Kona Real Estate Market Update

Aloha,

I have safely returned to the Big Island. Japan was quite hot!

Before diving into the market trends... here is a brief overview of last weekend's U.S. economic activities.

Economic Activities

At the Federal Open Market Committee meeting on July 30, Federal Reserve Chairman Powell announced that the policy rate would remain at 5.25-5.5%, while also suggesting a potential rate cut in September. The market expects rate cuts in both September and December, leading to a decline in long-term U.S. interest rates, a weaker dollar, and rising stock prices.

I returned to Hawaii with this news in mind.

On Friday, August 2, the U.S. employment statistics for July were released, falling short of market expectations. This led to a sharp decline in U.S. stocks, triggering a rapid drop in bonds and mortgage-backed securities. Japanese stock prices also plummeted.

By Friday afternoon, my office was buzzing with loan officers bringing in special bulletins announcing "declining mortgage rates." Rates, which were around 7%, dropped to 5.99% in just one day.

The 30 year mortgage interest rate is still 5.99%, but it is expected to be around 5% by the end of this year. This could potentially impact the housing market, as both potential sellers and buyers are currently on hold due to high interest rates. This could change if rates continue to fall.

Now, onto the Kona single-family home market.

Despite fluctuations, the median price has maintained record high levels this year. This month saw an approximate 12% increase compared to last August. The market is active, with only 2.5 months of inventory if sales continue at the current pace, indicating a seller's market.

The number of properties for sale remained unchanged from last month but has increased by over 35% year-on-year. Inventory is still only half of what it was pre-COVID. The slight sluggishness in contract signings in July (down 14.3%) is concerning.

Condominiums:

Prices remain on an upward trend, with a 20% increase compared to the same period last year. However, the number of properties for sale has significantly increased, and inventory is on the rise. It feels like the market is shifting from a seller's market to a more neutral stance.

The impact of recent natural disasters in the U.S. (including Lahaina) has caused a spike in condominium fire insurance premiums. Additionally, many condominium associations are struggling with the demand for upfront payment of these premiums.

Recently, Kanaloa's registration was completed, with each unit incurring a special assessment of $1,000. This is relatively low compared to Mauna Lani Fairways, where each owner faced an $8,000 assessment. This insurance issue is expected to continue at least until early 2025. Thoroughly examining this information is essential whether buying or selling.