Median home values in Hawaii are the highest in the nation, even above Californias.
During the pandemic boom (20202022), prices accelerated sharply.
Before the pandemic, the statewide median single-family home price was roughly $650,000.
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By 2022 it had jumped about 35% to well over $850,000.
Interest Rate Rollercoaster
This period was a rollercoaster partly because of mortgage interest rates.
In 2018, a 30-year fixed mortgage rate averaged around 4.5%, and in 2019 around 3.9%.
These rock-bottom rates allowed more buyers to qualify for mortgages and afford higher prices.
However, by 2022 the trend reversed interest rates surged.
Housing Supply Challenges
Another key factor was housing supply.
Hawaii has chronically low inventory of homes for sale, and many owners held onto their houses.
During 20202021, a refinancing boom took place as owners locked in those 3% rates.
Once locked in, people became hesitant to sell and give up their cheap mortgages.
New construction of affordable homes also lagged demand.
The result was intense competition, especially during 2021 when bidding wars were common.
This huge price gap made condos the entry-level choice for most first-time buyers, especially younger individuals and couples.
Young professionals and small families found condos to be a practical starter home.
Townhomes: The Middle Ground
Townhomes (duplexes or rowhouse-style units) were another common choice.
However, given the high prices, this often required compromises.
In that sense, they were upsizing gaining more space and stability than they had as renters.
However, upsizing for a first-timer usually meant starting modestly.
For example, a young couple renting a small apartment might buy a starter condo as their first home.
They often had to settle for less space or less prime locations to make that first purchase affordable.
The 20202021 period of ultra-low rates made these moves more feasible.
They could sell or refinance and use the gained equity as a down payment on a larger home.
So upsizing plans were often put on hold toward the end of the period.
This was less common, but it happened due to job relocations or personal preferences.
Oahu has the highest housing demand and a large share of the states condos and apartments.
Between 2018 and 2023, home prices on Oahu soared.
This relatively affordable price tag attracted budget-conscious buyers.
A significant characteristic of Mauis market is the high influence of out-of-state buyers and investors.
The median home price on Kauai was around the high $800,000s by 2022.
Urban vs.
Rural Divides
Even on the same island, the urban vs. rural divide played a role.
That is far above what many families earn.
So, new buyers turned to various loan types and assistance programs to make homeownership possible.
Instead, buyers often put down around 5% to 10%.
FHA loans allow as low as 3.5% down and more flexible credit requirements.
Throughout 20182023, FHA loans were quite common in Hawaiis entry-level market.
VA loans, backed by the Department of Veterans Affairs, were a huge factor for eligible first-time buyers.
This meant that a qualified veteran could borrow above the previous county caps with no down payment.
As a result, there was a boom in VA-backed purchases in Hawaii.
In Honolulu, VA home loans surged by mid-2020, VA loans in Honolulu were up 206% year-over-year.
This federal program offers 0% down loans for homes in designated rural areas to low-to-moderate income buyers.
Some first-time buyers in those areas used USDA loans as their ticket to ownership.
HHFDC also offered Mortgage Credit Certificates (MCCs), which are a kind of tax credit.
On top of state programs, each county had some assistance.
Who Are the First-Time Buyers?
A rough median income for millennial homebuyers in Hawaii was around $120,000/year in this period.
About 1 in 5 Hawaii residents lives in a multi-generational family home much higher than the U.S. average.
Home prices in Hawaii actually fell or stagnated for a few years around 20082011.
By roughly 20122013, the market stabilized and then entered a recovery and expansion.
Price growth in that decade was steady but not extreme.
Thats an increase of roughly 3% per year significant, but nothing like the pandemic-era spike.
The 20082017 period saw rates drop and then remain fairly low and stable.
First-time buyers in that era benefited from these lower rates which kept monthly payments in check.
The volatility was unique.
Conclusion
From 2018 through 2023, Hawaiis first-time homebuyers navigated a challenging and dynamic housing landscape.
The Big Island stood out as a more affordable frontier for those willing to move or commute.
Their stories reflect the broader trend that in Hawaii, the dream of homeownership is challenging but not impossible.
