Closings of condominium sales have dropped by double-digit percentages in the three months since Mayor Richard Bissen announced a proposal to phase out thousands of short-term rentals in apartment-zoned districts, according to monthly statistics from the Realtors Association of Maui.
Although too early to declare a long-term trend, the downturn could be an early sign of a cooling off in Maui’s hot real estate market that has put purchases of homes and condominiums beyond the reach of most long-term island residents.
Bissen announced a bill to make short-term rentals unpermitted uses in apartment districts during a news conference in early May. The proposal has been reviewed by county planning commissions, and now the measure is pending before the Maui County Council.
Here’s how Maui County condo sales volume tracked in the two months (March and April) before the bill’s May 2 announcement, and then the next three months (May, June and July) after. Association market statistics show:
RAM President Lynette Pendergast attributed the downturn in sales volume, in part, to uncertainty about short-term rental laws, although high list prices for properties and interest rates also play a role.
“The uncertainty surrounding short-term vacation rentals is certainly a significant factor, especially in the condo market where such properties are frequently used for short-term stays,” Pendergast said in an email. “However, it’s important to note that this is just one part of a larger picture. Interest rates and the high prices we’re seeing for single-family homes are also major influences on the market.”
In an email response to a Maui Now query, Bissen said the downward trend in condo sales volume is a positive indication toward housing affordability for island residents.
“It makes sense that uncertainty around the TVR phaseout could be impacting the condo resale market,” he said. “This data shows that condo owners, the vast majority of whom are not local owner-occupants, are more interested in selling, and fewer buyers are interested in paying the higher prices of the recent past. These are desirable trends for local housing affordability, and we expect that these trends will intensify if the County Council approves the phaseout, making it cheaper for local residents and long-term rental landlords to buy these units.”
While the number or volume of sales has taken a three-month hit, sales prices have not followed a similar downward trajectory. Compared with the month a year earlier, median condo sales prices were up 1.3% in May, no change in June and down 6.3% in July — an average price reduction of 1.3% over three months.
In comparison, median sale prices of single-family homes rose in each of the last three months: up 2% in May to $1,297,500, 30.8% to $1,350,000 in June and 0.8% in July to $1,210,000 — an average price increase of 11.2% over three months.
Pendergast said the noticeable decrease in the number of closed sales for both single-family homes and condominiums in July “reflects the dynamic nature of our housing market, influenced by various economic factors, consumer preferences and uncertainty surrounding short-term rental laws.”
When asked to elaborate on her comment about “short-term rental laws,” Pendergast said she was taking into account “the overall environment of regulatory changes affecting vacation rentals on Maui.”
Bissen’s proposal to make vacation rentals an unpermitted use in apartment districts came shortly before Gov. Josh Green’s signing of Senate Bill 2919, which clarified the counties’ authority to regulate vacation rentals.
“Both of these bills contribute to the uncertainty in the market, and together they have created a cautious atmosphere among both buyers and sellers, particularly in the condo market where vacation rentals are most common,” Pendergast said.
The vacation rental phase-out measure ultimately aims to motivate owners to convert vacation rental units into long-term housing for residents, although numerous apartment owners say the units are too costly for residents and not appropriate for extended residential use.
The measure would affect units in apartment-zoned districts, or approximately 7,000 of 13,000 vacation rentals in Maui County. Single-family residences are not in apartment-zoned districts.
Pendergast said the proposed regulation of short-term rentals can have an impact on the broader real estate market on Maui, meaning both single-family homes and condos.
“Buyers who are not fully aware of the nuances or who are concerned about potential future regulations may adopt a more cautious approach, which could slow down sales across different market segments, not just condos,” she said.
When asked if three months’ of data is enough for a “trend,” Pendergast said that “while it’s too early to definitively call this a long-term trend, the immediate impact of the announcement is evident, with a potential cooling effect on the market. If this pattern continues into the next few months, it would solidify the trend. Monitoring sales data for the next quarter will be crucial to understanding the full impact of the short-term rental phase-out bill.”
The association’s analysis of real estate statistics stems from data collected from its Multiple Listing Service system. For the full July statistical report, click here.
The number of new listings for single-family homes increased by 12.3% in July compared to the previous year, while new listings for condos rose by 47.8%. Additionally, the median days on the market for single-family homes and condominiums was 126 days.
The association’s housing affordability index in July was 33 for single-family homes (no change from the month of July 2023), or two index points higher than the 12-month average of 31. For condos, the index number was 50 (6.4% higher than July 2023), or four index points higher than the year’s average.
The index figures show housing affordability for the region. For example, an index of 120 means the median household income is 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. A higher number means greater affordability.
For more information about Maui County’s housing market, visit the association’s website at https://www.ramaui.com/, Consumers can browse single-family home and condominium listings available for sale on Maui, Molokaʻi and Lānaʻi, and to see a comprehensive list of Open Houses. Searches can be done by geographic location, residential type and/or price range, and the website provides useful information about buying and selling real estate in Hawaiʻi.
