Impacts of COVID-19 on the Hawaii Real Estate Market

Paul Brewbaker, a prominent Hawaii economist, recently presented his analysis and forecast of the impacts of COVID-19 on the Hawaii real estate market, to the Hawaii Island Board of Realtors. Here are his top economic takeaways from the presentation.

Paul Brewbaker, a prominent Hawaii economist, recently gave a wide-ranging 1 hour live presentation to over 500 members of the Kauai Board of Realtors®, the Hawaii Island REALTORS® and the West Hawaii Association of Realtors®.

“As you know everything was fine until four weeks ago, and then we went off a cliff together,” Paul Brewbaker said. “But for the contagion, really nothing was fundamentally wrong with the economy.”

The key question put to Brewbaker was what the future would look like for Hawaii real estate. “If you say you’re doing forecasting right now, you’re not,” he said, noting that the current situation is of a scale never before observed. “But I would expect a pull back in sale volumes and some compression in valuations.”

He was also optimistic about some of the changes seen across the industry, such as transaction acceleration through paperless, all-digital tools, and the adoption of virtual tools for property showings and other work.

“We might also see shift toward less dense, less urban communities”, Brewbaker said.

When asked when things would stabilize in a “new normal,” Brewbaker said a lot depends on what Hawaii does right now.

“If we get the daily case counts down, we implement contact tracing, isolation, and quarantine, maybe in a year — maybe in 18 months — we’ll reach the day when a version of herd immunity or a vaccine becomes available,” he said. “But my own impression is that the state is not leading as much as following, and not following fast enough.”

Top 5 Key Takeaways

1. Hawaii COVID-19 case counts are responding to social distancing and sheltering-in-place protocols, “bending the curve” in successful mitigation, leading to a possible stabilization by May, at which time risks of revived pandemic infection will have to be managed (contained).
2. The sudden emergence of Hawaii’s coronavirus infectious threat precipitously decreased new home listings for sale, international and domestic travel, and interest rates, and has also disrupted supply chains and clouded the investment outlook, even for ongoing construction and development.
3. Big Island regional and Kauai housing markets were in a relatively stable, extended trajectory of modest, single-digit annual price appreciation and sales volume growth. This trajectory will be disrupted by the sudden stop associated with the novel coronavirus, but it can still serve as a reasonable longer-term benchmark for housing market returns on investment during the inevitable recovery.
4. Among the lessons from the global influenza pandemic from one century ago (1918-’19) are the facts that recession can be sharp but comparatively brief, that risk of second or subsequent infection waves must be taken seriously, and that it’s easy to forget how the risks of Black Swan events are ever-present.
5. With tourism as Hawaii’s principle export, and primary channel of transmission of the pandemic’s economic effects abroad (although not infection, 80 percent of which in Hawaii was introduced by returning residents), prior experience does not compare in magnitude of economic impacts, but does offer insights into the V- and U-shaped nature of these experiences.

Watch the Full Presentation

To watch Paul Brewbakers’ full presentation, please click on the video below.