Learn more about the housing market in Hawaii

Every state is unique when it comes to the real estate market. That’s why it’s critical to understand the market you live or operate in. Whether you’re renting, buying, or selling, it will impact many aspects of your life.  

In this article, we’ll discuss the Hawaii housing market, including all the key metrics, insights, and forecasts you need to know if you’re interested in real estate on the Hawaiian Islands. 

Hawaii Housing Market Overview 

Hawaii is one of the most unique U.S. states. Not only is the Aloha State the only archipelago in the nation, but its geography is some of the most diverse in the world, ranging from arid deserts to lush green rainforests, snow-capped mountains, active volcanoes, beautiful bays, and of course, tranquil beaches.  

Hawaii is composed of 137 volcanic islands, with the largest eight being the most well-known: Ni’ihau, Kauai’i, O’ahu, Moloka’i, Lana’i, Kaho’olawe, Maui, and Hawai’i. Two thirds of the state’s population live on O’ahu, home to Hawaii’s capital city of Honolulu. Culturally, these islands are a melting pot of Indigenous Hawaiian, East Asian, and North American heritages, including the only Asian American/Pacific Islander plurality in the U.S. 

The housing market Hawaii currently has is equally unique. Historically, Hawaii has been a plantation economy and remains a major agricultural exporter today due to its warm tropical climate. However, increased tourism in the 1860s and 70s quickly transformed the state’s economy. More infrastructure and development quickly followed, fortifying the tourism industry in the 20th century as the islands received more and more visitors seeking tropical paradise—but at a cost. 

Developers and local populations are consequently in competition for the limited space on the islands. As more investors, eager developers, and wealthy vacation home-seekers bought up Hawaiian real estate, locals and indigenous Hawaiians struggled to find housing within their budgets. Today, Hawaii remains in a major affordable housing crisis, with one of the highest costs of living in the U.S. 

Property prices in Hawaii have skyrocketed, with the median sale price upwards of $780,000. These prices drive out locals, many of whom are forced to relocate to the mainland to find affordable housing. In fact, more native Hawaiians now live on the mainland than on Hawaii. Very few affordable units remain for the state’s permanent local population, a problem plaguing current residents and local governments on the islands. The costs of luxury development in Hawaii are suffered disproportionally by the islands’ local and native populations, who have the highest rate of poverty and lowest median income compared to other ethnic groups in Hawaii.  

Although Hawaii’s situation is singular, it shares concerns about the affordable housing crisis with most of the U.S. in 2024. Rising prices, high mortgage rates, and high demand are nationwide concerns, yet Hawaii’s challenges must doubtlessly be uniquely approached by its residents and government. 

Hawaii Housing Market Trends 

To understand the Hawaii real estate market, it’s important to keep up with trends. Let’s look at some key ones in Hawaii: 

Note: These statistics are based on Redfin’s monthly housing data from April 2024. 

Median Home Price 

The median home sales price in Hawaii is $783,700, up 14% since this time last year according to Redfin’s monthly housing data from April 2024. Currently, Hawaii has the second highest median home price in the country, behind only California. Prices will, of course, vary depending on whether you’re looking at modest housing in more rural areas of the islands or high-end luxury resort neighborhoods. In East Honolulu, for instance, median home prices are in the millions. 

Number of Homes Sold in April 2024 

1,143 homes sold in Hawaii in April of 2024, up 11.6% since April of last year. This metric gives us a good picture of the current sales volume in Hawaii. However, keep in mind that this number might be inflated compared to other months since nationally speaking, sales usually peak during the spring and summer months and slow in the winter. In fact, the National Association of Realtors (NAR) predicts that in February and March alone, sales activity increases by as much as 34% and prices by 3%. 

Median Days on Market (DOM) 

Days on market (DOM) is a measure of the average length of time a home remains listed on the market before being put under contract. A lower DOM typically signals a highly competitive seller’s market with more pressure on buyers to make higher offers and remove contingencies. A higher DOM usually signals a buyer’s market as sales are slower and sellers have less leverage. 

The current median days on market (DOM) in Hawaii is 74 days. This high DOM is likely due in part to restricted affordable inventory and extremely high listing prices of resort homes, which take longer to sell on average. 

New Housing Supply 

On average, there were about 2.4 new residential construction permits per 1,000 people in Hawaii in 2021. This slow rate of new home construction is a severe limiting factor in Hawaii’s housing market, which already suffers from a dwindling supply of homes and limited space for development. 

