The number of “Active” listings for both detached homes and condos in most major markets on the island of Kauai are at, or very near, all-time lows. The 38 active listings of condos in Princeville at the end of Q1 2018 is well below the average range of 60-80 active listings that we realized during the period from 2012-2016, and represents the lowest quarter-end mark since the summer of 2004. The Princeville detached home market has a total of 22 active listings at the end of Q1, which is the lowest level on record and nearly half the inventory level of just 2-3 years ago. The 50 active listings of fee-simple condos on the South Shore at the end of Q4 2017 was the lowest level since 2006, and the 20 active listings of detached homes priced under $2M (eliminating the effect of the very large and expensive new Kukuiula development) on the south shore at the end of Q1 2018 is on-par with 2013 levels (just before a period new construction began), and an amount not realized prior to that since 2005. In Kapaa, the 51 active listings of detached homes at the end of Q1 is the lowest amount on record (less than half of the inventory levels from 2011-2015), and the 20 active condo listings at the end Q3 2017 (26 listings currently) reflects the lowest level since 2004.
Given this historically limited amount of inventory, you might be wondering what effect that is having on pricing. In most all of these markets mentioned, the average sale price per square foot today, while higher than most every year since 2011, is still below the levels realized during the peak year periods from 2005-2009. In fact, a close examination of market proceedings following the last time inventory levels on the island reached historic lows (around 2003 – 2005) shows that the 3-4 years that followed demonstrated marked increases in both number of active listings and average sale prices per square foot.
So what does that mean for the state of the market today? The very low inventory levels today, coupled with very steady buyer demand, are causing average times on market to reduce, as each new listing is getting more proportionate interest from the active buying community, which in turn starts a trend toward faster increases in pricing. I do believe most buyers today can still find comfort in knowing that the prices they are paying, though higher than years past, are still a decent amount below historical high’s. Current market dynamics seem to reasonably point towards further appreciation potential in the coming years (barring influences from other microeconomic and macroeconomic forces), and in the long run (10-20 years) the appreciation potential for Kauai property remains very compelling. The trick today, however, will be securing the property of interest while it is available, as many other buyers will also be considering the same property at the same time. Therefore, “readiness” to buy will likely be among the most important factors for buyers in 2018. “Readiness” will likely not only include being financially ready (having your cash allocated or lender pre-approvals in-hand), but also ready in the sense that a buyer knows enough about the market to make a quick decision when the right property is available, and that they may physically be able to commit to visit the property very quickly once it is listed (this can prove tricky, as many of our second home buyers are shopping from the mainland).
If you are considering purchasing a property on Kauai any time in the coming year or years, give me a call to discuss the various ways we can help you prepare to be “ready” for your purchase when the right opportunity presents itself:
Jim Karlovsky, R(B)
Also, if you are just getting started in the buying process, be sure to read 6 Essential Steps to Finding the Perfect Kauai Property.