Before the pandemic, urban areas like Honolulu were cooling off, with prices dipping and inventory building up.
But when COVID-19 hit, everything flipped.
Urban vs.
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Here, condos and townhouses are prevalent, especially in Honolulus urban core (Waikiki, Kakaako, etc.
), where high-rise condominium towers are common.
Buyers in Honolulu often seek condos for proximity to jobs and amenities, despite their smaller size.
In contrast, rural areas and Neighbor Islands offer more spread-out living and unique property types.
Condominiums are less common in rural areas except in resort towns.
These were snapped up in 202021 largely by out-of-state buyers seeking vacation homes.
Who Is Buying Hawaiian Real Estate?
Local vs. Out-of-State Buyers
Local Hawaii residents remain the majority of homebuyers statewide.
In 2021, Hawaii residents bought about 76% of all homes sold statewide.
The share of outside buyers increased during the pandemic.
Mainland U.S. buyers in particular flocked to Hawaii when remote work enabled relocation.
In contrast, Mainland American buyers surged in 20202021.
Many were remote tech workers or retirees taking advantage of low interest rates and Hawaiis appeal.
The Urban-Rural Divide in Outside Investment
There is a stark urbanrural contrast in where out-of-state buyers focus.
Most Oahu homes are bought by Oahu residents, reflecting the islands large local workforce and population.
But on the Neighbor Islands, outside buyers play a much bigger role particularly in the condo market.
These tend to be vacation condos or investment rentals in resort communities.
Suddenly, having an extra room for a home office or a yard for the kids became a priority.
On the flip side, some longtime homeowners (often Baby Boomers) began downsizing during this period.
This created some inventory of larger homes (often snapped up by those upsizers or outside buyers).
Downsizing locals often sought condominiums in urban areas or senior-friendly communities, trading maintenance of big properties for convenience.
The Second Home Boom
Another major trend was vacation home buying and second homes.
During 20202021, demand for second homes skyrocketed nationwide, and Hawaii was no exception.
Wealthy individuals who suddenly could work from anywhere decided to purchase island getaways.
Many of these were Zoom boom buyers remote workers or semi-retirees spending part of the year in Hawaii.
Hawaiis resort towns saw a flood of these vacation-home buyers, especially in 2021.
Urban-to-Rural Migration
Remote work enabled some local residents to relocate from urban to rural areas.
This intra-state migration boosted rural home sales.
Pandemic Impact
The COVID-19 pandemic (20202021) was the single biggest catalyst.
It created a brief freeze followed by a buying frenzy.
But domestic demand more than made up for it.
The pandemic also highlighted Hawaiis limited housing inventory.
This lack of supply against surging demand pushed prices up at a record pace through 2021.
Interest Rate Rollercoaster
Mortgage interest rates were another critical factor.
These ultra-low rates enabled more buyers to afford Hawaiis high prices, fueling the 20202021 boom.
However, the environment flipped in 2022.
This rise in rates since early 2022 quickly curbed the number of homes sold in Hawaii.
Buyers faced higher borrowing costs, reducing their purchasing power.
New listings on Oahu dropped by about 20% in 20222023, worsening the inventory squeeze.
Supply Constraints and Natural Disasters
Housing supply and development constraints have been an underlying issue throughout 20182023.
Hawaii has chronically low housing inventory due to decades of underbuilding and strict land-use laws.
The pandemic didnt change that fundamental issue if anything it exacerbated it.
By 2023, only about 20% of local households could afford the median single-family home in Hawaii.
One acute event underscoring supply problems was the 2023 Maui wildfires.
In August 2023, devastating fires in Lahaina and Kula destroyed over 2,000 housing units.
Policy Changes
Government policy shifts also played a role.
The intent was to return housing units to local residents by curbing Airbnbs.
On Maui, policymakers in 20222023 discussed phasing out short-term rentals in apartment zones to preserve long-term housing.
Additionally, state and county governments began exploring a so-called empty homes tax on vacant investment properties.
While slow to show results, such measures aim to increase housing stock.
During the 20202021 boom, Oahus increase in sales and prices was significant but not as extreme as elsewhere.
Condo sales in town also jumped as first-time buyers took advantage of low rates.
Maui County
Mauis housing market is heavily influenced by tourism and luxury buyers.
From 2018 to 2019, Maui was somewhat flat, but during the pandemic Maui saw huge price appreciation.
By mid-2021, Kauai and Maui briefly had the highest median prices in the state, even exceeding Oahu.
High-end areas like Wailea and Kapalua saw an influx of cash buyers.
Maui also had many sight-unseen purchases in 2021 people buying multimillion-dollar homes remotely.
With its beautiful remote work setting, Maui attracted remote tech executives and others seeking resort-style living.
Meanwhile, Kona and Kohala on the west coast experienced a luxury boom (e.g.
sprawling ocean-view homes, golf estates) with mainland buyers.
Big Islands median home price, while lower than other counties, jumped significantly e.g.
up 26% year-over-year by mid-2021 (to about $472k in June 2021).
By 2023, Big Islands market cooled from its peak activity, but prices remained elevated relative to pre-2020.
Kauai County
Kauai, though the smallest market, saw outsized effects during the pandemic housing rush.
Its natural beauty and limited supply drove prices skyward.
Many Hollywood and tech elites bought Kauai estates in this period.
North Shore Kauai (Hanalei, Princeville) in particular saw a lot of high-end activity.
Out-of-state buyers comprised the majority of transactions by dollar volume on Kauai.
When travel reopened in 2021, Kauai real estate went into overdrive with bidding wars even on modest homes.
The earlier decade began with the Great Recession and housing crash.
Prices bottomed out around 20102011 statewide.
By 2015, statewide sales counts had finally surpassed the 2008 levels, marking a full recovery in volume.
In contrast, 20182023 was a roller coaster.
The later period had an unprecedented pandemic boom followed by a rapid interest-rate-driven cooldown.
Housing supply dynamics also differed.
That kept prices from rising too fast until excess inventory was absorbed.
Affordability worsened more dramatically in 20182023 as prices hit all-time highs.
