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Affordable Housing Inventory Shrinks & Prices Rise

“For Sale and “For Rent” units increasingly scarce--especially in South Maui.

February 6, 2014
Susan Halas - Contributing Writer ( , Maui Weekly

If you're a working person looking for affordable housing, you may have noticed increasing scarcity of available inventory both in rentals and in units offered for sale. This is particularly true in South Maui. To find out why, Maui Weekly consulted real estate professional and veteran blogger Pete Jalbert of the Maui Realty Team.

"The entry-level condo market in Kihei has seen rapid appreciation over the last 18 months," said Jalbert, who tracks this market closely. "The low sale for a two-bedroom condo at Kihei Villages, Southpointe, Keonekai Villages during that time was under $100,000. The majority of sales in 2012 were in the low to mid-$100,000s, with prices a little higher at Keonekai Villages, which has a more desirable location close to the Kama'ole Beach Parks.

"We are now seeing prices consistently in the $200,000s, with a recent sale at Keonekai Villages for a nicely remodeled unit reaching $300,000.

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Pete Jalbert of the Maui Realty Team shares his explanation for the increasing scarcity of available inventory both in rentals and in units offered for sale.

"This market was the hardest hit during the recession and it is now experiencing the strongest recovery," said Jalbert. "This bodes well for those who bought condos at high prices during the last recession.

"On the other hand," Jalbert continued, "the rapid appreciation in prices is making ownership less accessible for those that are seeking an affordable home. While the rate of appreciation for homes is not as rapid as condos, the inventory of homes under $400,000 is shrinking rapidly.

"The question," he said, "is how much affordable housing is coming in the pipeline to address this situation?"

Jalbert wondered if additional construction in Waikapu Gardens and potentially at Kahoma Village will be enough?

Like many others, he thinks that Maui's 50 percent affordable housing requirement was a well-intentioned piece of legislation with unintended negative consequences.

"Are we going to be able to meet the demand for affordable housing, or is 50 percent too high a barrier?" he asked rhetorically.

Like many, Jalbert thinks build-ers have gone where conditions for potential profit were more favorable.

Brutal rental market

Jalbert characterized the current rental market as "brutal." He said, "Rents on Maui have gone up considerably, and the overall availability of rental properties is getting tight. This is a big change from the bottom of the recession."

At that time, he said rental demand and rents shrank as people moved off the island or moved in with each other.

But, he said, "As employment improved and the workforce expanded, demand for rentals has sky rocketed," in part, he thought, because, "more people have come to the island seeking work here."

He gave Pa'ia as an example of an area with rapidly rising rents and sales prices.

"Aside from a handful of homes in Spreckelsville," he said, "there hasn't been any new construction in Pa'ia since the completion of North Shore Village in 2003."

In the meantime, "Pa'ia has been identified in national publications as a great and 'hip' place to live," said Jalbert. "That means more people wanting to move to Pa'ia and more of the homes in the community have been purchased as second homes.

"This is just simple supply and demand," he continued. "Demand has gone through the roof, while supply is unchanged or even smaller due to the homes that have been converted to second homes. Additional affordable housing in the North Shore and Upcountry could make a difference."

The shadow inventory that wasn't

One thing that was supposed to put a damper on market appreciation was the so-called "shadow inventory" of foreclosed properties that many thought would glut the market.

"That hasn't been the case," Jalbert said. "There were lots of rumors that the summer of 2012 would be when we would start to see some of the backlog trickle out on to the market. That never happened. Eighteen months later, we still haven't seen anything more than a drip when a deluge was expected."

He said he could understand some, but not all of the reasons why this occurred.

"One factor was that some sellers were able to sell their property via short sales," he said. "Bank of America had an aggressive program for short sales during 2012 that preapproved short sales at certain prices before they hit the market. There were a few sellers on island who took advantage of that program."

Appreciation and the improved economy may have bailed out some other sellers.

"I have heard that there were bank-owned properties bought by institutions before they came to the market, but I have yet to see clear documentation of those sales," said Jalbert. "There are also some properties that are still tied up in the system."

Rise in interest rates expected

Like many other realty commentators, Jalbert thinks that the Federal Reserve will continue to cut back on Quantitative Easing (QE).

"That should lead to a bump in interest rates," he predicted. "Higher rates mean less buying power for the buyers. If that increase is modest, the market may be able to absorb the increase. If the increase is more significant, it will likely slow the rate of appreciation. Financed buyers will be less likely to absorb significant price increases in concert with higher rates.

"Sellers have been seeing stronger appreciation in some communities around the island," he said. "Consequently, they have been pricing their properties more aggressively, with some homes and condos listed well above comparable sales.

"Sellers will need to be responsive to higher rates and adjust expectations," Jalbert said. "Otherwise, a stalemate between buyers and sellers and a subsequent slowdown in sales volume could result."

But he also thought it could go the other way.

"If rates start to rise with even more significant increases forecast for the future, an increase in activity may result. We saw that occur last summer when rates saw a sharp uptick based on the prediction that QE was coming to an end." The result, he said, "was "buyers were scrambling to secure properties before their buying power shrank further."

For more on Jalbert's view of the year just past, see his year-in-review realty blog at



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