Property Tax Rate 

The average property tax rate in Hawaii is 0.32%, according to Rocket Mortgage. Hawaii’s average property tax rate is the lowest in the country. This is mainly because Hawaii’s taxation system differs from other states: the State of Hawaii funds public education rather than individual counties, leading to a lower tax rate for residents.  

However, it’s important to put this in perspective: Hawaii may have the lowest property tax rate, but because property values are among the highest in the nation, the average Hawaiian homeowner’s tax bill is still about $937. 

Foreclosure Rate in Q1 of 2024 

In the first quarter of 2024, 1 in every 2,658 homes experienced a foreclosure filing (according to recent data from ATTOM). Based on this data, Hawaii’s foreclosure rate is slightly lower compared to other states. 

Hottest Local Markets in Hawaii 

Hawaii features a variety of housing markets sought after by homeowners and real estate investors. Here are a few of them: 

1. Waikoloa

Located on the northwest corner of the Big Island, Waikoloa has been rated the second best residential real estate market in Hawaii, with a reported 78.44% property value appreciation rate. Waikoloa’s beach resorts and luxury condos thrive nestled between ancient lava rock fields on the scenic Kohala Coast, where the median cost of a home is upwards of $850,000. 

2. Hilo

Also located on the Big Island, this eastern neighborhood is only about 40 minutes from Hawaii Volcanoes National Park. Although this neighborhood isn’t very competitive, it does feature slightly more affordable homes, with median property prices settling at $507,500. Residents here enjoy the peaceful environment of Wailuku State Park, beautiful views of Rainbow Falls, and the unique basalt lava rock pool known as the “Boiling Pots.” 

3. Waikiki

This Honolulu neighborhood is located on the island of O’ahu. Waikiki is a center of tourism, nightlife, and culture in the state’s capital city, harboring high demand for vacation rentals, resort properties, and luxury homes. Shopping, dining, and cultural events are found in Waikiki year-round, promising uninterrupted opportunities for both homeowners and real estate investors. The median home price here is slightly more affordable compared to other Hawaii neighborhoods, at $428,000. 

Economic Factors Impacting the Hawaii Housing Market 

A holistic view of Hawaii housing market requires a basic understanding of the main economic drivers affecting the market. Let’s look at a few critical ones below: 

Mortgage Rates 

High mortgage rates are a continuing challenge for would-be homeowners in the U.S. Hawaii’s average rates for 30-year mortgages in June of 2024 are slightly lower than the national average at 6.38%. Higher interest rates deter borrowing and discourage those who already own homes from putting their homes on the market. Many homeowners report feeling “locked in” to their current homes, as it is unlikely they will secure a mortgage rate as low as their current one on their next property. Prospective buyers in Hawaii should monitor mortgage rates in the coming months for a better understanding of how they impact the housing market. 

Inflation and Cost of Living 

Mortgage rates are tied to inflation, another massive contributing factor to the affordability of housing and the state of housing markets in general, but especially in Hawaii. As mentioned above, Hawaii has one of the highest costs of living in the nation. This means fewer people can truly afford to limit rent or mortgage payments to less than 30% of their monthly income. The burdens of high housing and living costs fall especially hard on younger generations in Hawaii, who anticipate struggling to afford to remain in Hawaii beyond their educations. 

Population Changes and Demographics 

Population, employment, and migration trends each impact the housing market in Hawaii, which has an especially unique demographic profile. Hawaii has a negative net migration, meaning that more people (often locals) are moving out of Hawaii than to the state. The state’s increasingly tourism-dependent economy has replaced much of the islands’ native population, who are seeking jobs and affordable housing on the mainland. Housing shortages caused by over-regulation and zoning are also responsible for out-migration in Hawaii. The loss of local populations will doubtlessly impact Hawaii’s economy and housing market in the coming years. 

Other Factors for Hawaii: Climate and Shoreline Loss 

Like most Pacific Islands, Hawaii has a front-row seat when it comes to changes in oceanic climate patterns. 

Currently, Hawaii faces several climate and eco-emergencies. Increasing ocean temperatures are damaging coral reefs and delicate marine ecosystems on the islands, where diminishing algae levels is leading to coral bleaching and disease. Not only is this devastating from an ecological standpoint, but it also spells trouble from a financial perspective: Coral reef-related tourism brings in about $385 billion each year.  

Additionally, invasive species like Californian shrubs and grasses are outgrowing native species in Hawaii, increasing the risk of wildfires. As recent fires in Maui are testament to, wildfires can have a permanently damaging effect on both ecosystems and human life.  

