Oahu Real Estate Market Update – Spring 2025 – Stable Prices, But…

• Just when you thought the US election results would reduce uncertainty…
• Higher interest rates, …now still for longer!
• Oahu Real Estate Median Sales Prices Are Channeling Sideways.
• Price Pressure Increased On Condos.

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Humans habitually suffer from excusitis, the inflammation of the excuse glands.

In late 2024, one popular excuse from some buyers and sellers was that, due to uncertainty(?!), they wanted to wait until after the US election results. – You survived 2024. Welcome to 2025. Now, past the elections, what’s your next excuse?

Shifting Policies, Tariffs, Trade Wars, Inflation, And Interest Rates

I’m a slow two-finger peck typer, so I can’t keep up with writing about shifting US policies. They are now so dizzyingly fast, furious, and unpredictable. During his first week in office, President Trump imposed steep 25% new tariffs on Canada and Mexico, stoking fears of a trade war. A couple of days later, they were postponed.

On January 30, 2025, the Federal Reserve decided against reducing interest rates because President Donald Trump’s proposed tariffs could reignite inflation. Trump slammed the Fed, claiming it had “failed to stop the problem they created with inflation.”

As of 2.12.2025, the Core Sticky-Price CPI year-over-year change was 3.6%. That’s good progress, steadily moving in the right direction towards the Fed’s stated 2% target range. However, in January, the index surprisingly jumped 5.1% (annualized).  Oops.

Monitor the latest core sticky CPI numbers here. The trend towards 2% continues. We will eventually get there—soon, but not yet.

On 2.12.2025, Trump posted on X, “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!”

The Fed and markets can’t be bullied. Trump may understand transactional money management, but the Fed knows macroeconomics: Yes, tariffs could increase inflation, and so could lowering interest rates.

Fortunately, the Fed’s dual mandate of maintaining stable prices and maximum employment remains unmoved by political pressure.

Based on the latest data, traders are currently pricing in a 95% probability of no rate change for the Fed’s March 19 meeting.

Use the CME FedWatch Tool to track probability changes by selecting future Fed meeting dates on the top horizontal toggle bar.

According to the University of Michigan sentiment index, consumer sentiment dropped to a 7-month low in early February 2025, and the New York Fed survey sees inflation expectations rising before tariffs.

However, inflation expectations don’t determine inflation itself. It’s not a psychological issue. Instead, it is simply ‘too much money chasing too few goods.’

The Fed has the experience, skill, and monetary tools to counteract inflation by controlling the money supply and short-term interest rates. He has done a fine job at that.

Even if tariffs were to broaden, the fear of them might be more noise than the actual risk of an economic fallout.  

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The Doge Effect

DOGE layoffs and reduced funding are in full swing now and could increase unemployment. This could curb demand, slow the economy, and affect the Fed’s timing of interest rate cuts. It could also increase demand for long-term bonds, reducing the 10-year treasury yield and mortgage rates.

If your head is spinning, you are not alone. I follow dozens of economic newsletters, and their perspectives diverge greatly. Too many variables are at play to predict the outcome of the current policy experiment. It is safe to say that sudden drastic tinkering with a complex system, such as the economy, can trigger different unintended consequences.

For now, higher interest rates will last longer.

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Mortgage Rates

Granted, the Fed does not control 30-year fixed mortgage rates. They tend to move in lockstep with the 10-year Treasury yield, which fluctuates with bond market expectations for future inflation.

In October 2023, 10-year treasuries peaked at 4.93% and have been gyrating roughly between 4% and 4.5% since.

30-year fixed mortgage rates peaked at close to 8% in October 2023; as of this writing, they are hovering below 7%.

For reference, mortgage rates stayed above 7% for over three decades during the 1970s, 80s, and 90s. They have been below 7% only since September 2001. How could we forget?

Here is a link to today’s 30-year mortgage rates. The long-term historical average is 7%. Of course, that does not console today’s rate-sensitive buyers who missed the record-low 3-5% mortgage rates from 2009 to 2022.

Current inflation expectations suggest mortgage rates will remain above 6% for 2025.

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Keep It Steady

While the current noise, chaos, executive orders, and tariffs can overwhelm and unravel, trust that something good will eventually emerge. In time, it always does.

“Worrying is like paying a debt you don’t owe” ~Mark Twain

You may call me a Pollyanna. Worrying never produces favorable outcomes. So, I choose not to. Life is too short. It is what it is, and I trust everything will turn out fine.

I consciously ignore the short-term noise and focus on the long-term trends. That also applies to my investment decisions for 5, 10, 20, and 30-year horizons, including my outlook on Hawaii real estate.

Yesterday, a buyer from Buffalo, NY, shared that it has been below freezing for six weeks. He can’t wait to finally move to Hawaii.

As long as I receive similar weekly inquiries, I assume that Hawaii will continue to be a desirable place to live and that Hawaii real estate will remain expensive.

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Stable Real Estate Prices

Oahu median sales prices peaked in 2022, propelled by record-high demand fueled by ultra-low mortgage rates. Interest rates have since surged from ~3% to ~7% for 30-year fixed-rate mortgages, stifling affordability. However, Oahu’s median sales prices remain robust, forming a new plateau and oscillating in a sideways price channel, currently just below their all-time peak.

