Just Plain Nuts

The title of this post is the only description you need to understand what’s going on with real estate on Kaua’i these days. There is a real estate bubble pretty much everywhere in the U.S., and mortgage rates are rising, but prices on our little island have now left the stratosphere and entered unknown territory.

This 320 square foot “studio” condo is priced at $315,000 ($984/square foot). There’s no kitchen, and the HOA is $1,372/month and covers electricity, cable, wireless Internet, water, and trash. The resort does have an amazing swimming pool and lovely beach, but it’s basically a hotel room for sale.

The lowest priced condos on the island are selling for around $250K right now. That’s for a one bedroom, one bath, 640 square feet place in a lovely resort setting. That sounds affordable . . . except the monthly HOA fee is $1,822! And, the condos are leasehold property, not fee simple, which means there’s a small monthly leasing fee to pay as well. The lowest HOA I could find on the island was $431/month, but that was for a 720 square foot condo (selling for $350K) in a complex with no amenities.

This 1100 square foot kit home in Hanalei, with no yard and in very close proximity to two other homes, has an asking price of $2,495,000.

Buying a home here versus a condo might save you a ridiculous monthly HOA fee, but the current median home price on Kaua’i is $1.3 million. The lowest priced home for sale on the island is $480K for a 1,100 square foot leasehold home in the Hawaiian Homelands (blood quantum requirements must be met). The home pictured below, 916 square feet on a 10,000 square foot lot (located a very short distance up the road from us), is priced at $675,000. Out of 307 homes currently for sale on the island, there are only ten houses selling for that price or less.

It’s just plain nuts. And yet, people are buying property on the island hand over fist, not only to live here permanently, but as vacation homes and investment properties as well. Purchasers are remodeling like crazy too. It’s frankly mind boggling the amount money being spent.

A home bought in the $500K range in 2014, the year we first arrived on Kaua’i, is now most likely worth a million or more, or at least very close to it. Locals who bought their homes back in the 80s or 90s in the $50K – $60K ballpark are now holding millions worth of value in their property. There is also a building boom happening on the island as land is sold and divided, some of it given to children to build their homes with other lots sold as people cash in. Our friends told us the other day of a “view lot” on their street that had recently sold, with about 30 feet of flat land from the street before dropping down a steep cliff. The sale price was $300,000.

It doesn’t take much imagination either to guess what rental prices are like these days. We know we were very, very fortunate to find this place when we did. The owner is asking nearly $200 more per month for our apartment than what we’ve been paying . . . and will easily get it.

Could it all go bust? Of course – a deep recession, a huge storm, or some other unforeseen issue could cause housing prices to plummet. But for now, property owners and home buyers with money to burn are riding high and it truly seems not even the sky’s the limit any more.

16 thoughts on “Just Plain Nuts

  1. Housing prices are crazy in the Phoenix area, but nothing like Kaua’i. Selfishly I hope the building boom helps my investment in the radio station, but it certainly kills any possibility of our owning property.

    Our home’s valuable has more than doubled in 7 years, but selling would be silly since any place we moved to would have also increased as much.

    This boom will end and there will be a pricing retreat. At the moment though, future trends seem to be tied to how the war in Ukraine ends.

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    1. Prices are crazy everywhere it seems. The price increases here are keeping many locals out of the market, and many aren’t “moving up” to a bigger home even though the value of their current home has risen. The dream of buying a first home has been delayed or eliminated for a couple of generations because of prices, and of course the local economy does not support the incomes necessary to buy at these prices.

      We just finished a Nielson radio survey and listened to your station!

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  2. Wow! Just wow. We once rented a condo on a resort island near us, and it was about the same situation (less pricey than Kaua’i, but still). No kitchen and, as you say, you’re basically buying a hotel room. People have to have a lot more money than sense IMO. I fear we are heading for another burst bubble in real estate at some point. It’s a little frightening. And those HOA fees! Crazy!

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    1. We have a friend here that’s a realtor, and he says stuff is moving like crazy, even at these prices. He used to say if you wanted to live here badly enough you could make it happen but now says that’s no longer case.

      The whole housing market has gone nuts, but HOA fees are absolutely crazy here. Even the lowest make a condo here unaffordable for almost all local residents.

      And, if we think Kaua’i prices are bad, Oahu and Maui are worse.

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  3. I live in nyc and the prices are higher here. That 900 square foot house looks like a bargain to me.

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    1. Comparing NYC and Kaua’i is comparing apples to coconuts. Kaua’i does not have the jobs or economy to support these prices for local residents.

      That house and price might look good to you but it’s uninhabitable and is a total tear-down. Someone would basically be buying the lot for that price plus the expense of getting rid of the current building and putting up something new (at the same price just paid for the tear-down, if they’re lucky). The lot is located on a busy road as well.

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  4. I know it may be hard to accept, but housing prices are where they are because of demand, so clearly there are plenty, oodles even, of people who can afford them. And low interest rates bring monthly payments within reach for those making their first entry into the market. As compared to, for example, the 15% interest rates when we first bought!!!

    Case in point is our youngest daughter and son-in-law, who on a teacher’s and O-4 (at the time) military salaries, bought a nicer first home than my husband and I could afford in the high interest 80’s.

