reality with fewer residential transactions and less international buyers.
Honolulu condo sales are projected to slowly increase as buyer demand returns to Honolulu, one of the world’s top vacation markets with an expected increase in tourists to rent condo units and hotel rooms. An uptick in vacation activity will translate to better rental income for second home owners who
rent their places to tourists. However, Honolulu will have to deal with another dip in housing prices in the short term, forecast to deflate 7.3% in 2012.
Tepid consumer confidence is also keeping many buyers on the sidelines in Maui, despite historically low mortgage interest rates. The volume of sales may have been over heated during the housing bubble, but sluggish sales have put a drag on the local economy. The pace of sales in Maui should pick-up towards spring time, aided by the lower rates and an influx of buyers from foreign counties.
However, buyers should be prepared for lower prices even after they sign the dotted line to make a purchase, forecast to drop another 6.8% on Maui during the year.
Kauai is the least populated island in Hawaii, where home sales are running at a sluggish pace with prices dropping at double digit annual rates. Prices are projected to drop another 7.6% in 2012 as the market adjusts to less mortgage lending and tighter appraisal standards.