Compare this with the U.S. National Home Prices Index.

See related article:  The Market Is Up. Should I Sell My Hawaii Investment Property?

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2024 Year-end Comparison

Here’s how 2024 compares to 2023:

• Oahu single-family homes are a) selling 13.6% faster and b) 9.1% more closed in 2024 than in 2023.
• Oahu condos are a) selling 42.9% slower and b) 2.5% fewer closed in 2024 compared to 2023.
• Single-family home median sales prices increased by 4.8% in 2024 vs 2023.
• Condo median sales prices increased by 1.3% year over year.

See related article: Market Update – Summer 2024 – The Fed Pivot?

The relative slowdown in condo sales in 2024 compared to 2023 could be due to the difficulty in getting financing that year, as many condo buildings were underinsured for hurricane coverage.

High insurance premiums resulted in steep increases in condo maintenance fees, dampening affordability, which will continue to drag condo sales activity in 2025.

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Supply – Active Inventory

Although sales prices have been robust, inventory levels for single-family homes and condos have increased year over year. Ignore the slight seasonal December dip and notice the long-term trend.

For reference, in 2019, the year before COVID, active inventory levels were around ~1,500 for single-family homes and ~2,350 for condos. That was the all-time peak in condo inventory levels since the 2009 financial crisis.

The active condo inventory is approaching those previous peak levels. – Selling your condo will take longer this year.

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Demand – Pending Sales

Pending sales eventually turn into closed sales 30 to 60 days later. This year, the typical January uptick in pending sales looks slightly more muted. Could this foreshadow a slower market for the next couple of months?

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Demand – Closed Sales

2024 Closed Sales were higher by 9.1% for single-family homes and 2.5% lower for condos, compared with 2023.

Higher interest rates from mid-2022 onward triggered slower demand that continues into 2025. Except at the onset of COVID, when social distancing made high-density condo living temporarily undesirable, condo demand, as in ‘closed sales,’ continues to be the slowest since 2013/2014!  

If it hadn’t been for the limited supply, condo prices might not have remained so robust. However, the supply has been climbing throughout 2024, and condo inventory is now becoming plentiful.

Closed sales of single-family homes remain close to the 2009 record low levels!  

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MRI – Months Of Remaining Inventory

MRI combines supply and demand into one ratio: the current active listings divided by the monthly closed sales rate. This MRI ratio shows how fast the existing inventory sells, or how many months it takes to sell the active inventory at the current monthly sales rate.

The lower the MRI, the faster the existing inventory sells. When MRI is trending up, the market is slowing down.

MRI hit a multi-decade record low at the start of 2022 and has been increasing for the last two years. Can you spot the trend?

MRI is at 3.1 for single-family homes and 5.6 (!) for condos. – Condo MRI has now reached levels consistent with a Buyer’s market!

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Hawaii Tourism And Condotels

Tourism is the lifeblood of Hawaii’s economy. We monitor passenger count as a proxy for tourism activity and, by extension, the strength of the local economy.

Total passenger arrivals so far are on par with the 2024 and 2019 record numbers. That is despite continued muted international passenger arrivals since the dollar strengthened against the Yen and other foreign currencies three years ago.

Passenger count live updates are here: Visitor Statistics | Daily Passenger Counts

Condotel rental revenue directly results from visitor arrivals and reached another new record high in 2024.

The condotel market performance will be the subject of a separate article shortly.

See related article: How To Improve Your Hawaii Condotel Income

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Conclusion And 2025 Hawaii Real Estate Outlook

No, we don’t have a crystal ball, and we make fun of those claiming to know the future.

See related article:  Let’s Check The Crystal Ball

However, the following Hawaii real estate trends are currently continuing for 2025:

1. Mortgage rates are likely to stay elevated.
2. Condo maintenance fees skyrocketed in the last year and could continue higher into 2026, outpacing the inflation rate due to excessive increases in insurance premiums.
3. Higher condo maintenance fees trigger more condo owners to list their condos for sale, which increases supply.
4. 1) and 2) decrease the affordability of condos, leading to a slowdown in condo demand.

These factors combined suggest that condo sales will be slower in 2025. The increase in supply and lower demand could also lead to softer prices.

Oahu condo median sales prices in January 2025 could possibly be the peak for this year! Until mortgage rates improve, softer condo prices are likely.  

Downward pressure on prices for Oahu single-family homes is probably more limited due to a continuing lack of supply.

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Final Thought

Unless you live with your parents, you rent or buy. Renting offers the flexibility of moving with short notice. But if you are committed to living in Hawaii, buying might be the better long-term option.

When you rent, you pay off your landlord’s home with little to show. When you buy, you pay off your own home and build equity. 

Waiting for lower prices and trying to time the market is a fool’s game.

Instead, consider that the best time to buy is when you are ready to commit to living in the same neighborhood, and you find a suitable home you can afford.

Choose, visualize, and design your desired outcome. Then, take the most practical, feasible, and necessary action toward making it come true. Manufacture your luck by positively influencing the areas of your life that are within your control.

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— We don’t just write about this stuff. We are expert realtors representing buyers and sellers of real estate in any market condition. We are committed to providing the most excellent service available on the planet. We love what we do and look forward to assisting you too!

Contact us when you are serious and ready. We are here to help.

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