Being known as the most reliable, trustworthy, and best cash buyer on Maui, many people come to me with questions about real estate and how to sell your house fast for cash on Maui, Hawaii, or about the cheapest way to sell your home as is in Maui. The single question I get more than any other is: when is the Maui real estate market going to crash?
Of course, the answer is always “I don’t know”. If I did, I would probably be very rich! But the reality is that no one knows when the housing market is going to crash in Hawaii, or anywhere for that matter. However, I can use my experience and Hawaii real estate market knowledge to give facts and my opinions about where we are in the current real estate market cycle.
What’s happening in Maui’s Real Estate Market
Currently we have seen home sales slow dramatically, and many areas have seen prices decrease slightly, but not significantly. I think the best way to explain the current housing prices on Maui is that sellers and buyers are on two different pages.
Sellers are looking at the house down the street that sold a few months go for a record high price (right before mortgage interest rates in Hawaii increased, causing the cost to buy a home in Maui to be significantly higher). These sellers think their home should be worth the same amount as the house or condo next door. But being in their position, it’s difficult to appreciate the buyer’s perspective.
On the other hand, whether buying a Hawaii house with a mortgage/financing, or paying all cash for a home on Maui, they have a completely different perspective on the value and max cash offer they’re willing and able to make. Buyers are seeing the headlines in the news, such as “The housing market is about to crash”, “Why the housing market crash will be worse in 2023”, or “Housing prices predicted to drop by 20% over the next 12 months”. Understandably, even buyers that are motivated and need to buy a home are still not willing to match that record high sales price down the street. The other major factor affecting what a buyer will pay for your house are today’s interest rates.
How increased interest rates are effecting Hawaii home prices
“In December, when rates were approximately 3% and you borrowed $600,000, your principal & interest payment was $2,530. Today, that rate is approximately 5.750%. To borrow that same amount, your payment would now be $3,501. Another way to look at it is if you wanted to keep that $2,530 payment, how much would you have to reduce your loan amount by to have the same payment? Instead of $600,000, to keep that same payment, you could only borrow $435,000.”
-Alan Van Zee, President of Hawaii Mortgage Company
I think giving these real-world numbers is the best way to illustrate how drastic the rise in interest rates really effects the max cash offer a buyer can make for your house. Even if the buyer is paying cash, they are still competing with buyers that are limited by these increasing interest rates, plus they will likely refinance at some point anyway and the rates will most likely be higher at that time.
In conclusion, no one knows for sure if and when the Maui housing market is going to crash, or if we are really in a recession. What we can say is that the market has cooled down significantly, and there are many indications that prices could very possibly begin to dip. Personally, I don’t think we will see a huge price correction like what we saw in the great recession from 2008-2010 when some areas saw home prices drop by over 50% (in fact there’s a condo complex on Maui, HI that saw home prices drop by about 85% on average during the great recession!). But I do think that it’s very feasible that home prices in Hawaii could dip by 10-15% over the next year or so. That said, I do think this would only be temporary. However, if you are considering selling your house in Hawaii I certainly would not recommend waiting at this point. The chances that prices will decrease are certainly much higher than the chances that Maui real estate values will continue to increase. Here at Maui Home Buyers we have been seriously considering which of our properties we might not want to own for more than a couple more years. Because even though we may only see prices decrease for a year or two, it would almost certainly take years for those prices to recover and get back to the high prices that are still possible today.
Is it time to sell your home or condo on Maui, HI?
If you’re considering selling and would like a fair cash offer to sell your home as is in Maui, HI for all cash, give us a call! There are no obligations, we are honestly here to help, just look at what some of our current and past customers have to say about us here. We’d be thrilled if we are the right solution for you, but even if we’re not we are still happy to answer your questions, point you in the right direction and hopefully help you make the best decision for your needs!