It’s been five years since Hawaii’s economy was rocked by the COVID-19 pandemic. The crisis tested the very fabric of island life and reshaped everything from tourism to home prices. Recent data shows that the state has technically recovered, but the on-the-ground reality tells a much more nuanced story. As someone who’s lived and worked through this transformation, both personally and professionally, I can say with confidence: Hawaii hasn’t gone back to “normal.” It has evolved. In fact, one could even say that Hawaii has been reshaped and at the same time, stayed resilient.
The Numbers Say “Recovery.” The Experience Says “Recalibration.”
According to the Department of Business, Economic Development and Tourism (DBEDT), Hawaii’s GDP finally surpassed pre-pandemic levels in Q4 2023. On paper, that marks a full recovery. But in reality, many of the forces that define our economy—visitor arrivals, workforce size, industry diversity—have not bounced back.
From 2019 to 2023, Hawaii’s inflation-adjusted economic growth was just 1.5%, compared to the national average of 12.6%. That puts us 49th out of 50 states, with only North Dakota trailing behind. The state’s dependency on US mainland has increased: U.S. mainland visitors now make up 77% of total tourism spending, up from 66% in 2019. This is a major core change.
The Vanishing of Japanese Tourism
Nowhere is that shift more visible than in the steep decline of Japanese visitors. The Japanese tourists were demographic that once formed the cultural and economic heartbeat of Hawaii’s tourism. Before COVID, Honolulu was affectionately dubbed the “48th prefecture of Japan,” and for good reason. Japanese buyers were loyal, respectful, and deeply connected to Hawaii’s values.
But with the yen significantly weakened against the U.S. dollar, outbound travel from Japan has dropped dramatically. On a recent trip to Japan, I noticed how few Japanese nationals were traveling to Hawaii. My flights to Tokyo and back to Honolulu were filled instead with American tourists, seizing the opportunity to experience a more “affordable” Japan.
This reversal has certainly impacted my business. For first 15 years, I focused on a specialized Japanese clientele. Now, that audience plays a smaller role, prompting a swift pivot on my end. My business looks very different from its pre-pandemic days—and I’m enjoying the change. My client portfolio is far more balanced than ever.
Home Prices Have Surged—But Not for Everyone
Despite Hawaii’s sluggish economic recovery, home prices have soared. Since 2020, median home prices statewide have nearly doubled, fueled by low inventory, rising construction costs, and high demand. On the Big Island, we’re still experiencing multiple-offer situations in desirable neighborhoods.
At the same time, housing affordability has become a crisis for many local families. It’s a stark contrast: the market thrives at the top, while everyday residents struggle to stay rooted. Building isn’t easy. Inflation has driven up the cost of materials and labor, making new construction expensive and time-consuming. Now we also have to deal with tariffs.
The Vendor Crunch: A Hidden Post-Pandemic Struggle
One of the most unexpected challenges we now face is the labor shortage across service industries. Many of our trusted vendors—contractors, landscapers, inspectors, cleaners—have retired or left the islands during the pandemic. The talent pool has shrunk and the quality has become inconsistent.
As a result, vendor management has become a major part of our work. Emil and I spend more time than ever coordinating repairs, scheduling trades, and frankly, coaxing reliable vendors to take on our clients’ projects. In a market where time is money, having the right team has become everything.
Federal Aid Gave Us a Lifeline, but Loose Ends Remain
Massive federal aid—over $21 billion—kept Hawaii afloat during the worst of the pandemic. These funds supported state agencies, small businesses, unemployed workers, and individuals. But many of those dollars have run dry, and some industries are still grappling with the aftereffects.
Restaurants, for instance, are fighting back against unexpected taxes on their 2021 federal relief grants. One pending bill (HB1278) aims to exempt these funds from Hawaii’s general excise tax. Without it, some business owners face six-figure tax bills on money they thought was meant to help them survive.
What Does This Mean for Buyers and Sellers?
For those navigating Hawaii’s real estate market, context matters. Yes, prices are high and inventory is tight. But there’s also opportunity. Especially so for buyers who understand the long-term value of properties in Hawaii, and for sellers who know how to position their property effectively.
The Big Island remains a place of unmatched natural beauty and cultural richness. In this post-pandemic world, success in real estate requires good timing, adaptability, strategy, and deep local insight.
Whether you’re buying your dream home, selling a legacy property, or simply curious about where things are headed, the KE Team is here to help you make sense of it all.
Here is latest Hawaii economic outlook from the Governor’s Office.
Here is more about Hawaii Economy on West Hawaii Today.
(Kai)