It’s likely to be a slow spring for Big Island home sales as the market struggles to recover from 2023.
According to multiple listing service data, 477 homes have been sold on the island this year as of the end of March, a 10% increase from the first three months of 2023.
However, because 2023’s first quarter sales represented a 41% decrease from the same period in 2022, this year’s market is still lagging considerably behind the post-pandemic peak, before rising interest rates and inflation chilled sales around the country.
Despite this, median sales prices in Hawaii County have remained largely consistent over the past two years. The 2024 first quarter median price, $515,000, is only a negligible decrease — less than 1% — from last year’s, which was itself a less-than-1% decrease from the year before.
Meanwhile, sell-through rates have quickened, with homes staying on the market for 32% less time last month than March 2023.
South Hilo has seen 55 single-family homes sold this year so far, a slight drop from the 59 sold by April 2023. However, Puna had gains over last year, with 194 sold in the first three months of 2024, compared to the 175 sold in last year’s first quarter.
On the other side of the island, the number of home sales in North Kona increased from 79 to 103, while South Kohala sales decreased from 41 to 33 compared to Q1 2023. In Ka‘u, homes sales jumped from 31 to 42 during the same period.
All other districts typically had so few home sales month-to-month that no clear trends could be gleaned.
Despite the stronger sales in some districts, Big Island real estate agents told the Tribune-Herald that the market is still struggling.
“After the holidays, we usually see an uptick in pending sales,” said Realtor Davin Padilla. “Wer’e not seeing that right now. Spring is usually when sellers start heating up. We’re not seeing that right now, either.”
Padilla said high interest rates and mortgage rates are still keeping potential buyers on the fence, while would-be sellers who got locked into favorable rates during the “unicorn years” are holding onto their homes rather than getting a new home with a worse rate.
Because of this, the number of homes up for sale on the island is still low. Padilla said there is about three to four months of housing inventory available, down from the six to seven months of inventory from previous years.
“It’s still an active market, but it’s a lot slower,” Padilla said.
Kailua-Kona Realtor Stephen Proski said there still is considerable demand from people on the mainland interested in buying Big Island homes, but the lack of available inventory is a stumbling block. At the same time, he noted that first-time homebuyers on the island are becoming rarer as home prices increase.
“It’s a very hard market to get into right now, especially for first-time buyers, if you don’t have the money,” Proski said.
“We do see a trend of more out-of-state buyers purchasing properties here, primarily fueled by the fact that companies allow workers to work remotely from their homes these days,” said Christi Mallicoat, Hawaii Island Realtors president, via email. “We will always have local families buying their first homes on the Big Island; it typically tends to be around a minimum of 10% of the purchasers.
“Due to prices rising in other counties, we noticed a recent increase of interisland buyers purchasing homes in the area, (for example)buyers from Maui that may have lost their homes due to the fires, or Oahu buyers that are priced out of their market.”
With inflation still high, economists are uncertain whether the Federal Reserve will cut interest rates anytime soon. The current interest rate hovers around 5.25%, while the average 30-year fixed mortgage rate is just over 7%.
“I’ve been telling people, if they’re sitting and waiting for a big rate decrease … if prices are still high, you’re not necessarily getting ahead of the curve,” Proski said.
Proski added that mortgage lenders have guessed that some rate cuts might be coming later this year, but, as always, nobody can predict what exactly will happen.
Mallicoat added via email that even if rates don’t drop anytime soon, the Big Island is still more affordable compared to other counties, which she said should keep the market ticking.
Meanwhile, legal issues surrounding the National Association of Realtors might throw another wrench into the works.
A federal civil jury found last year that the NAR violated federal and state antitrust laws in several ways, including by prohibiting listing services from disclosing to prospective buyers the commission that a real estate agent will earn from a home sale or purchase.
Last month, the NAR agreed to a settlement of $418 million. While the settlement still awaits court approval, if it goes through, Realtors will be subject to new requirements about how they disclose commissions.
The upshot of the settlement is that the brokers’ standard 6% sales commission rate will no longer exist, so brokers and agents will be able to compete on commissions. While this could be positive for home sellers — who typically bear the brokerage fees, and buyers, who can now shop around for the most competitive broker rates — brokers themselves might be getting the short end of the stick.
“The … settlement would bring more transparency in transactions and preserve the choices consumers have regarding real estate services and compensation,” said Mallicoat via email. “Just to be clear, commissions have always been and will continue to be negotiable between agents and consumers. As the new rules go into effect this July, listing brokers and sellers could continue to offer compensation for buyer broker services, but such offers could not be communicated via (listing services).”
Proski said this isn’t the first real estate shakeup that was predicted to spell the death of the industry, and probably won’t be the last.
“There’s going to be some changes in how we do business, but we’re going to learn to adapt,” Proski said.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.