Luxury Home Sales in Kahala have Increased in the Last 6 Months

Does it seem like a lot of luxury homes are for sale in Kahala and that they have been on the market for longer periods of time? It does seem that the luxury home market has been stagnant for almost 2 years, but the trend is that sales are increasing. Open houses have been well attended and appointments for showings are more frequent. There is an increased number of buyers looking for luxury Kahala homes, which is good news for sellers.

If you are interested in the statistical basis for the above, then the rest of this article will give you more information than you probably need. Statistics can always be examined in more depth, which is what your agent should be doing, but here is the data that would appear from a Comparative Market Analysis done on October 14, 2016.

If we define the luxury home market in Kahala as single family homes selling at $3,000,000 or more, then we can conclude that Luxury Home Sales in Kahala are selling with increased velocity. Take a look at what has happened over the last 12 months:

• For the six-month period from October 1, 2015 to March 31, 2016, there were 5 sales in Kahala over $3,000,000.
• For the six-month period from April 1, 2016 to October 14, 2016, there were 5 closed sales and 6 pending sales (one is not in the MLS system yet).

There are a number of possible reasons for the rise in sales over the last six months. Two are worth reviewing:

1) Possibility that prices have adjusted downward, thereby reaching the crossing point between the supply and demand line

2) Weakening of the “New Condominium” effect.

In the opinion of Patricia Choi, Principal Broker of Choi International, the weakest reason for the increase in sales is that list prices have adjusted to the point that buyers are now buying. In fact, the adjustment of sales prices seems to have had little relationship to the increase. Of the 6 properties now in escrow, there was only 1 property that had a list price drop that was significant – 4834 Kahala Avenue’s original list price was $4,600,000, which was adjusted to $3,950,000 before it went into escrow. Three of the other properties in escrow did not adjust their prices and one other at 918 Koloa Street had only dropped the list price from $3,950,000 to $3,475,000. Of the 5 Sold properties, 4 had not reduced their original list price and 1 had reduced their original price a relatively small amount. So, it turns out that price adjustments have had little to do with spurring demand.

The most likely reason for the increase in demand is the diminishing inventory of new luxury condominiums. For about the last two years many of the luxury buyers have been lured to the Park Lane project at the Ala Moana Shopping Center and to the Waiea and Anaha condominiums being built at Ward Village. The new luxury condominiums advertised heavily targeting luxury buyers who were in the $3,000,000 to $10,000,000 range. Indeed, the Park Lane project has sold more units to Luxury Buyers than all other Luxury residential sales on Oahu for the last two years. According to a study done a few months ago, the sales of $3.5 Single-Family Home and Condominium Sales Combined since November of 2014 (presumably excluding all project sales) was about $400 million in total. The Park Lane Ala Moana sales were just about $700 Milllion. This does not even take into consideration the sales at Waiea and Anaha in Ward Village.  So, the takeaway is that if you were selling a luxury home in Kahala over the last 2 years, then a large number of buyers were being diverted to the “New Condominiums”, hence the identification of the “New Condominium Effect”.

So, what is the good news? The good news is that the Park Lane Ala Moana is about 85% sold.  The Waiea and the Anaha at Ward Village may have a smaller percentage sold, based on the remaining value of their inventory, since the super high priced Penthouses remain.  With the tightening of inventory at the New Condominiums in a price range of about $3,000,000 to $10,000,000, there seems to have been the likely cause of the increase in luxury home sales in Kahala. Choi International expects that this trend will continue until the inventory of new or newly remodeled homes in Kahala are exhausted or prices go up significantly.