Where are Oahu Home Prices Headed?

After a frenzied 2021, the Oahu real estate market is moderating as home sales soften and competition eases. However, median prices continue to rise, reaching $1,108,000 for single-family homes and $500,000 for condos in July 2022.

The recent shift in market dynamics has many future homebuyers and sellers asking: Will home prices drop, and if so, when? According to Locations’ Research Department, home prices will continue to rise through the end of this year. However, prices are not expected to rise as sharply as they did in 2021—a sign of a more stable market, as last year’s double-digit price growth was unsustainable.

Of course, home prices are only one piece of the affordability puzzle. Interest rates can also affect the purchase price for most homebuyers. Rates have been rising sharply this year in an attempt to curb inflation and are currently hovering around 5.5 percent (compared to the all-time record low of 2.65 percent in January 2021).

While this year’s higher rates have tamped down enthusiasm among some homebuyers, waiting for rates to drive down prices would be a big mistake, says Locations Realtor® and Partner Cory Takata. Homebuyers may be priced out of a particular neighborhood or home type due to higher interest rates, but rates are not a “market killer,” he says.

“Even with rising interest rates, people will still need to buy or sell homes. Buyers will adapt to higher rates and adjust their budgets and preferences accordingly. Last year, historically low interest rates allowed buyers to purchase homes they may not have otherwise been able to afford,” he explains. “It was a crazy, crazy market. We were spoiled by very low rates.”

Takata often reminds his clients that his parents’ generation faced rates of 15 percent or higher and now enjoy significant home equity. He emphasizes the importance of entering the market, even if rates are higher now than in recent years. What you may save in interest payments by waiting, you’ll have more than lost in missed equity gains. Locations expects rates to remain around 5.5 to 6 percent for the remainder of the year, but refinancing when rates come down is always a possibility, says Takata—as long as you’re able to afford your monthly payments in the interim. Despite rising home prices and higher mortgage rates, he sees a few bright spots in the current market for homebuyers as we head into fall. “It’s been a sellers' market for the past 15 years, because there’s just not enough housing inventory on Oahu to keep up with demand. However, we’re beginning to see an uptick in new listings, which will give future homebuyers more options. For example, there are currently double the number of homes for sale on the Ewa Plain than there were last year.” Takata notes that thanks to growing inventory, competition is easing slightly. “We’re still in a competitive market, but the bidding wars have slowed down a bit in some neighborhoods. A real estate professional can help to identify neighborhoods of opportunity that meet your needs and your budget. At the end of the day, Hawaii real estate is a solid long-term investment, so don’t delay homeownership. The best time to buy is now.”