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Are you wondering if real estate prices in Honolulu will take a nosedive in 2025? You're not alone.
Many are speculating about a potential crash, but we have delved deep into the numbers to provide clarity.
In this blog post, we will explore why a significant drop in Honolulu's housing market is on the horizon.
We rely on solid, up-to-date data and statistics from credible sources to support our analysis.
By the end, you'll see how we piece together this information to reach our own well-founded conclusion. Enjoy the read!
How this content was produced 🔎📝
This article offers thoughtful insights and analysis based on reliable sources, but it should not be considered financial advice. We work hard to research, compile, and analyze data to give you a well-informed perspective. However, as you can guess, our analysis involves subjective choices, such as source selection and methods, and it cannot fully capture the market's complexity. Please, always do your own research, consult professionals, and make decisions based on your own judgment. Any financial risks or losses are your responsibility. Additionally, you should know that we have no affiliation with the sources mentioned, ensuring our analysis is completely impartial.
1) A local in Honolulu would need about 9.3 years to afford a house, which is quite a long time
Signal strength: strong
In Honolulu, it currently takes around 9.3 years for a local to afford a house, which is quite high compared to many other places.
This is based on the median household income of approximately $84,907 and the median home price of about $786,725. When housing becomes this unaffordable, it often signals that prices might need to adjust downward to match what people can actually pay.
High prices that are out of reach for most locals can lead to reduced demand in the housing market, as fewer people can afford to buy. This reduced demand can put pressure on sellers to lower prices, especially if they want to sell their homes quickly.
If the time it takes for a local to buy a house were to decrease to around 5 years or less, it might suggest that prices are stabilizing or even increasing, as affordability improves.
Source: USCensus
2) Redfin considers the Honolulu real estate market to be lacking in competition
Signal strength: strong
The fact that Redfin ranks the Honolulu real estate market as "not very competitive" suggests that there are fewer buyers actively competing for homes. This lack of competition often leads to less upward pressure on housing prices, which can result in prices stabilizing or even decreasing over time.
In Honolulu, the most competitive properties are typically condominiums located in the urban core. These properties are in high demand because they offer proximity to amenities like shopping, dining, and beaches, which are highly valued by both locals and investors.
However, the overall market being "not very competitive" indicates that outside of these specific areas, there is less urgency among buyers to purchase homes. This can be a signal that prices might not rise as quickly or could even decline in less competitive areas.
If the market were to become "highly competitive", it would suggest a stronger demand across the board, potentially leading to rising prices instead.
Source: Redfin
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3) A 13.5% vacancy rate in Honolulu indicates the market lacks strong competition
Signal strength: moderate
The vacancy rate of 13.5% in Honolulu indicates that there are more available properties than there are tenants looking to rent them.
This high vacancy rate suggests that the market is not very competitive, meaning landlords might struggle to find tenants. When there are more properties available than people looking to rent, rental prices tend to decrease as landlords compete to attract tenants.
As rental prices decrease, property values can also be affected, leading to a potential decline in housing prices in the future. In Honolulu, properties that are easily rented are often well-maintained, single-family homes located in desirable areas like Waikiki.
If the vacancy rate were to drop to below 5%, it would indicate a more competitive market, potentially leading to stable or increasing housing prices.
Sources: NeighborhoodScout, DataUSA, USCensus
4) Selling a house in Honolulu now takes 80 days, compared to the previous 70 days
Signal strength: moderate
When it comes to real estate, the time it takes to sell a house is a crucial indicator of market health. If it used to take around 70 days to sell a house in Honolulu and now it takes 80 days, this suggests a shift in the market dynamics.
Longer selling times often mean that buyers have more options and are not rushing to make purchases. This can lead to increased competition among sellers, which typically results in price reductions to attract buyers.
In essence, the longer it takes to sell, the more likely it is that housing prices will decrease as sellers adjust to meet buyer expectations. This is a signal that potential investors should consider when evaluating the market.
However, if the selling time were to decrease to less than 70 days, it might indicate a stronger demand and potentially rising prices.
Source: Redfin
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5) In Honolulu, about 63% of homes sell for less than their listing price
Signal strength: moderate
In Honolulu, a significant indicator of the housing market trend is that around 63% of sales close at a price lower than the listing price. This suggests that sellers are often willing to accept less than their initial asking price, which can be a sign of decreasing demand or an oversupply of homes in the market.
Additionally, only 17.3% of homes close at a price higher than the listed price, indicating that bidding wars or competitive offers are not common. This further supports the idea that buyers have more negotiating power and are not pressured to offer above the asking price.
When more homes sell below their listing price, it often points to a downward trend in housing prices, as sellers adjust their expectations to meet market conditions. If you are considering investing in real estate in Honolulu, these statistics suggest that prices may continue to soften in the near future.
However, if the percentage of homes selling above the listing price were to increase significantly, say to over 30% or more, it could indicate a shift towards a stronger seller's market.
Source: Zillow
6) Home values in Honolulu have dropped by 5.5% since last year, and this trend may persist
Signal strength: moderate
The fact that home values in Honolulu have already changed by -5.5% since last year is a strong indicator that the housing market might be on a downward trend. This decline suggests that the demand for homes might be decreasing, or that there is an oversupply in the market.
Currently, the median home price in Honolulu is around $786,725, which is quite significant. Additionally, the median sales price per square foot is around $714, indicating that the cost of space is still relatively high.
These figures, combined with the recent decline, suggest that potential buyers might be hesitant to invest at these prices, anticipating further drops. If this trend continues, it could lead to a more pronounced decrease in home values by 2025.
However, if the home values start to increase by at least 3% over the next year, it might signal a stabilization or even a recovery in the market.
Source: Redfin
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So, are prices going to crash in Honolulu by 2025? Yes, they are!
Honolulu's housing market is showing clear signs of a potential price crash by 2025.
Firstly, the affordability gap is significant, with locals needing 9.3 years to afford a house based on a median income of $84,907 and a median home price of $786,725. This gap suggests that prices are unsustainable and may need to adjust downward. Additionally, Redfin's assessment of the market as "not very competitive" indicates a lack of buyer urgency, which typically leads to price stabilization or decline.
The 13.5% vacancy rate further supports this, as it points to an oversupply of properties, leading to decreased rental and housing prices. The increase in the average time to sell a house from 70 to 80 days and the fact that 63% of homes sell for less than their listing price are additional indicators of a weakening market. Finally, the 5.5% drop in home values over the past year suggests a continuing downward trend.
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