    My point being that home prices, like everything else, are relative. 🙂

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    1. There has always been a demand for housing here, but what’s happening now is different. The huge increase in prices has completely pushed local families out of the market. Kaua’i is a rural island, and jobs providing the income needed to purchase a home here don’t exist (the main industry is hospitality), especially when a starter or entry level home is over $650K. Even with many young locals working two, three, even four jobs, owning a home here is a completely unaffordable endeavor, and that wasn’t true when we arrived in 2014. It’s the reason so many young families are leaving the island where they grew up and moving to the mainland. They are being driving out by new money, and by those who see Hawai’i as Disneyland (including local governments here) rather than a place families have lived for generations up until now.

      Oh, and I remember those high interest rates! We almost bought a home at 18%, but changed our mind and decided to save our money and stick with military housing until we retired.

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  5. My retirement house, which I bought a year ago this April, has increased in value over $50,000 and I could not buy it in today’s market!!!! I am also under two minutes, the short way, to our major hospital, major state university, beautiful river park, Target, Aldi, etc. So it is a highly desired location in the college town. However, the location of my other small house, where I live during the week, has not increased in value at all. In fact, I will be lucky to get what I paid for out of it. It is in a very rural, fairly high crime area, with zero amenities, but is very convenient for work for the past decade so it was worth it to me to live there. The nearest grocery store, hospital, etc. is 20 miles away although we do have a Dollar General and now a Family Dollar. I dread selling it when I finally fully retire, because I think it will be a headache. These the two houses, both two bedroom and one bath, stand for the saying location, location, location! Since Hawaii is one of the most desired spots in the world, I am not surprised it has skyrocketed in value.

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    1. We could not afford our home in Portland any more, and would probably have had to move anyway because the taxes rose so high. We sold that house right before the market rebounded (went crazy is more like it) – the people behind us, with a smaller house, no yard, no garage, maintenance needed, etc. sold their home the following year for $50K more than we got. Location is what sold both of our houses though. It sounds like you’ve got yourself a great place now, and your other home may just do better than you think (I hope so).

      Real estate is crazy everywhere now though, not just Kaua’i. There are other factors going on here though that make it unique.

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  6. 50 years ago I paid 70,000 for 20 acres and a double wide. Interest rates were 9% and 11%. 50 years ago I could not afford to live in my house because the payments were over 700 per month. So I rented it out for 7 years while I lived with my parents and working on paying off the mortgages. In 1964 my parents paid 10,600 for their house. They wanted a different house but the mortgage payment was 99 per month and the one they bought was 79 per month. They couldn’t afford the $20 difference. Everything is nuts now but it was also nuts back then

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    1. I agree about being able to afford a house has sort of always been crazy, but also think location plays a huge role in that as well. My parent bought their first home in 1951, in the Los Angeles suburb where my mom’s parents lived. The 2-bedroom, 1-bath house they bought was on an acre of land, very unusual because it was in a city, and my grandparents balked at helping them with the down payment because they thought the sales price was too high: $15,000. My parents eventually added on another bedroom and bath, and a family room when we lived there. Today that house, with no additions but remodeled kitchen and bathrooms is valued at $1.9 million dollars. My grandparents owned a huge house in that suburb because in 1925 my grandfather had insured a builder. He went bankrupt and my grandparents got their house for a song. It is now worth over $3 million (on a smaller lot than the house my parents bought), with no additions other than a swimming pool in the back yard and remodeled kitchen and baths.

      The comparison for housing here now is to a college education. There’s then and there’s now. When I went to college, 50 years ago, my very middle class parents could afford to save and pay for me (and my siblings) to attend private colleges. The cost of my college back then was expensive for my parents and our family lived very frugally, but the expense was still doable. That’s no longer the case, at least not without massive amounts of financial aid – there has been an 1800% increase in the cost of tuition and room & board since I attended. The same is true for housing now on Kaua’i – there’s a HUGE difference between what a house cost in the past, even a few years ago, and now. You can’t just tighten your belt any more and expect to own a house here.

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  7. I just checked Hanalei Colony Resort where my husband and I stayed a couple of times. There is one condo for sale (850 square feet) for $1m and the HOA fee is $2,815/month. Just wow!!

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    1. Almost anything on the north shore is going to be worse than the south or east sides (with a couple of exceptions).

      I honestly can’t get over that home in Hanalei going for $2.5 million – no garage, no yard, close neighbors, kit home (the first home we lived in here was the same kit – it’s nothing fancy, believe me). People who live here are insulted by these prices, not just because it’s unaffordable and unattainable for most who live here, but that outside of taxes (which are actually pretty low here, all things considered), the income derived from the sale or rental of properties like these does not benefit or stay on the island.

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  8. I live in a midwestern city that has gotten an influx of people over the last decade or so due to national recognition of our affordability and quality of life. But now the private equity investors have descended upon us and housing costs have soared. I’ve lived here all my life but am working toward selling my house and will leave the state. I’m hoping to find a nice smaller town with a similar quality of life, but that may be a unicorn. I believe most of the problem with housing, both rentals and home sales, are due to private equity investors who care only about profits, and they are everywhere.

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    1. Private equity investors (and others) are one of the reasons prices have gone through the stratosphere. COVID also sent others over here as they gave up on international travel – Hawaii is in the U.S. but a “safe” destination. We have loved the small town feel of Kaua’i, but it’s unaffordable for us. It’s sadly unaffordable for many young families – so many are relocating to the mainland for work and (more) affordable housing.

      By the way, we can no longer afford the house we sold in Portland eight years ago. Taxes have doubled as has the market price for the house. It’s crazy everywhere out there!

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