Hawaii Real Estate
Hawaii Real Estate
Talking Story with Hawaii REALTORS(R) President Julie Meier
In this episode, we sit with Julie Meier, the 2024 Hawaii REALTORS® president and Hawaii’s representative to the National Association of REALTORS®’s Multiple Listing Issues and Policies Committee. She and I discuss how REALTORS® can leverage recent required practice changes to enhance their business.
Also, what did Federal Reserve Chair Jerome Powell recently say about inflation, unemployment, and whether the Federal Reserve would cut federal interest rates? We have his comments and an analysis of how a federal rate cut could affect Hawaii’s housing markets.
Talking Story
with
Hawaii REALTORS® President Julie Meier
© 2024 by Hawaiʻi Association of REALTORS®. All rights reserved.
1259 Aala Street, Suite 300
Honolulu, HI 96817
Phone: (808) 733-7060.
Email: har@hawaiirealtors.com
Introduction
E komo mai. Welcome to Hawaiʻi Real Estate, a podcast on the buying, selling, and leasing of property in Hawaiʻi. Each episode of our podcast consist of a Real Data Report, which analyzes Hawaiʻi’s most recent real property data, and a Focus Piece, which provides legal and other special insight into a matter of major and contemporary concern for Hawaiʻi real estate transactions.
In this episode, we sit with Julie Meier, the 2024 Hawaii REALTORS® president and Hawaii’s representative to the National Association of REALTORS®’s Multiple Listing Issues and Policies Committee. She and I discuss how REALTORS® can leverage recent required practice changes to enhance their business.
Also, what did Federal Reserve Chair Jerome Powell recently say about inflation, unemployment, and whether the Federal Reserve would cut federal interest rates? We have his comments and an analysis of how a federal rate cut could affect Hawaii’s housing markets.
Today is September 15, 2024, and this is Hawaii Real Estate.
[Transition sound]
Real Data Report
Welcome to Hawaii Real Estate’s September 2024 Real Data Report.
Interest Rates
The Federal Reserve began aggressively raising interest rates beginning in March 2022 to combat surging inflation. Since then, the federal reserve’s federal funds target range has climbed from between zero to a quarter percent to between five-and-a-quarter to five-and-a-half percent, and as the Federal Reserve raised its target federal funds range, banks across the country began raising their mortgage rates. The 30-year fixed rate mortgage average in the United States rose from about three percent to about eight percent.
For Hawaii homebuyers, that meant that the cost of financing a home increased dramatically. Even though Hawaii’s real estate market is often driven by wealthier buyers and investors, those higher rates made it more expensive to borrow, which caused many prospective buyers to either delay their purchase or look for small, more affordable properties.
Higher interest rates also lowered the number of new homes that entered the market. Home owners who purchased their property with a mortgage before 2022 had no interest in trading their three percent rate for an eight percent rate. So, they didn’t sell their home, unless selling their home allowed them to buy their next home—in cash.
But there’s clear evidence now that interest rates are about to fall. Speaking at the Federal Reserve’s annual meeting in Jackson Hole, Wyoming, Chairman Powell expressed his confidence that his bank had inflation under control.
After a pause earlier this year, progress towards our two percent objective has resumed. My confidence has grown that inflation is on a sustainable path back to two percent.
And he noted that the labor market, which had until recently been white hot, could benefit from a lowering of the federal reserve’s benchmark rate.
Today, the labor market has cooled considerably from its formerly overheated state. The unemployment rate began to rise over a year ago and is now at 4.3%--still low by historical standards, but almost a full percentage point above its level in early 2023.
With inflation slowing and the labor market slackening, Chairman Powell argued:
The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balances of risks.
The Federal Reserve’s Open Market Committee, the body responsible for setting interest rates, next meets September 17th-18th. Many expect a rate cut to be announced on September 18th.
How would a rate cut affect Hawaii’s housing market. Well, let’s do a quick survey of how that market’s performing.
City and County of Honolulu
We start in the City and County of Honolulu, where the market remains highly active. Honolulu has over 2,700 active listings right now, and homes are selling relatively quickly compared to the other islands.
The median listing price for a home in the City and County of Honolulu is $725,000, which, while high compared to the U.S. mainland, is more affordable than Kauai and Maui. Plus, with 892 new listings coming onto the market, buyers have plenty of options.
If you’re selling in a home in the City and County of Honolulu, know that you’re selling in a strong market, but buyers are gaining leverage as inventory increases.
