One home in Mililani Mauka receives 42 offers. A property listed early in the week is in escrow before the open house. At one point, Carvill Sotheby’s International Realty’s Eric Olson has eight houses in escrow at the same time. He sold 12 the entire year before.
Realtors say it’s been frenzied. On fire. Crazy. The housing market on speed.
Welcome to the breakneck pace of O‘ahu real estate.
The upswing in the market was not expected. Far from it. When Honolulu went into lockdown in March 2020, open houses and home tours abruptly stopped. Unemployment soared. Economic activity collapsed. The Honolulu Board of Realtors reported home sales dropped 17.3% and condo sales plummeted 38.1% that month compared to March 2019. Realtors we spoke with say they were getting ready for a slowdown and some clients pulled listings off the market, expecting buyers to disappear until better times. Many were surprised by what happened next.
Olson listed a home for a client who decided to go ahead with a sale. “I had showings booked every 15 minutes. For three days, eight hours a day for three days straight,” he says. Nineteen offers came in.
Locations’ Kristin Mukai says she had a couple who put in an offer and found they were competing with more than two dozen more. “It went from six to 10 and then at one point it was 25. It blew my mind.”
“I sold more homes last year in under two weeks than I ever sold in my 32 years with Coldwell Banker,” Realtor Tracy Allen says, homes with an average price upward of $4 million.
The trajectory continued. In May 2021, The Honolulu Board of Realtors says one property received 60 offers in its first week on the market. Low interest rates and low inventory created a hyperactive situation with sellers firmly in power and buyers scrambling to compete. But this doesn’t mean you can skimp if you are thinking about putting your house or condo on the market. And if you’re looking to find a forever home, you can, if you do the right research. We asked Realtors, many who work mainly with local and military families seeking mid-price properties, to share the advice they’re giving clients right now to help fast track you into the game.
Asking Price: $820,000
Selling Price: $865,000
Days on Market: 7
Buyer’s Agent: Cathy Possedi, Hawai‘i Life Real Estate Brokers
Asking Price: $889,000
Selling Price: $960,000
Days on Market: 6
Listing Agent: Richard Linke, Locations
For Sellers: Don’t Skip Staging
Yes, buyers are hungry. They are paying more and looking in more neighborhoods. But Realtors say it doesn’t mean that sellers can stop trying to put their best rooms forward. Staging and taking good photos are still the key to closing. “You can’t just put an ugly duckling on the market and expect it’s going to sell for top dollar,” Olson says. Yes, even now, some homes still do not sell.
Realtor Cathy Possedi with Hawai‘i Life Real Estate Brokers tells her clients that most buyers still want move-in-ready places. That means the usual steps: cleaning up the clutter and landscaping, adding a fresh coat of paint, new flooring and finishes to present the best image possible. “It’s not the work of the seller that changes necessarily,” Locations’ Mukai says, “It’s just that they can probably get a better price now if they take the right steps than compared to a couple of years ago.”
For Allen’s high end buyers, Hawai‘i’s affable weather and low COVID-19 numbers drew people working virtually to trade in their secondary homes here for primary residences. “They want to just move in, bring their toothbrush, put their shorts on and go swimming at the beach,” she says.
Is there anywhere you can cut corners? “For the most part I’m advising to make smaller minor repairs rather than spending thousands of dollars on something,” Possedi says. “It really is situational but if the house is in a good location that is in demand there is definitely room to sell as is.”
And with the number of homes available falling almost 20% in February 2021 versus a year ago, buyers in this competitive situation may be more likely to overlook a few common problems.
“Say you’re on a busy road and so your house is worth $100,000 less than a house off the busy road. Right now, you’re going to get the same price as the house that is off the busy road or close to it because people are going to overlook little things,” Olson says. “If you’re in that kind of a situation where you have a less than ideal location, you might want to go ahead and jump on [selling it].”
“[Buyers] just want to move in, bring their toothbrush, put their shorts on and go swimming at the beach.” –Tracy Allen
Asking Price: $400,000
Selling Price: $430,000
Days on Market: 8
Listing Agent: Corinda Wong, Locations
Asking Price: $688,000
Selling Price: $700,000
Days on Market: 7
Buyer’s Agent: Grace Koreyasu, Better Homes and Gardens Real Estate Advantage Realty
For Sellers: Do Not Overprice
In May 2021, the Honolulu Board of Realtors says 58% of single-family home sellers received more than their asking price. When it came to condos, 36% sold above asking price, compared to 9% last May. But, Realtors say in this climate, potential buyers are still looking for deals. Sellers can aim too high, keeping their properties out of the bidding wars.
“You can see that there’s several examples where there’s a perfectly good house and it’s not moving,” Olson says. “It’s because people look at it and go, ‘Oh the market’s hot—I can ask whatever I want and get multiple offers,’ and that’s not the case.” In his experience, prices soar when buyers are bidding above asking and appraisal prices, not because the seller asked for big numbers from the start.
Grace Koreyasu of Better Homes and Gardens Real Estate Advantage Realty agrees. “The buyers out there, they’ve been looking for a while so they know exactly what they’re looking for,” she says. “They’ve seen all the inventory. So the minute a new listing comes on the market, they’re on it. Sellers will misinterpret this as their property is just so desirable that [they think] ‘I can get cocky on it.’ It’s not the case.”
Another way overpricing can get you in trouble is during escrow. Homes are typically selling above appraised prices right now, something that can backfire on sellers once an appraiser takes a look. If the estimate comes in far below the offer, there is no guarantee the bank will approve the higher number for a loan. If the buyer feels like he or she is getting fleeced, there is no motivation to pay the difference. The sale can fall apart.
