The Hawaii Lag (Published 10/13/13)

Aloha!  Past trends between the Hawaii and San Diego real estate markets reveal that dramatic housing price escalations in the Hawaii real estate market lagged behind the San Diego market by over a year.  If you have considered buying a vacation home in Hawaii before, now is the time to prepare for the next housing cycle.

My wife grew up on the Big Island in Kona.  We travel back there twice a year frequently visiting some of the other islands.  I often day dream of owning a house in San Diego and a house in Kona and having them both paid off when I retire (hoping for 20 years).  During retirement, I'd go over to Hawaii for half the year and play my ukulele on my patio, read on the beach, and kayak to my favorite snorkel spot.  

Now that the median sales price in San Diego County has jumped over 40 percent since early 2012, it is safe to say that, for the time being, my family is unfortunately priced out of the San Diego market for the time being.  I investigated the Kona real estate market trends and noticed that during the last price escalations in the early 2000s, the Kona real estate market lagged behind San Diego by over a year.  History repeated itself this summer.  Since May 2013, the median sold price in the Kona market went up 35 percent and continues to escalate (once again lagging by over a year).  If you are interested in investing in the Hawaii market, I would recommend waiting for the market in San Diego to cycle (drop and escalate) again within the next ten years and buy in Hawaii after the next big price escalations in San Diego occur.  

There are two potential problems with waiting though.  The first is that interest rates could continue to increase and make monthly payments higher regardless if housing prices drop.  The second is that housing prices could still be relatively higher after the market cycles.  This has happened before, but without significant increases in household income, I think it is safe to say that this won't happen.  

While buying a Hawaii home comes with challenges, the upside is you'll own a Hawaii home free and clear at the end of your loan term and have an opportunity most retirees only dream about.  Mahalo!

Dave De Vries is the founder and principal of 1000s2u Real Estate and Planning Services.  He also works as a principal planner in San Diego County and has over 13 years of planning experience.  Dave has a B.A. in Urban Studies and Planning from U.C.S.D. and an honors M.B.A. with an emphasis in Real Estate from S.D.S.U.  He is a licensed real estate broker and is certified by the American Institute of Certified Planners.  Dave is a member of the American Planning Association and Toastmasters.  Find out more at http://www.1000s2u.com.