April 24, 2019||Mortgages/Economy/Market

Trend Watch: Q1 2019 Hawaii Island Market Report

The following Big Island real estate market overview is compiled from MLS data for transactions that closed escrow in the first quarter of 2019. Pictured above: MLS 622668, a Kohala Ranch property listed by Waimea agent Regan Matsumura that sold for $1,800,000 in March 2019.
District Map with Median Prices Q1 2019

Q1 2019: Some Ups, Some Downs, Some More of the Same

Real estate analysts have had their 2019 crystal balls out for a while now, speculating with varying degrees of optimism and pessimism about the 2019 real estate market. Most have agreed that there would be a “deceleration” in the market compared to recent years. Generally speaking, Hawaii Island has, in fact, shown a deceleration, with a lower overall number of transactions, a slowing of price increases, and in some cases, a drop in median sale pricesdepending on where and what you want to buy

Close on the heels of the deceleration predictions, economists have also been saying lately that improving consumer confidence in the 2nd quarter could positively affect the real estate market in the United States starting in Q2. Interest rates are driving some of this renewed energy. While Q2 performance remains to be seen, Q1 is on the books and the data is best described as “mixed.”

Islandwide, the number of residential closings dropped by 37 from Q4 2018, with mixed results by district. The biggest declines occurred in the districts of South Hilo and Puna, while North Kona posted the biggest increase. Land transactions remained exactly the same at 327 closings in both quarters. Condominium transactions climbed slightly across all districts by five. Median price by individual segments varied greatly across districts and will be explored in more detail below.

Residential Transactions

For single-family homes sales, only three districts saw increases in transactions over last quarter with North Kona up by 17 units, and Hamakua and South Kona up only slightly by two and four units respectively. Kau had 33 residential transactions—exactly the same number as Q4 2018. The following five districts experienced a decrease in total transactions from Q4 2018: Puna (-25), South Hilo (-21), North Hilo (-3), North Kohala (-6) and South Kohala (-5).

It is noteworthy that North Kona, considered to be one of the most expensive districts on Hawaii Island, had 123 closed residential transactions in Q1, which beats the same quarter last year (118) as well as the 2018 average by quarter (120). Analysts have cited affordability as a factor in slowing sales, a principle which does not appear to be holding true here. It could be that North Kona, while expensive when compared with much of the rest of the island, is still considered affordable when compared to certain markets on the other islands, as well as some of the feeder markets on the U.S. mainland.

Residential Median Price

Of the districts that showed median price declines, the most notable decrease occurred on the south end of the island, an area generally considered the most affordable on Hawaii Island. Kau had a decrease of $18,000 and now stands at $180,000. In East Hawaii, the Puna District had a decrease in the median price of $14,000 dropping to $211,000—the lowest residential median price there since Q4 2016. South Kohala also had a fairly significant drop in median price of $14,500, closing Q2 at $593,000, but still not far off the 2018 full-year median price of $597,000. The median price also dropped in North Hilo and Hamakua.

South Kona had the largest increase in residential median price beating Q4 2108 by $39,500 and closing Q1 2019 at $519,000. North Kona outperformed Q4 2018 by $20,705 with the Q1 2019 median price of $645,705. This also beat the same quarter last year, as well as the 2018 full year median price for the district. Rounding out the median price increases is South Hilo, which closed Q1 at $366,500, up $7,250 from Q4 2019. North Kohala also saw a median price increase in Q1.

Note: We briefly reference the districts of North Hilo, Hamakua and North Kohala here without taking a deep dive as the low number of transactions and wildly varying property types make the resulting data not particularly representative of a trend.

Luxury Market Update

64 homes and condos closed escrow with sale prices over $1M across Hawaii Island in Q1, down four from Q4 2018. The average number of transactions closing escrow over $1M in 2018 was 69 per quarter, which compares favorably to the 64 sold in Q1 2019. Of the $1M+ properties sold in Q1, 63 were located on the west side of the island: four in North Kohala, 19 in South Kohala, 37 in North Kona and four in South Kona. The remaining closing was in the Hamakua District on the east side of the island.