Hawaii County
Now, let’s look at Hawaii County, the Big Island. Here, the median listing price is lower, around $650,000, making it more attractive for buyers who want more space and don’t mind being outside the bustling Honolulu metro region.
The Big Island has about 1,044 active listings, but homes here tend to sit on the market longer. Before being sold, a home on the Big Islands stays listed for a median 83 days. That’s a slower market compared to Honolulu, but with plenty of new listings coming in (280 from July to August of this year), it’s a great opportunity for buyers who want more bang for their buck.
Kauai County
Now let’s talk about beautiful Kauai, the Garden Isle. Kauai’s real estate market is one of the most exclusive in Hawaii. With a median listing price of $1.39 million, luxury properties dominate the Kauai housing market.
But with only 306 active listings in August 2024, the last month for which data is available, Kauai is Hawaii’s smallest market, and with only 76 new listings, it’s not growing fast.
If you’re looking for a high-end property, Kauai can be quite attractive. But with few listings, competition for a home there can be fierce.
Maui County
Finally, let’s head to Maui, which, like Kauai, has a large luxury market. The median listing price for a home on Maui is just over $1.24 million, making Maui the second most expensive housing market in Hawaii, and one of the most expensive housing markets in the nation.
Maui had 1,087 active listings in August 2024, and properties there took a median 88 days to sell. But 196 new listings were added to the market, so opportunities for Maui buyers are growing.
A Lowered Interest Rate’s Affect on Hawaii’s Housing Markets
While the entire U.S. housing market felt the impact of rising interest rates starting in March 2022, Hawaii’s real estate market stood out for its resilience. That’s certainly not to say, however, that a rate cut would not help improve Hawaii’s housing markets.
A quarter-point cut in the federal funds rate could lead to slightly lower mortgage rates, which would reduce monthly payments for buyers financing their homes. This could help unlock demand, especially for mid-market buyers in areas like Honolulu and the Big Island, where affordability has been a challenge due to higher interest rates.
In Hawaii’s luxury markets—like Maui and Kauai—where buyers are less sensitive to borrowing costs, a rate cut could still boost activity. It might encourage some high-end buyers to secure financing at more favorable terms or increase investment activity from mainland buyers seeking vacation homes or rental properties.
Overall, a rate cut could reinvigorate buyer interest, driving more transactions and potentially putting upward pressure on prices in areas where inventory remains tight. I should point out, though, that mortgage rates have actually fallen fairly substantially since May of this year, and we haven’t yet seen a material effect on Hawaii’s home prices, inventory, or time on market.
Prices remain stable, inventory is still tight, and the time homes spend on the market has not shortened significantly. So, although this month’s likely federal rate cut will have some salutary effect, particularly in Honolulu and on the Big Island, don’t expect major changes in Hawaii’s other housing markets.
Focus Piece
JASON E. KORTA: Welcome to the Focus Piece. Today, I’m joined by Julie Meier, the 2024 Hawaii REALTORS® president and Hawaii’s representative to the National Association of REALTORS®’s Multiple Listing Issues and Policies Committee. She joins me today to discuss how real estate agents in Hawaii can thrive under the recent changes to the rules of our local MLSs and to Hawaii real estate practice, generally.
JASON E. KORTA: Julie has many years of experience practicing real estate in Hawaii. She’s the 2015 Honolulu Board of REALTORS® REALTOR® of the year, and she currently serves as both regional compliance manager and broker-in-charge for Compass Hawaii.
JASON E. KORTA: Welcome to Hawaii Real Estate, Julie, thank you for being here.
JULIE MEIER: Oh, it’s great to be here. Thank you so much, Jason.
JASON E. KORTA: As you know, the real estate industry was upended a bit by a nationwide settlement agreement entered into earlier this year by NAR and plaintiffs in four federal lawsuits across the country. The nationwide agreement would protect REALTORS® across the country, including REALTORS® here in Hawaii from being held liable for claims similar to those raised in those four federal lawsuits. But to get the protections that the settlement agreement affords, REALTORS® had to adopt certain practice changes. They had to stop advertising or describing cooperating broker compensation on their MLS, and they had to agree to enter into written broker services contracts with their clients.
JASON E. KORTA: Some of these new rules, though, can lead to some curious situations and raise some difficult-to-answer questions. Consider this hypothetical, for instance:
A REALTOR® and their client enter into a Buyer Representation Contract that sets the REALTOR®’s compensation as a certain rate or amount. Later the REALTOR®’s buyer finds the home that they want to purchase, but the home’s listing agent is offering more cooperating broker compensation than the REALTOR® is allowed to accept under the Buyer Representation Contract. Can the REALTOR® amend the Buyer Representation Contract to receive the higher compensation?
