Hawaii Economic Report – A Soft Landing

Are you optimistic about the state of Hawaii’s real estate market? Or, do you have a sense of foreboding? I tend to fault on the side of optimism. Why? For one, it’s just my nature to be optimistic, but more importantly, because for years I have witnessed Hawaii’s resiliency when it comes to the real estate market. Yes, we’ve experienced recessions and slow markets, price declines and troughs, but over time, the market not only bounces back, it grows. And, to new heights.

What High Inflation and Interest Rates Mean for Hawaii

I’m not an economist, but Dr. Carl Bonham is. And, he’s not just an economist, but he’s also the Executive Director for UHERO. If you aren’t familiar with UHERO, it’s the economic research organization at the University of Hawaii.  UHERO conducts rigorous, independent economic research on issues that are both central to Hawaiʻi and globally relevant. When UHERO speaks, we listen. And recently, we listened to Dr. Bonham share his views. He went over everything from inflation, economic recovery, the bond market, real estate, construction, tourism, and a whole lot more. Without getting into the weeds, suffice it to say that I came away from his presentation feeling hopeful and validated. Validated because Dr. Bonham said that he is cautiously optimistic. And, so am I.

Here’s why — interest rates have been increased to stem inflation and it seems to be working, at least to some degree. Dr. Bonham believes we’ll see inflation at around 3.5% by year end. Not optimum, but definitely an improvement over the nation’s current 6 percent inflation rate. And, with lower inflation, we’ll see lower interest rates. Over the long-term, they’re projected to be around 5-5.5%, which is well below the historical average. As inflation comes down, the U.S. economy will go back to growth and things will normalize. Yes, we’ll see some softening in prices, but not much. Oahu’s median sales price for single-family homes is hovering just under $1 mil. It’s a little below $500k for condos.

A Soft Landing

I like what I heard from Dr. Bonham and I think you will, too. Inflation will come down. Interest rates will come down. And, a recession in Hawaii is unlikely. To quote Dr. Bonham, “Hope is on the horizon.” Sure, we have a way to go. Everything is a work in progress and there are lots of variables to consider. Our U.S. visitors are driving the tourist boom, but we still need our Japanese visitors back and that may take a while. And, even though the U.S. has recovered in terms of jobs, Hawaii’s labor market needs to recover more. There is also a possibility that it may take longer than anticipated to get inflation under control. Still, according to Bonham, a soft landing for Hawaii is in the cards. And, that is good news indeed.

If you would like to learn more about the economic condition of Hawaii, you can view the full report here.