Kona native Shelsy Olive and her husband set out to purchase their first home after renting for 21 years. But finding one during the pandemic was difficult.
They put in an offer on a $390,000 three-bedroom, two-bathroom house with a wraparound lānai and detached carport in South Kona’s Captain Cook area. By the end of that November day, the owners had received 10 more bids, including a cash offer.
They didn’t get the home.
“It’s been a bidding war trying to purchase a home,” says Olive, who wanted to stay in Kona to be close to family. “I just felt like we didn’t even have a chance.”
Realtors say bidding wars are common on homes that are reasonably priced and cash offers are also common for certain kinds of homes, putting ordinary families at a disadvantage.
Prices for both condos and single-family homes are increasing on each major island and some are setting record highs. Single-family median sales prices on Kaua‘i already passed the daunting $1 million threshold and economist Paul Brewbaker says O‘ahu and Maui will likely cross that threshold this summer.
“This would have happened anyway in about three years, but it’s speeding up right now because of whatever’s going on out there that’s uniquely associated with the post-COVID environment,” Brewbaker says.
“Do I think that will persist forever? No. Is it like a bubble for three, four, five years? No, I’m pretty sure this is like right now, like this year, or until (buyers) say, ‘I have to go back to work at the office’ or whatever’s going on.”
Three Key Factors
Realtors interviewed for this article cite three main factors driving Hawai‘i’s housing prices higher:
- Intense demand from people taking advantage of low mortgage rates.
- A dwindling inventory of homes for sale.
- People working for Mainland companies who are now free to work from anywhere, including beautiful Hawai‘i where COVID counts are relatively low, plus local people who want more space because they are also working from home.
“Those three items together have kind of created the perfect storm,” says Shannon Heaven, president of the Honolulu Board of Realtors and a Realtor and property manager with ‘Aiea-based Property Profiles.
Some Realtors say this puts first-time homebuyers and buyers who need financing at a disadvantage. Jenni Lee, a Realtor with Corcoran Pacific Properties who specializes in the Kona market, helped Olive and her husband purchase a North Kona home in April. But Lee thinks Olive will be the only first-time homebuyer she’ll be able to help this year.
“It’s harder for buyers to get into homes unless they have cash,” she says.
Sellers frequently prefer the certainty of cash offers because mortgage buyers might need an appraisal, which takes time. In addition, a low appraisal might mean a buyer can’t get a large enough mortgage to close the deal, though Lee says, when that happens, a buyer could always put in a larger down payment to…