Underpricing brings its own problems, including a landslide of offers of various quality to wade through. But if you are going to miss the sweet spot by just a bit, Realtors say it’s better to err by going a little below the right price than over.
For Buyers: Know What You Want
The current atmosphere for sellers is invigorating. For buyers, especially first-time ones, it can be petrifying. For the past several years, people looking for a new home had to move quickly, perhaps in a week. Now?
“A day, if it’s a hot property,” Koreyasu says, “or a couple of days.”
Things accelerate even more when prospective buyers use websites that alert them when a place goes on the market in their preferred neighborhood and price range. “That’s when your phone starts ringing,” Olson says. “Both Realtors and buyers themselves will call you with, ‘I just saw this.’ It’s just, you know, like holy crap, I just hitmy button on the computer two seconds ago.”
“A lot of my properties, I’m selling even before they’re [listed] in MLS,” Allen says. “I get calls regularly, ‘what do you have coming’ and there are sellers who would prefer to sell privately. They don’t want public opens, just for safety reasons.”
It’s common for a place to receive several strong offers before the official open house. Properties in ever-popular Kailua and in town always move quickly. Now, in-demand areas also include ‘Ewa, Kapolei and Mililani Mauka, where prices are lower and typically robust inventory is shrinking. That property Mukai’s client was bidding on along with 24 others was in Mililani Mauka.
“It’s terrifying, no doubt about it,” Koreyasu says. She says she tells first-time buyers that knowledge is power and that “we need to get out there and you need to see what your dollars will buy you.”
Start early so that you know what homes are currently selling for in your preferred neighborhood. Go to open houses, even a year before you think you may be ready to put in a bid, to create that all-important must-have list. And if the right property appears, do not hold anything back hoping for a counter. These days, it probably won’t come. The Realtors we interviewed say buyers have to come in with their strongest, highest, best offer immediately. It may mean putting planned upgrades on hold to increase your down payment or finding other ways to fund an above-asking and way-above-your-comfort-level bid.
However, if this is not going to be a forever home, buying now may not be worth it.
“For the ones who plan to sell after being here for three years, they do need to understand what buying over market value means in the big picture,” Possedi says. “Analyze the numbers to see if it actually does pencil out. You are going to be paying a premium so your savings in [mortgage] interest rates may be offset.”
Asking Price: $1.195 Million
Selling Price: $1.31 million
Days on Market: 10
Listing Agent: Eric Olson, Carvill Sotheby’s International Realty
For Buyers: Get Creative
When sellers are going through sometimes dozens of offers, how can you stand out? While cash is king, it’s not always just about the highest offer.
“A cash buyer is not vested, they haven’t paid a loan application fee, they haven’t sat down and filled out paperwork, they haven’t gone through this exercise of being prepared for this,” Koreyasu says. “They can flip: ‘Another new listing came on and I think I like that one better.’ We see that happen.”
Show the homeowner you do not plan to back out.
“The seller has all the power until they accept the offer,” Olson says. “Once the seller accepts the offer power switches to the buyer.”
Now, addressing contingencies in the purchase contract are a common way for potential buyers to lower the risk for the seller. Take on the termite inspection fees. Drop the professional cleaning requirement. Beyond major structural or electrical problems, agree to accept the property as is. One addition that can make a difference is an appraisal clause. “Ask 20 different appraisers to appraise one property and you’re going to get 20 different values, right? There are no guarantees,” Possedi says. The clause states that if the home’s appraisal is lower than the offer, the buyer will guarantee to pay a certain amount above the estimate. It adds some certainty in an uncertain market.
For Sellers and Buyers: Be Ready
“I tell sellers if you want to put it on the market, don’t play games; we’re going to sell it,” Koreyasu says. “It’s going to be gone in two weeks. And you have to be ready for that.”
“If we listed on a Monday, we would be presenting offers to the client over the weekend,” Mukai says.
There isn’t a lot of time for remorse or second-guessing. Realtors say as things move at a breakneck pace, communication between them and their clients is essential to keep things from feeling like they’re spinning out of control. Timelines and key moments are set in a calendar and both sides prepare for what can be an emotional time. After all, learning your home received 40 offers can be exciting but sifting through them can be exhausting.
“They include cover letters that are so attractive, you know, emotionally, you wish you had five houses to sell,” Mukai says. “I do see pictures being included, the dog, the family on vacation, there’s all kinds of things.”
Buyers also need to be ready to lose, especially in this market. It may take five, six, seven or more offers to get into escrow.
The $917,500 (Median Price) Question
So, how long will this boom last? Koreyasu noted that before COVID-19, the market was in the middle of a correction, a normal downturn that was shifting power back to buyers. But since then, fueled by record-low interest rates and low inventory, the Honolulu Board of Realtors says the median price of a single-family home hit a new record this past January at $883,000, then surpassed it to $917,500 in February. By May 2021, the media sales price was $978,000, an almost 23% increase from 2020.
Of course, this past year has been anything but normal and few experts we spoke with say they could confidently predict when activity and prices will fall again. After all, none of us saw this coming. Allen tells her clients, “If you have any inkling of selling in the next two years, you need to do it now.” Most agree the buying fever will likely last at least through the summer, which is typically the busiest season. In 2020, the lull that usually comes late in the year didn’t happen—in fact, sales in November and December surpassed average summer month sales in 2019—and the strong seller’s market could last through the end of 2021. But, hopefully, it won’t be as frenetic.
“Once it all mellows out, it will taper off to a more healthy environment. And then I think it’ll be good for both buyers and sellers to have a week or two to make a decision,” Koreyasu says. “But if you want to sell your property, do it this year, because we really don’t know what next year is going to hold.”