As of this post, of the 402 homes and condos listed for sale across the island priced above $1M. All luxury listings on Hawaii Island can be viewed here.

Big Island Condominium Sales

The Big Island condo market exists primarily in three areas: Hilo (in the South Hilo district), Kona (North Kona district) and the Kohala Coast resort areas (South Kohala district). Combined condo sales across the island were up slightly from Q4 to 187 units (+5). Condo sales in North Kona slipped by 12 units, while condo sales increased in North Kohala (+14) and South Hilo (+1). Three condo units also sold in South Kona and one in Kau.

The median condo sale price increased in North Kona and Hilo but slipped in South Kohala, due to fewer higher-end condo sales there. South Hilo increased by $13,500 to $147,500 with 13 sales, North Kona increased $37,500 to $365,000 with 95 sales, and South Kohala dropped $130,000 to $470,000 with 75 sales. When compared to the same quarter last year, the median price in Q1 2019 dropped for South Hilo and South Kohala but remained the same for North Kona. As of this post, there are 336 active fee simple condo listings located on Hawaii Island.

Residential Land Sales
(5 Acres Or Less)

Land sales across the island remained relatively flat with the exact same number of sales in Q1 2019 as Q4 2018 (327). The districts with the most land sales were (as always) the districts with the most land listings, Puna with 206 (-1) and Kau with 51 (-1). The next closest was North Kona with 24 (+1), followed by South Kona with 20 (+11) and South Hilo with 12 (-5). Three districts had median price increases: South Hilo ($197,500), South Kohala ($500,000) and Kau ($17,500). The remaining five districts with sales had median price decreases, although most were slight: Puna-$27,000, Hamakua-$182,500, North Kohala-$169,000, North Kona-$291,375 and South Kona-$42,000.

A Potential East to Southwest Shift?

The most interesting dynamic relating to land sales in Q1 seems to have happened in the districts of Puna, Kau and South Kona. While not necessarily indicative of a trend, some very curious sales characteristics took place in these three districts in Q1 that depart from the historical norm. Could any of these factors be related?

Puna District: The number of land sales in Puna decreased by only one and the median price decreased by just $750, which, as isolated data, does not really stand out. The key point about Puna sales is the more significant drop from historical numbers. For instance, compare the 206 sales in Q1 of this year to the 272 sales in Q1 2018. For years, land sales in Puna have averaged from about 250 (2018 average) to more than 330 per quarter in 2017. The slowdown in the pace of land sales in Puna appears to have started during and after the Kilauea eruption there last summer. In the first half of last year, there was an average of 290 land sales per quarter. The second half of the year had 214 per quarter.

Kau District: The Kau district is interesting in that the median price increased from $13,000 to $17,500, which may not look like that much, but it is a 26% increase in a quarter. More dramatic is that in Q1 of last year, the median price for land parcels in Kau was only $10,000—making the Q1 2019 median price a full 75% more than the same time last year. Is increasing demand in this southern district driving up pricing? Hard to say, as the total number of Q1 sales (51) was still 18 fewer than the quarterly average of land sales there in 2018.

South Kona: The median price for land in South Kona in Q1 2019 was $42,000—the lowest since 2010 when it was $37,500. Also worth noting is there were almost double the historical number of land sales in South Kona20 versus an average of 10 or 11. So what changed? For one, there seems to have been somewhat of a spike in sales for Milolii Beach Lots in far South Kona for Q1—10 in Q1, compared to an average of 4-5 in previous quarters. Beside Milolii, 75% of the total land sales in South Kona were for parcels further south (TMK 3-8-7 to 3-8-9), with just five of the 20 total sales in the more northern parts of the district (TMK 3-8-1 to 6).

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