September Fed Decision And How It Affects Our Market
The decision to not raise interest rates in September by the Federal Reserve drew great sighs of relief from investors as news pushed home mortgage rates even lower this month. At 3.85% or less for jumbo loans being widely advertised, the rate is very close to the lowest it has ever been since 30-year rates were first tracked in 1971.
The historically low interest rates have caused a recent rise in list prices for property although at different rates for the two separate types of markets we have here on Maui.
In the primary home 1M and below market, we have seen large jumps in prices as supply of homes on the market stays uncharacteristically low. In the primary home market over 1M and the second home/investment market, supply is still pretty high as it is typical to see properties on the market for 6-months or more without any movement. To further exasperate the situation, demand for these homes is still relatively low making for a market where some great deals can be found. In fact, the vacation home areas of West and South Maui adjusted for inflation are seeing prices back at early 90’s levels.
Maui has also seen an increase in occupancy and ADR (Average Daily Rates) for vacation rentals across the pricing spectrum over the last few years which, combined with lower prices on real estate, has equated to a majority of complexes showing good net positive cash flow. Maui has seen a consistent occupancy rate of over 80% during the first half of the year and leads the state in that factor.
We feel that Maui will continue to be a great market for investment for the long term, especially as home prices in hot markets like California and New York begin to slow down as prices reach ever more unaffordable levels. It’s a buyer’s market here on Maui and it’s rarely been a better time to invest in a home or vacation property.