When does this end? When Will Real Estate Prices Stop Skyrocketing?

I posed this question myself to the team during our live broadcast on August 20, 2021 in regards to the current trends of real estate prices skyrocketing relative to the normal trend of appreciation.

Where do we see this ending? How far is this going to go? We have high demand and low supply. Where is this going?

This short clip came from our Aloha Friday Hawaii Real Estate Show which goes live every other Friday on our Hawaii Real Estate YouTube channel or our Living in Hawaii Facebook page

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Transcript:

so here’s my question to the two of you
where do we see this ending
where is this gonna you know how far do
we how far is this gonna go because
right now the the the the price curve uh
heidi you mentioned it and i saw this
written up in the news uh maui median
medium family uh medium median price for
single family homes has been over a
million dollars now for i think three
months i think that’s going to be a
permanent fixture i don’t think it’s
going to go back down below prices are
continuing to inch up as so as demand is
still high and supply is still low
where does this end
heidi do you have any sense of where
this is going to end yeah i mean you’ve
been in the business for a while what
what do you think
well i mean i i don’t know the future
peter none of us do none of us do
you know i see more of a leveling off i
mean i think the big jumps in prices
might have already happened
but
i mean demand’s just not slowing down
because even though there’s not not a
lot of listings there’s all these buyers
that have been waiting and waiting and
now are ready and now the time is right
for them so as soon as new listings come
on the market i mean there’s going to be
buyers for it so i mean to me that
there’s no indication of this slowing
down anytime soon i mean i think it
would take some kind of
world event or
major changes in
in policies or i mean something
um but just
the normal market i mean demand is is
not slowing down i i think if anything
we’re just gonna see
maybe leveling off a little bit i mean i
i don’t foresee prices jumping quite as
drastically this next year but
um i mean buyers aren’t going away
i think the big thing i my big takeaway
from you heidi is that the demand is
still high and you know laws of
economics
demand you know high demand low supply
prices go up scott what do you think if
you here’s here here’s here’s a question
from from jen and i think it’s it’s
relevant to the conversation here so jen
says look not trying to predict the
future but with the insurgent of new
residents do you anticipate that we will
have a exit in another few years jed i’m
not sure what you mean by exit uh my
understanding i guess exit from this
madness my understanding is there is a
high percentage of folks who move to
hawaii only to not like it and move back
thoughts so so jen there’s a lot of
people who come to hawaii and move back
um but i’m going to put that category
those aren’t the kind of people that
that plunked on a million dollars for a
home uh those
folks who who plunked on a million or or
700 000 for a condo or whatever you know
they’ve gone through the process they’ve
been a part of the islander ohana too
but anyway that’s beside the point um so
i don’t think that the
the ones who come and there are many who
leave there’s no question i mean a quick
statistic i’ve got for you uh
is that uh uh
the the the department of economic
development last time i checked which
was a while ago but i think that the
stand is still the same we had about
approximately 50 000 people that move to
hawaii every year and about 60 000
people that leave hawaii every year now
it’s not the same 50 uh that leave
but it’s just to kind of show you that
there’s a lot of people that are leaving
hawaii i don’t think it’s the people
that just bought a home uh
scott what uh uh
where do you see this going you know you
you’re pretty good at predictions and
we’re not going to hold you to anything
because that’s not what we do here we
all know that the future is in motion
and no one can see the future but where
do you see this ending scott yeah 100 of
what i’m going to predict is going to be
wrong but um there you go uh the no i
mean i i see it continuing to go in
until either something drastic
changes
which could be interest rates um
uh or affordability or you hit an
affordability ceiling because part of
what what’s driving this besides a
lifestyle factor is the fact that
interest rates dropped so much and that
created effectively a 17 and a half
percent price drop so if we’re up 21
that’s only like four percent that we’re
up and um i remember paul brubaker was
saying on his presentation from the
economic side that you know
affordability prior prior to the the
shutdown was extremely good um in
general from a marketplace standpoint
housing was actually very affordable for
people and then you have the interest
rate drop so
we’ve got this affordability component
that’s allowing us to continue to go
upward people can afford it um and i
think there’s a little bit of the we
like heidi said we will
i think we’ll start to slow down we
won’t continue with 20 price
appreciation that’s not sustainable i
think next year we may be double digits
but i think it’ll be you know in the 10
range somewhere around there um
but something’s drastically got to
change in the short run to change it on
the short short period here i i see this
kind of carrying out for two maybe two
more years maybe but but slowing in the
acceleration
i i do think that the uh that the curve
is gonna is gonna flatten off per se in
other words the acceleration curve is
gonna flatten down but it’s gonna
continue now again the future is always
a motion i mean there could be a an
epsilon a variant uh shutdown i mean
this thing you know we could be you know
what what we could be doing covid
forever and will the world change then
uh tom kerr jumped in where as you’re
just just as you’re talking about the
interest rates uh when interest rates
start to change in 2023 if the feds
change rates that that could be one of
it so scott basically what you just made
me aware of and you mentioned this
before but i kind of hammered again
the interest rate drop was effectively a
a big discount it was a 17 discount in
prices so of course we kind of almost
had like a perfect storm right you had a
kind of drop in interest rates which
essentially was a price cut
laws of economics prices go down you
know uh people more people are going to
buy um so you had that plus you had the
whole covet thing where people were
staying and they didn’t want to move
because they were uncertain plus you had
a people that realized that hawaii’s the
place that you want to be and so he had
a whole influx of things and he had
remote workers so all kinds of things
are kind of all coming together
and uh like you i don’t i don’t see
these things i don’t see these things uh
changing so
all right
i met with a guy actually i met he he
said he watched the show i met with him
in kailua and he had a really good point
um
that i
i believe in but he he said it in a way
that was really interesting we all live
on cash flow so we buy our house on cash
flow if we make ten thousand dollars a
month we wanna we’re gonna put our
mortgage payment or a house payment at
like 5 000 a month because we want to be
positive cash flow right and you have to
for lender guidelines so
um people can still afford those
payments fairly easily because the
interest rate drop was so good right so
from a cash flow standpoint people are
it’s very affordable for housing for
people right now and they’re going to
continue to buy until it’s no