Story of the Honolulu Market and how real estate got so expensive.

1. Context of the Market

2. $0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000 1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Single Family Condominium
(data through 3/31/2016)
Single Family 2016 Median Price: $725,000
Condominium 2016 Median Price: $380,000
“Price Run” Cycles
A Look at Oahu Price Cycles

3. $0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000 1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Single Family Condominium (data through 3/31/2016)
Single Family 2016 Median Price: $725,000
Condominium 2016 Median Price: $380,000
During a Price Run, Properties can
Appreciate 15% to 20%, or more, per year
A Look at Oahu Price Cycles

4. Price Records Set in June

5. Four Graphs Tell the Story
1.) Inventory 1980 ‐ 2015
2.) Interest Rate History
3.) 38‐years of Bid‐ups
4.) 38‐years of Prices & Runs

6. $0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000 1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Single Family 2016 Median Price: $725,000
Condominium 2016 Median Price: $380,000
What Causes Prices
to Increase?

7. Competition for Properties

8. The Market Context Formula
Inventory at Record Lows
+ Interest Rates at Historic Lows
= Competition for Properties
= Prices on the Move

9. Inventory Near Record Lows
Through June 2015, Inventory Levels for
Single Family Homes and Condominiums
remain near the lowest ever recorded.
Low inventory increases upward pressure
on prices.

10. Oahu Available Inventory 1980 ‐ 2016

11. Oahu Available Inventory 6/30/16

12. Perpetual Housing Shortage
According to Paul Brewbaker, former State
Economist and President of TZ Economics;
Oahu needs 3,500 new housing units per year.

13. Perpetual Housing Shortage
Typically, the State issues a maximum of 1,500
permits per year for new housing. Building permits
issued between 2009 and 2014 were lower than in
any period since WWII.
Each year, we fall behind by 2,000+ Housing Units.
We are likely over 60,000 behind . . .

14. The cost of money remains at historic lows.
At today’s rates. everything is on sale.
Interest rates at historic lows mean the
number of Buyers is at record highs.
Interest Rates at Historic Lows

15. Interest Rates Still at Historic Lows
Fed intervention began September 2008

16. The combination of low inventory and a high
number of Buyers creates an environment for
competition = Bid‐ups.
A “Bid‐up” occurs in a competitive market when a
property receives multiple offers, and sells for
more than the listed price.
As the percentage of bid‐ups increase,
median prices increase.
Competition Drives Prices

17.
Competition for Properties
Percentage of Sales above
List Price = Bid‐ups

18.
Bid‐ups Drive Prices
Bid‐ups are the Mechanism for
Median Price Increases

19. “Price Run” Cycles
A 38‐year Look at Prices

20. Price Runs Match Bid‐up Increases
Bid‐ups Drive Prices