Oahu Real Estate Market Update: 2023 Forecast & Trends
After two years of significant growth, Hawai’i may anticipate a steady decrease in interest rates, a slowing in declining sales, and a leveled off – or perhaps a decline – in prices.
According to two economists who study the housing markets in Hawaii and the United States, Hawai’i home sales may continue to fall as 2023 begins, but the market is likely to level out starting as early as June as interest rates remain in decline and prices balance off.
2022 will be remembered for the dramatic rise in mortgage interest rates, from 3% in January of 2022, to 7% last fall, which slowed the rapid surge in Covid-era home sales.
However, experts predict that 2023 will be a slowdown period: interest rates will gradually fall, the percentage of sales declining will lessen, and prices may begin to level off or drop gradually.
After a period of strong growth — the number of single-family homes sold in 2021 was 37% greater than the previous year, and the average price increased 19% — inflation caused by Covid-19 shutdowns and supply-chain concerns halted the housing market in 2022. The Federal Reserve’s measures to manage inflation by boosting the overnight lending rate for banks drove up 30-year fixed-rate mortgage rates, which began the year around 3% and reached above 7% in late October and early November before falling to 6.31% in December.
The rise in interest rates dramatically reduced affordability for homebuyers who did not have enough money to put down or make a large enough income to be approved for higher monthly payments. Consequently, single-family home sales on Oahu fell 48% in November and were down 21% for the first 11 months of 2022. Furthermore, condo sales on Oahu fell 43% in December and were down 9% for the year through November.
However, one local expert Hawaii Business spoke with believes the market will turn the curve next year, paving the way for positive development in 2024.
With rates in Hawaii reaching 6.35% for a 30-year fixed mortgage in 2022, the prediction is that by the end of 2023, it is probable that the inflation rate will drop to 3% or 3.5% which is not much higher than the Federal Reserve’s 2% goal. The hope is for the housing market to recover within a year or two, rather than four years.
Prior to the Covid-19 outbreak, Oahu was on track to have a $1 million median price for single-family houses by the end of 2023. Nevertheless, Covid sped the process and the island arrived at the $1 million median house price two years early, in the fall of 2021. Through November 30, 2022, the average price of a single-family home on Oahu was $1.1 million.
Housing market experts predict that we have reached the peak of rising interest rates. Although rates may not go back down to 2%, we are on a downward path.