Big Isle home sales decline

Kelsey Walling/Tribune-Herald This house at 1625 Mele Manu St. in Hilo was up for sale earlier this month.
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Soaring interest rates have cooled the Big Island real estate market, with sellers and buyers alike reconsidering transactions.

According to multiple listing service data, 494 single-family homes were sold on the Big Island in the third quarter of 2023, with each month of the quarter falling behind sales numbers from the previous year.

Nearly every district on the island had decreases in home sales last month compared to September 2022, with the sole exception of North Kohala, where the seven homes sold in September represented a 250% increase from last year. In districts with more frequent sales, the drop in activity was pronounced — 53% lower in South Hilo, 41% lower in North Kona and 37% lower in Ka‘u,

However, in Puna — typically one of the least expensive and, therefore, most active home markets on the island — sales only dropped by 1.3% during the third quarter of this year.

Year to date, 29% fewer homes have been sold on the Big Island in 2023 than during the same period of 2022, and the total value of those sales was down 30%.

Despite that decline, the median home sales during the first nine months of the year remains exactly the same as last year at $500,000.

Meanwhile, the number of condominium sales rose in the third quarter, compared to previous months and the previous year, and the median condo price climbed to $593,750 year to date. In September, condo sales remained level or increased in every district where one occurred that month, most notably in South Kohala, where 19 sales represented an increase of 35% from September 2022.

Single-family homes in both East Hawaii and West Hawaii are staying on the market longer. Where an East Hawaii home spent an average of 53 days on the market in 2022, now it spends 66 days.

“What I tell people is that, if you have to buy, you’re buying, but if you don’t, you’re waiting,” said Kona real estate broker Stephen Proski. “A lot of people who are interested in buying are on the sidelines waiting to see if interest rates will go down.”

With interest rates upwards of 7% for a 30-year fixed mortgage, Proski said people buying a home using a loan are much more tentative to take the plunge now than they might have been a year ago.

East Hawaii Realtor Lisa Heaviside said at least one of her buyers has backed out of a deal upon realizing what the interest rates were, and several would-be sellers have chosen to rent out their properties instead of selling.

“I’d typically have six to 10 escrows going at once, but now I have just one,” Heaviside said, comparing the slowdown in the market to the 2008 housing crash.

Heaviside went on to say that if current trends continue, the market could hit the same lows as 2008, noting that the winter months — which she said typically bring an uptick of interested buyers — will indicate whether an upswing is imminent.

“If we don’t get busier in the winter, that’ll be the tell,” Heaviside said.

Hilo real estate agent Denise Nakanishi said she is still seeing “more theoretical demand than supply,” and added that the actual number of prospective buyers is not as high as it appears on paper. She said she’s seeing deals being cancelled, even by buyers paying with cash, which she said is unusual.

“I’ve been hearing about these cancellations happening across the nation, too.”

In addition to the high interest rates, Heaviside said the Puna market has been doubly impacted by the announcement earlier this year that the last home insurer in Lava Zones 1 and 2 will be leaving the market. That development, which will force homeowners to seek insurance through the state Hawaii Property Insurance Association at rates four times higher or more, has significantly cut the number of would-be buyers in Puna.

“If they’re buying with cash, of course, then it’s fine, and I’m seeing some people selling their homes elsewhere and using the cash to buy homes in Puna,” Heaviside said.

Nakanishi added that she has begun to receive inquiries from those displaced by the Lahaina wildfire and expected that once victims begin getting their insurance payouts, there will be an influx of interested buyers on the Big Island.

All three agents agreed that whether the market pulls out of its downswing is entirely dependent on whether the Federal Reserve begins lowering interest rates again. But Proski said that based on previous market downturns, some people might learn to adjust their expectations to the new prices and bite the bullet regardless of the rates.

“If you’re a seller, and you price it right, you can still sell,” Proski said. “And if you’re a buyer, you can’t wait. You won’t benefit from waiting, not if rates keep going up.”

Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.