What’s Going On in Oahu Real Estate in 2022?

Welcome to 2020 too. You almost can’t unsee that. Sorry. Rewind! 

WELCOME TO 2022!

2020 and 2021 created so much shift – in money, in business, in lifestyle, in mindset. 2022 seems to be the year we’ll actually plant ourselves in those shifts. For me, personally, I’m realizing I’m turning 40 freaking five! When the heck did that happen? I swear I’ll be 37 forever, but only if my metabolism and hair color would agree. Darn you JLo for raising that bar so freaking high and for having way more money than the rest of us to make a perpetual 37 years old a reality.

Who am I? Why am I here? I’m Maila Gibson-Bandmann (pronounced My-La not Mali-a). Much like “2020 too,” some of you all refuse to unsee and unsay Mali-a. I was a singer for the first 20 years of my adult life doing a little bit of real estate. Now that I’m in the next 20 years of my adult life, I’m a realtor on Oahu who does a little bit of singing. I wasn’t blessed with children, but I am crazy about my fur kids and I’M FORTY FREAKING FIVE!!! I might be in a midlife crisis. I’m not leaving my husband for a younger man or anything like that. I love him to life. My midlife crisis is more along the lines of realizing my generation needs a voice. I hope to be one of them who speaks truth, finds community, and as a bonus, if I get to help you with your real estate in Hawaii…YAY!

What happened in real estate on Oahu in 2021? The same thing the rest of the United States experienced: historically low inventory, historically low interest rates, tons of buyers, not enough homes to sell, people working from home therefore abandoning their condos in the city and moving further away and into the homes of their dreams. The media likes to tell it this way: “Home prices escalated to unaffordable levels due to wealthy mainland buyers buying every single house for sale and pushing locals to the streets or Las Vegas.” Here’s the truth and you can look it up in public records. The number one buyers of real estate in Hawaii were Hawaii residents. Where did the rest of them come from? Second place goes to California buyers with less than a thousand purchases on Oahu out of 15,741 homes sold. They accounted for only 6% of all home sales on Oahu. Next was Japan and then Washington for less than 400 sales combined. What makes California buyers love Hawaii so much? Other than similar lifestyles and a salad bowl of cultures, our property taxes are the lowest in the country. For every $1000 of assessed value, it’s only $3.50. On a home assessed at $1 million, that’s only $3500 per year. Cost of living in Hawaii is expensive (let’s not beat that dead horse), but property taxes are low. Now there’s a win!

So if Hawaii residents really bought all this property, how did they afford it? Low interest rates coupled with appreciation. Interest rates were in the 2’s and 3’s all year. Many sold and bought something else or they refinanced and cashed out. Single family homes ended around a median price of $1M. Condos ended up around $500K. Condo sales surged as new construction in Kakaako (such as ‘A’ali’i) became available. 

What’s going on in 2022? Is the market going to crash? Probably not, but I’m not psychic. We still have a supply problem. We just don’t have enough homes. Interest rates have shot up into the 4’s, but that’s still low! If you’re a child of the 80’s, you’ll remember that interest rates hit 18%. However, interest rates follow the rule of 10x. For every 1% increase, you can expect a 10% decrease in borrowing power or a 10% increase in your monthly mortgage payment. That’s huge. For example, if you take out a mortgage for 1 million dollars, you can expect a monthly payment to be somewhere around $5000 at today’s rates. If the interest rate goes up a point, that payment for the same amount is now $5500. Or, if you need to stay at a $5000 payment, now your purchasing power is only $900,000. The difference between a $900,000 home and a million dollar home is vast. Will this affect the market? Of course. Perhaps we’ll see less buyers competing for homes and less bidding up the price like we saw in 2021. Will there be a crash? Probably not. Prices may not even drop. They just won’t increase as much or as quickly and quite frankly, I’m ready for a more balanced market. Presenting 23 offers on a single family home is a lot of work and rejecting 22 broken hearts shatters my heart too. 

It’s important to talk about legislation. Bill 41 is a big one. It seeks to extend the minimum time for short term rentals (AirBnB, VRBO, etc) from 30 days to 180 days! The government is hoping this will solve our housing shortage crisis. It won’t. Most short term rentals are studios or 1 bedroom condos in Waikiki with no parking or luxury homes along Lanikai Beach that cost $3M or more. Bill 7 is an important one too. It allows for 3-4 times the number of units allowed on the same lot size. Think: all those old houses in urban Honolulu next to 3 story walk up apartments on teeny lots. Those are the ones this bill targets and developers are foaming at the mouth for these little nuggets. The caveat, however, is that they are to be priced at affordable rents. What we really need are more homes like Ho’opili and Koa Ridge, but where are we gonna get the land? This is why Hawaii has and always will be expensive. Land is precious and no one’s making more of it. 

What should you do in 2022? Owning a principal residence is a long game. Timing the market shouldn’t be your goal as a buyer. Buy when the time is right for you. If you’re an investor, that’s a different story. If you’re a seller, your timing is also most important, but with our housing crisis, you’ll almost never go wrong selling in Hawaii. And watch when Japan opens up again for travel. They’ll be back and they looooove Hawaii real estate. 

2022…I’m here for you. I like that much better than 2020 too. 


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