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Kailua Real Estate - Stabilizing or Crashing?

Updated: Jun 28, 2023

It's been a rollercoaster of a real estate market, that seems to have slowed down, but is it just our seasonal normal slowdown? What does the future hold?What really happened during the real estate pandemic mayhem? Are we expecting a housing crash like the one in 2008? Should you buy, or wait to buy? We get asked these questions daily, so we decided to answer them for you based on historical data and economic experts opinions we follow closely.

Below we have Kailua, Oahu specific market data that should help illustrate historical market trends and the state of the real estate market today. While reviewing this data please keep in mind 26% of homes purchased in Kailua in the last 180 days were Cash and 51% were conventional and typically put down 20% or more.

We've included some of our take-aways and are happy to discuss with you in greater detail anytime - just give your favorite Island Living Homes agent a call!

This first chart provides a good historical view of both the Kailua market (blue line) and the market across the entire island of Oahu (gray line) since 2005 illustrating the median single family home prices. *Data points in the graph represent a rolling 12 month average, which smooths out monthly data volatility and the effect of outliers in a given month.

Key Take Aways:

  • Kailua single family homes appreciated 22% in 2021 and are still up 7% in 2022, year to date.

  • July 2020 - March2021 Kailua held steady at about a median sales price of $1.200.000 before we saw a drastic increase.

  • March 2021- May 2022 Kailua experienced an unprecedented dramatic climb to $1.600.000 a 33% growth.

  • January 2021 Mortgage rates began to drop below 3% where they remained until January 2022 with a spike beginning in March 2022 until now. (People who went under contract in March locked in great rates and closed in May at the peak of the market and beginning of price stabilization.) Due to their low interest rates their mortgage payments are historically low.

  • May 2022 - October 2022 Kailua has held steady at $1.600.000. (Keep in mind October sales went under contract mid Aug-September and locked in rates of 5.5% - 6%.

  • Unknown - we will be watching closely the next 3 months to see the Sales Price effects of the 7% interest rates which hit mid October. Those who went under contract during this time will be closing end of November-December.

  • Unknown - Will 26% of our buyers still be cash? If so, even with higher interest rates, will this make any difference to our home values?

  • Interesting - Median Kailua home prices retreated only ~10% between 2007 and 2009, and avoided the significant 20-30%+ drops experienced in some other markets (i.e. in FL, CA, NV, & AZ), most likely due to the same demand Hawaii has today for a scarce resource - it's land.

This second graph illustrates inventory of single family homes. Inventory in this case is measured in "months of supply" (or more specifically, how long it would take to sell-off all the homes on the market given average monthly pending sales the prior 12 months). As a point of reference, inventory in a healthy, balanced market here is typically between 3 and 5 months of supply (today we stand at 1.8 months). *Data points in the graph represent a rolling 12 month average, which smooths out monthly data volatility and the effect of outliers in a given month.

Key Take Aways:

  • Currently we are experiencing historical low inventory, the lack of supply and the "life happens" demand may help sustain the sales prices regardless of interest rates. *Life Happens - Marriage, Birth Divorce and Death...

  • Inventory is starting to trend upwards again (Kailua inventory data in Kailua stood at 1.8 months of supply, up from a low of 0.7 in Dec 2021 - again, as a point of reference, a balanced/healthy market here has been ~3 to 5 months of supply).

Taking a closer look at more recent monthly Kailua data, the below graph illustrates not only the increased activity during the pandemic,

but also the seasonal nature of the market and that most of our market activity, similar to most residential real estate markets, occurs during the spring/summer months. Obviously, the market has slowed since the flurry of interest rate hikes this year, but a portion of the current pace can be attributed to seasonality as well.

Kailua Single Family Home Pending Sales Data Last Five Years

Finally, the below graph shows average days on market of single family homes in Kailua over the last 3 years.

After supply dropped and demand picked up near the start of the pandemic, it was a market dominated by Desperate buyers offering sellers often crazy, multiple-offer situations and houses went under contract in half the time they did previously...or even quicker.

The last few data points suggest that houses are starting to sit on the market a little longer, and that matches our first-hand observations working in the market every day.

Big Picture:

Life happens. Jobs, Marriage, Babies, Divorce and Death. With it comes change that includes buying and selling houses.

Because of Life - People have historically purchased in any interest rate market. My first house was purchased at a 10% interest rate a few decades ago!!!

The characteristics that have made Kailua such a unique commodity for years still remain (lifestyle, scarcity of real estate and development potential, and supported by rather steady retirees/DoD/military/government/tourism and service industries)

3) To buy or not to buy?

That's up to you... My husband I have never tried to time the real estate market. We've just bought along the way - with each move regardless of the news, and media hype. Any of our agents are happy to sit down with you one to one to discuss your particular situation and all things local market here on Oahu.


Shannon and Scott King


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