Important Market Trends for Hawaii Real Estate

September 21, 2022

With the market being so volatile in the past two years, let alone the past few months, your home buying criteria may have shifted quite dramatically. According to Locations Hawaii, the August median single family home sales price is now up to $1.2 million. If you have been following the news, mortgage interest rates have been aggressively climbing over the past few months in hopes to slow down the drastic increase in home prices. Despite an increase in rate hikes, Hawaii's real estate market continues to trend upwards unlike other markets in the nation that have seen a slowing down in housing prices or "market correction".

The recent climb in interest rates make it challenging for real estate investors because our holding costs end up being higher which leads to tighter profit margins; and our profit margins ultimately determine how much we can offer on a property. Despite these interest rate hikes, real estate investors are always tracking market conditions and market trends so that we know when a good deal comes across our desk. With our market knowledge we can take quick and accurate action, no matter what market we may be in. Two of the metrics that we investors track are the Days on Market (DOM) and Market Inventory.

Days on Market: also known as DOM, is the number of days that a property is actively on the market before going under contract. The reason this metric is important is because investors can get a feel for how a specific market is performing or "moving". If homes in a specific market are not moving, meaning their DOM are longer than other markets, then we investors will need to take caution before taking up a deal in that specific market. There are many reasons why homes might have longer DOM such as: list price, high inventory, marketing (or lack thereof) and market conditions. We Investors need to track and investigate further into the potential causes of longer days on market when we come across a potential deal in a specific area. A big mistake would be to overlook DOM and just chase a comp (a comparable home that sold in the area) that sold for an attractive price point. Overlooking DOM could lead to longer holding times which could quickly eat into our profits.

Market Inventory: the number of homes that are actively marketed and listed for sale. Supply and demand is the principle when it comes to sales. Market inventory will immediately let the investor know if there is an abundance of supply in a specific area. If the supply is high, then the demand will be lower. As investors, we want to be cautious with picking up a new deal in a market that has a high number of supply because this could lead to buyers being more meticulous when choosing a home because they'll have more properties to compare against. If an investor lists a home in a market where market inventory is currently high, this could lead to the investor having to lower the list price of their home to compete with the other homes also listed for sale in the area, or worse, the investor might have to keep their property on the active market in hopes of getting an offer at their desired price. Like we learned earlier, keeping a property actively listed for a long time leads to longer DOM.

To conclude, a savvy real estate investor does not take on deals with the mere hope of obtaining a profitable return. We track our market trends, and adjust our approach accordingly. We never speculate and never just hope that market appreciation will keep our deals alive. We pursue all of our deals solely off of the numbers making sense.

Homes By KM is always actively looking to buy properties here in Hawaii. We take a conservative approach to ensure that our equity partners know that we are not putting their investments at risk. Please reach out if you are interested to learn more about what we do at Homes By KM! In real estate investing there is a saying, "You make your money when you buy, you realize your profit when you sell". We hope to connect with you!