If you listen to the word on the street, housing options on Oahu seem to be getting farther and farther out of reach. The Honolulu Star Advertiser described the situation last week in a featured story:
The limited supply of single-family homes on Oahu pushed the median price beyond $700,000 in June, tying the record set a year ago and placing homeownership out of reach for many first-time buyers.
“Affordable now is typically a condominium … unless they have help from family along with higher income,” said Dennis Oshiro, executive director of the Hawaii Homeownership Center, a nonprofit that provides financial education to prospective first-time homebuyers.
With the median Single Family Home (SFH) prices climbing over $700,000 in July and median condo prices hitting $390,000, its clear that overall the market is experiencing a housing shortage and median price increases. But after taking a closer look at the data, our findings painted a much more nuanced picture.
Your options expand the closer you look. To get the full picture you need to think in terms of market areas.
Macro vs. Micro
Former State Economist and current owner of TZ Economics Paul Brewbaker’s research describes a perpetual housing shortage stemming from the state of Hawaii issuing a maximum of 1,500 permits per year for new housing and the Oahu market requiring an estimated 3,500 new units per year. At a macro level, the low supply and high demand means the median price will most likely continue to increase.
Each area of Oahu is an individual market that has its own pricing and inventory fluctuations. So while it is true that the median price is over $700K, you can still find plenty of houses and condos for considerably less.
Overall Inventory is Increasing
Despite the underlying Oahu inventory concerns, for the past 2 years it has been on the rise. The graph above shows a market where available condos and SFHs are slowly but steadily growing.
The inventory of SFHs have increased steadily since January 2013. As of this month, the number of available single family homes (1,041) matches the highest it’s been in the past 3 years with the exception of July 2014 (1,064). The growth shows no sign of stopping in 2015, as inventory has grown 9% overall in Oahu from April to June of this year.
The condo market is responding to the need for affordable options with developments such as Keauhou Place in Kakaako coming in the next 2 years. Even in its current state, inventory in the condo market is up 38% since January 2013.
Increase in median prices on Oahu doesn’t mean affordable homes have disappeared, only shifted locations. As we mentioned, from a high level view it appears affordable homes are going extinct. However, analyzing by market area shows that it varies wildly depending on where you look. For instance, finding a condo in Kaneohe would be difficult and expensive (inventory down 41%) but Kailua has an abundance of available options (up 231%!).
As inventory and demand shifts across the island much like the tectonic plates responsible for its formation, the affordable homes will change locations. The luxury areas aren’t the only ones thriving, SFH inventory is up in Hawaii Kai as well as Ewa, and condos are available in Kakaako as well as Pearl City and Aiea.
Stay up to date by reading our blog for the most accurate, complete data on Oahu home prices and availability.
Inventory in Every Price Range
Luxury Market Inventory
The luxury market is expanding as seen by the inventory of SFHs over $1.0M and condos over $750K steadily trending upward recently. This trend looks to continue with the construction of luxury high rises in Kakaako and inventory increases across the high price areas below.
Luxury Market Areas with the largest increase in SFH inventory (April ’15 – June ’15):
Luxury Market Areas with the largest increase in Condo inventory (April ’15 – June ’15):
Median Price Range Inventory
The median price ranges for condos ($250K – $500K) and SFHs ($500K – $1.0M) are still the most popular as well as the most stable. Although the median markets fluctuate up and down on a monthly basis, they never deviate too far from their median. SFHs hover around 400-500 listings every month and condos around 500-600.
Median Market Areas with the largest increase in SFH inventory (April ’15 – June ’15):
Median Market Areas with the largest increase/lowest decrease in Condo inventory (April ’15 – June ’15):
First Time Homebuyer Price Range Inventory
The most affordable price range for condos (<$250K) and SFH (<$500K) remain the most popular and were the only two price ranges where inventory has decreased since January 2013. Although inventory is down, several new development efforts are underway that will be coming to fruition in 2016 and 2017, adding affordable housing options across Oahu.
First Time Homebuyer Market Areaswith the largest increase/lowest decrease in SFH inventory (Apri ’15 – June ’15):
First Time Homebuyer Market Areas with the largest increase in Condo inventory (April ’15 – June ’15):
Are Increasing Prices a Positive?
Oahu’s consistent home and condo value appreciation should be looked at as a positive thing for potential homeowners. You’re likely to pay more in this market than most other places in the U.S., but you’re also likely to see a bigger return than anywhere else in the U.S. Think of it as an investment in a historically strong market that has experienced few down periods and appreciated in value an average of 6.9% each year since 1973. Home value increases are never guaranteed, but with supply becoming more valuable and demand continuously increasing in Oahu, they are much more likely.
Additionally, rent prices have doubled in the past 10 years at almost the same rate as home prices. Investing now means your equity will increase year after year instead of your expenses.
Some important things to remember:
- Overall inventory is on the rise with both condos and SFHs
- There are options available at all price levels
- Every market area around Oahu should be viewed as an individual market
- The more detailed your view is, the more options you have
- Having a qualified agent is an absolute must
Locations has the data and the neighborhood experts to help you find exactly what you need and keep you ahead of the market. This data changes on a monthly basis, and in order to stay on top of it start working with one of our agents.