After Wildfires, Hawaii’s Housing Market Shows Signs of Recovery

Kahea Zietz, Vice President and Co-owner of Hawai’i Life, discusses the hurdles faced during a turbulent four-year period in the housing sector across the Hawaiian Islands.

The Hawaiian Islands have endured a tumultuous journey in recent years, marked by both prosperity and adversity.

During the pandemic-induced housing surge, Hawaii emerged as a favored destination for Americans seeking solace in picturesque second-home and beachfront retreats. However, the archipelago faced its own crisis just three months after the World Health Organization declared the pandemic over in May 2023.

In August of the same year, four devastating wildfires swept through Maui, leaving behind a trail of destruction with profound physical and economic consequences.

Among the blazes, the Lahaina Fire stands out as one of the deadliest in modern U.S. history, claiming the lives of 101 individuals and decimating the historic town of Lahaina.

The fire consumed approximately 2,200 acres of residential properties and 500 acres of commercial establishments. Moody’s Analytics estimated the economic toll on Hawaii at a staggering $4 billion to $6 billion in property damage and business disruption, with an additional $1 billion in lost output.

The aftermath of this catastrophe posed immediate and enduring challenges for the real estate sector, impacting both home sales and rentals. Kahea Zietz, Vice President and Co-owner of Hawai‘i Life Real Estate Brokers, sheds light on the region’s resilience and its journey towards recovery.

Zietz, who oversees the company’s rental division, short-term vacation rental business, and long-term residential leasing, offers valuable insights into Hawaii’s evolving real estate landscape.

As a co-host of HGTV’s Hawaii Life series, she aids individuals in finding their ideal properties amidst the island’s unique charms. In a recent interview, Zietz shared with Mansion Global the strategies and initiatives guiding Hawaii’s resurgence in the wake of adversity.

Mansion Global: How has the landscape shifted for international buyers investing in Hawaii?

Kahea Zietz: Historically, countries like Japan, Canada, Korea, and various Asian nations have shown significant interest in Hawaii. However, due to pandemic-related challenges and fluctuating exchange rates, international investment saw a sharp decline.

Throughout the pandemic, the majority of transactions were domestic, with Canada showing signs of recovery but not yet reaching pre-pandemic levels. Japan’s investment remains subdued, with currency differentials still posing a significant barrier.

How did the pandemic impact Hawaii’s real estate market beyond international investment?

The pandemic triggered an unprecedented surge in real estate activity across Hawaii. With minimal Covid-19 cases and the allure of Hawaii’s natural beauty, the islands emerged as a sought-after destination. We witnessed record-breaking sales volumes and unit transactions, intensifying the housing crisis and reshaping the rental market.

The inability to purchase homes led many individuals to opt for rentals, driving up demand and rates. Short-term rentals transitioned into extended stays, catering to a steady year-round demand.

Since Hawaii’s reopening in March 2021, pent-up demand has fueled a surge in rates and occupancy levels, surpassing 25%. Notably, many buyers opted to relocate to Hawaii permanently, engaging more deeply with their communities and contributing to local philanthropy.

This influx of new residents has enriched Hawaii’s social fabric, with individuals investing in their children’s education and actively supporting island-based nonprofits—a heartening development amidst challenging times.

Which Hawaiian island has shown the most resilience in the wake of the pandemic?

Oahu has demonstrated remarkable resilience, being the most populous island in Hawaii and boasting a diverse economy with numerous industries. Unlike other islands, a significant portion of Oahu’s real estate is owned by local residents rather than out-of-state investors.

Real estate transactions on Oahu tend to be driven by practical lifestyle needs rather than speculative investment, contributing to its stability.

How did the Maui wildfires impact real estate across the islands?

The devastating wildfires on Maui resulted in the destruction of approximately 20% of west Maui’s housing inventory, surpassing the number of homes permitted on the island over the past five years combined.

This catastrophe occurred amidst already dwindling inventory levels and a contracting real estate market post-pandemic.

Following the fires, rental activity across the island halted as the community grappled with the aftermath. Many short-term rental properties were repurposed to provide long-term housing solutions for displaced residents.

However, short-term rental activity is gradually resuming, with a promising outlook for the rental market on Maui projected to exceed the performance of the previous year in the first quarter of 2024.

What are the anticipated trends for 2024?

Based on the trends observed in January, it appears that the market stagnation experienced in 2023 is dissipating. There seems to be a growing confidence among individuals regarding interest rates and future prospects, prompting both buyers and sellers to take action.

Many who had been waiting on the sidelines are now adjusting to market realities and actively participating in real estate transactions.

In the rental sector, we anticipate a surge in demand as travelers express a desire to return to Hawaii. With international travel experiencing a decline in popularity, visitors are turning to familiar destinations like Hawaii for their vacation plans.

This resurgence in tourism is expected to drive an increase in real estate transactions as demand for rental properties rises in the region.

What are the notable observations regarding each island’s real estate market?

On the Big Island (Hawaii), there is a slightly higher availability of high-quality inventory compared to other islands.

Following the wildfires, Maui is experiencing a significant reduction in inventory and heightened market strain.

Oahu stands out as the most resilient market overall, with a consistent performance even before the pandemic. However, it typically doesn’t boast an abundance of luxury listings.

Kauai witnessed a substantial surge in demand during the pandemic, resulting in a quieter market currently with lower inventory levels compared to other islands. Nonetheless, there remains notable demand for luxury properties on the island.

Clare Trapasso
Clare Trapasso
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