The time has come – the time to take charge. This summer, July 30-August, at Inman Connect Las Vegas. On January 1, 2024, experience the complete reinvention of the most important event in real estate. Join your peers and the best in the industry to shape the future. learn more.
Seven months ago, a fire broke out on Maui, fueled by strong winds, that spread more than two miles, killing 100 people and displacing thousands more.
Number of visitors The island’s economy shrank by 58% year-on-year in August, and the recovery of various industries on the island has a long way to go.
Because individuals who might have invested in Maui real estate can no longer do so, nearly all of the demand has been moved to and absorbed by other islands, said Matt Beal, Hawaii Life CEO and principal broker. Leasing and buyer inventories are already tight as demand surges, and potential demand on Maui is putting pressure on markets on other islands.
“This really exacerbates challenges that already exist,” Beer said.
The CEO recently sat down with Inman to discuss current market conditions, the return of seasonality, the increase in off-market listings and more. Here’s what he had to say, lightly edited for brevity and clarity.
Inman: What was the situation like after the fires on Maui?
Matt Bell | Hawaii Life
Matt Bell: We still have a long way to go in terms of recovery. From a business perspective, this is still pretty daunting. Obviously Maui’s tourism industry took an immediate hit, and despite the fact that the fires had the greatest impact on West Maui as far as resorts are concerned, and other resorts were affected as well, there are still questions about whether it’s a good idea to go to Maui. Ishima. Still open. So there’s real indirect economic damage caused by fires caused by tourists not going there.
But the byproduct of that is that other islands absorb that interest because people who would otherwise go to Maui go to Kauai or the Big Island or Oahu, so those markets rise accordingly, which is kind of interesting. This comes at a terrible time for the entire housing industry – nearly 20% of homes in West Maui were destroyed, and more homes burned than Maui has allowed in the past five years combined.
At the time, especially in the wake of the pandemic, housing was extremely tight at all levels of the real estate market. This really exacerbates the challenges that already exist. And, anytime Maui is in the global news, even about something obviously horrific, it actually increases demand, which I know sounds a little morbid.
But if you think of the old adage, “There is no such thing as bad news,” for all those whose heartstrings are pre-wired to Maui (we’ve seen this after other events in Hawaii, whether Whether it was a volcanic eruption or a volcanic eruption (or a flood) in 2018) there was demand almost immediately after the event, which is actually a bit concerning because (the rental and sale markets) were not able to meet that demand.
Ironically, its impact on the rental market is greater than the impact on the for-sale market; just more drastic. People are fleeing the pandemic or whatever else is going on – the fires on the West Coast, the political unrest, everything that’s going on from the pandemic outbreak to probably the mid-22nd century, it just swamps the activity. And it’s all domestic, because many foreigners can’t get here.
That’s certainly true for the luxury and ultra-luxury segments, but for a lot of people those deals would have been more transient, there would be a second or third home or whatever, and that’s not the case. They moved here, sent their children to school, became part of the community, put down roots, and many of them still stay here. This is very different from what we have seen in previous market cycles.
It sounds like some people are hoping for a temporary oasis by renting out, but others really want to put down roots?
I think in our big market report for 2022 at the premium end of the market, I predict there’s going to be more of a shakeout – the pandemic is over, people are going back to work, and maybe some of them have escapist, romantic ideas .a fantasy about Hawaii that didn’t come true, or whatever. Suffice it to say, I think there will be more people coming back to the continent, but we don’t really see that.
Part of it is that Hawaii has a way of spoiling you – once you realize how great it is, you’ll be like, this is awesome. Some of it may also be interest rate driven because if you think about it, even if most of the purchase is cash, if you were to sell that house and buy something else, there might be a loan involved at some point. Now you will enter a loan environment that is twice as big as before. So we’re not really seeing a lot of inventory coming out.
But we do see a lot of people who choose to go back to China and turn their homes over to property management. So our property management segment is growing very strongly both long-term and short-term, but we haven’t seen an onslaught of sales yet.
However, you mentioned to me earlier that you have had an increase in off-market listings recently, how does that impact the inventory issue?
We certainly have more than ever, but that’s not saying much. Usually, a little bit. The reasons are as wide-ranging as ever – sometimes it’s someone who has a certain fame or notoriety and doesn’t want to be in the media, doesn’t want people driving by their house or something like that. Sometimes they might have really valuable assets in their home, an art collection or something like that.
Frankly, sometimes they just know that the price of the house is too high and if it becomes public, it may end up being taken off the market. So it does make a difference. For the most part, they are quite effective and I understand why they don’t want to go public.
I think we have more off-market listings than ever before, and we’re probably also cursed with the randomness of those successes, because it’s certainly not easy. It’s a very difficult thing to do, but we have a pretty healthy market share in the high-end space and sometimes, even if we’re limited to just our clients, we’re still able to influence deals, and that’s nice.