Among the chief climate concerns for Hawaii is shoreline loss due to rising sea levels. Since 1960, sea levels in Hawaii have risen two to eight inches.  Although a few inches might seem relatively insignificant, experts at Oceanographic Magazine predict that up to 40% of O’ahu’s beaches could be lost by 2050. Homes on Hawaii’s coastlines are already being lost to coastal erosion, increasing insurance costs and spelling change for the way developers in Hawaii must approach real estate in the coming years. 

Coral reefs, coastal beaches, and wildlife are the foundation of Hawaii’s economy. Without them, Hawaii’s housing and real estate landscape will suffer drastically. Although the situation is alarming, there is fortunately much research being done in building design to attempt to mitigate some of these growing risks for homeowners in Hawaii. 

Hawaii Housing Market Forecast 2024 

Hawaii’s landscape and history require a singular approach to real estate. Unique challenges, cultural and ecological, are faced by the islands’ residents, investors, and developers, including some that require immediate attention in order to maintain housing stability for thousands who live on the islands and thousands of others who would like to. 

However, if stakeholders, local governments, developers, and others can rise to these challenges, the future of Hawaii’s housing market will remain bright. There will always be a high demand for vacation and rental properties in Hawaii, promising real estate investors sustained growth. Additionally, at least 21,000 housing units need to be built on Hawaii to sustain the islands’ local and native populations and fulfill the need for affordable housing amidst the islands’ many vacation properties and luxury homes. Until then, home prices and demand will likely continue to rise. 

Likelihood of Hawaii Housing Market Crash  

The Hawaii housing market shows no signs of an incoming housing market crash. Unceasing year-round demand for housing in Hawaii makes it extremely unlikely that there will be a housing market crash in the state anytime soon. 

Forecast for The U.S. Housing Market 

Now that we’ve looked at Hawaii housing market, let’s zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years? 

The United States’s current median existing-home sale price is around $384,500 per the National Association of Realtors. The inventory, though, remains low. A balanced market typically has a 5-to-6-month supply, but the current figure is 2.9. 

We’re currently in a seller’s market with buyers looking at continued rising house prices. The same trend can be seen with renters. Housing continues to appreciate, in general.  

Dr. Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors, believes the housing market will appreciate 15 to 25% over the next five years. He thinks that the seller’s market will continue because housing inventory will remain low. In five years, however, he predicts a more balanced market, in which neither party has a built-in advantage. Thus, the market will shift to a case-by-case basis to determine what kinds of deals people can get. 

Hybrid work also impacts the housing market. This shift in work culture means suburbia will continue to grow. States like Texas, the Carolinas, Tennessee, and Florida should see continual growth. 

The number of single-family homes built decreased over the past couple years while the number of multi-family homes increased due to lower prices and a demand for affordable housing. Higher mortgage rates and inflation (affecting price of materials) were the main causes.  

Lower income households continue to struggle in the current housing market. This trend appears likely to continue into the foreseeable future. Without enhanced supply or helpful subsidies, the outlook is that many Americans will still wrestle with housing affordability in the years to come.  

Hawaii Rental Market 

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.  

Rents were more unaffordable than ever in 2021 and 2022. In 2022, 22.4 million households paying rent said it was unaffordable, which is the highest that figure has ever been, according to a January report from the Joint Center for Housing Studies at Harvard University. The study found that half of all renters in the United States spent over 30% of their income on rent and utilities.  

The markets cooled in 2023, though, due to new units and decelerating demand. But a serious problem persists: Rent increases are still outpacing income gains.  

Moreover, high interest rates are keeping borrowing and transaction activity down. Over half the banks surveyed by the Federal Reserve reported that demand for multifamily loans decreased year-over-year. 

The pandemic caused a housing disparity that isn’t going away anytime soon. Unaffordable housing is a serious issue across America. Whether high rents or low income is the main cause doesn’t change the fact that this problem is widespread.  

This short summary leads directly into Hawaii’s current rental market, with key trends below from Zillow: 

Hawaii Rental Market Key Trends 

• Median rent: $3,000 

• Month-over-month rent change: $0 

• Year-over-year rent change: +100 

• Available rentals: 2,320 

Conclusion 

Hawaii is unlike any other U.S. state, nor is its housing market typical. From wildfires to shoreline loss and affordable housing crises, Hawaii’s housing situation is marked by quite a bit of uncertainty. While we can be certain that prices and demand for Hawaiian homes aren’t slowing anytime soon, potential homeowners and investors in Hawaii would be wise to consider the unique challenges faced by the state and how its trajectory might be shaped in the coming decade.