So you’re saying that in most cases it’s the client who’s pushing for the property to be sold as an off-market listing, right?
In almost all cases, because I don’t think any of us are in denial about reality – that’s a pretty big hurdle. When we started the company, we were a creative agency entering the lead generation space. So we fully understand how wide the funnel needs to be and what a comprehensive marketing campaign looks like. If you can’t make your list public, you’re leaving a lot of gaps.
As I said, some people have very legitimate privacy and security concerns, and all other kinds of very legitimate reasons. So most of the time, we listen to our customers’ instructions. We must address clear collaboration and other challenges.
knew. What else is happening in the market right now? Are you starting to see seasonal changes in Hawaii (if this is common in your market)?
What’s more is that it’s returning to some sense of seasonality. During COVID, everything has been completely destroyed. A small example is the west side of the Big Island, the Kona side of Hawaii Island, and the Kohala Coast and southern Maui, which are really sunny areas that are almost guaranteed to have sunshine all year round. So they attract a lot of snowbirds, a lot of people from the Pacific Northwest, which historically has a season from December to April or May when it’s really just the middle of winter everywhere else. People obviously want to come out into that guaranteed sunshine.
All of this seasonality, and there are different examples – foreigners have their own times, different islands may see different peaks at different times – but all of that has been completely taken away during COVID. There is a season and it is always going on.
Starting around mid-’22, we’ve seen a return to historic seasonality. So summer is more family time and people in Honolulu may see an increase in transactions as it relates to kids being out of school so families can move.
As far as the market is concerned, the future is a bit pixelated. While there is a lack of predictability, I think the return of tourists to market cycles and the way markets behave is helpful because it creates more certainty.
I’m sure. Speaking of seasonality and other trends, I’m wondering, because Hawaii is so far away from the mainland, do you think you’re generally on the front or back end of trends in other parts of the continental United States?
A bit of both – I think it depends on the trend. It’s hard to generalize because Hawaii is so small. The most important reality goes back to the fundamentals of supply and demand. Even geographically, supply is very low. Now, inventories are infinitesimally small, so this is the overriding rule.
We do have the same economic headwinds and challenges, so a large part of the market is impacted by interest rates. So the flip side of this leading trend is that a lot of our customers are from the West Coast, and they may come from a market that behaves completely differently than the Hawaii market. They might be in a market where you put your house on the market and you get 15 offers in a week and then sort out the highest and best from those offers; that might not apply here. So you have to set those expectations in the right way…
I think the broader economic factors have weakened, which means that people used to say (a decade or more ago) “Oh, Hawaii follows the West Coast, and we know that anything that happens on the coast is going to hit Hawaii six months later. ” That’s wrong—that’s no longer the case.
I think it’s mostly because of our supply and demand and housing constraints, we’re so far behind in housing the people who already live here. We’re in this unique, specific market that’s not going to be weighed down by what’s going on on the West Coast and in other parts of the country. The only exceptions might be these macro effects like interest rates or (talk about a recession). This zeitgeist gives both sides pause.
What are your thoughts on Salesforce CEO Marc Benioff purchasing a large amount of land in Hawaii, as reported recently?
I can’t comment specifically on Benioff, but I will say that it’s interesting to me, and I think the image of the tech billionaire is a lightning rod and catnip for the media. It would be easy to write this story and then watch it cascade and get reported everywhere…some people buy more land completely under the radar and no one writes about it and no one cares just because that’s who they are numbers, and they have a level of activity that makes them interesting. If you zoom out, it’s boring stuff… I’m skeptical of all this.
But after the fires, as is true with every natural disaster, it may be a trend worth noting that many truly wealthy people, famous or not, do contribute greatly in times of dire need. Even if they make a huge contribution, they get the heat because it’s not enough, or “they didn’t do blah, blah, blah”… which is sad because they were here and invested enough to make a change, which What a great experience.
Many of us have ignored transient visitors in the past, and if you have a second or third home, you don’t have enough roots to get involved and make a difference. But that’s not the case for those who came here during the pandemic. They’re more committed, they’re more philanthropic, they’re more community-oriented…I’ve seen an outpouring of support and community engagement and involvement and that kind of time and talent and treasure from people who are new to Hawaii, and it’s just amazing. marvelous.
Author’s Note: As Inman and Beale said, news comes out Benioff donated $150 million to Hawaii hospitals and donated much of the land he purchased in recent years.
Get Inman’s Luxury Lenses Newsletter Delivered directly to your inbox. Every Friday is an in-depth look at the biggest news in high-end real estate. Click here to subscribe.
Email Lillian Dixon