JULIE MEIER: We need to really follow the Code of Ethics on that. When we make an amendment and we change what our compensation is, are we looking for the best interests of our buyer? If we’re reducing it, of course it’s a benefit to the buyer.
JULIE MEIER: When we’re going to amend it up. Are we looking at it through the eyes of, ‘Who is benefiting. Is this something that’s going to benefit the buyer, the clients?’
JASON E. KORTA: There’s a contract law principle to consider, too.
NARRATOR:
WARNING: THE FOLLOWING LEGAL GUIDANCE IS IMPORTANT. IT’S ALSO A NIGHTMARE. So brace yourself—and keep a heavy, blunt object nearby, something that can deliver a merciful blow if this seemingly endless legalese starts scrambling your brain into a sludgy paste.
JASON E. KORTA: So anytime that you amend a contract, there needs to be what a lawyer would call, “consideration.”
JASON E. KORTA: Basically, that means, if you’re going to amend a contract, the people involved, on both sides, have to give something, to get something. Right?
NARRATOR:
OK, this is going to drone on for a while. We’re cranking the soundtrack for a moment to strengthen your resilience just enough to receive this turgid stuff without your brain leaking through your ears.
[Music switches from piano ballad to disco.]
[Music returns to piano ballad.]
JASON E. KORTA: So, if I have a contract to paint your house, for $10 on Thursday, and on Wednesday, the day before, I say, ‘I’m amending this contract, so that you must pay me $20,’ that amendment is unenforceable, because I’m not giving up anything to get that extra $10.
JASON E. KORTA: The original contract, the one to paint for $10, is enforceable, but the amendment isn’t, because there isn’t a give-and-take on both sides. So, in addition to what I think you thoughtful mentioned with the Code of Ethics, requiring you to look out for the best interests of your client, I’d also look to see if the buyer gained anything by amending their contract with their REALTOR®--if they didn’t, then the amendment allowing the REALTOR® to receive more compensation not only violates the Code of Ethics, but likely is also legally unenforceable.
JULIE MEIER: So one of the other things that we’re hearing from the agents is there’s a little bit of confusion on when exactly that Buyer’s Representation Contract needs to be signed.
JASON E. KORTA: Yeah.
JULIE MEIER: And, so here in Hawaii, we do not require it, if someone is just coming into your open house, ‘cause people thought they were going to have to get everyone to sign one, but ‘no.’ If someone is coming into an open house, you showing that open house, you still represent the seller. So there’s no need to have that buyer’s rep. agreement.
JULIE MEIER: When is that buyer’s rep. agreement required? It’s when you’re going to be ‘working with’ the buyer. So, ‘working with’ is a key word, and ‘before you tour a property.’ So, if after they see the property, they say, ‘You know, this wasn’t quite it. I’m not working with a REALTOR®, do you think you could show me some other properties, besides this one?’ Have that buyer’s rep. agreement ready. That is when you sign it.
JASON E. KORTA: Right. Because at that point, you and the buyer have agreed to work together, and you’ll need a Buyer’s Representation Contract in place before touring another home with them.
JASON E. KORTA: Let me throw another hypothetical at you. Can a buyer say:
‘Look—I’m not going to buy a house, unless either the seller or their listing agent will offer at least a certain amount in cooperating broker compensation?’
If a buyer says that directly to their broker, can the broker just not show them the homes that don’t meet that requirement?
JULIE MEIER: We want to honor anything that our client wants. If they’re saying, specifically, I don’t want to see anything that’s not, that seller’s not offering compensation, we’ll honor it, but first ask why, because what we want them to know is, we want to show you every property that meets your criteria. and if they’re not offering anything, you can always ask for it in the purchase contract, you can negotiate—it’s always negotiable.
JULIE MEIER: If a[] agent, on the other hand, a REALTOR® says, ‘I’m not going to show these properties because they’re not paying a high amount . . . that’s steering, right? That’s steering them away from properties, and we don’t want to do that. But the buyer always has, the client always has that choice.
JULIE MEIER: I think it’s a good opportunity to educate them. To let them know, ‘Hey—it’s negotiable. We can still do that.”
JASON E. KORTA: Yeah, absolutely.
JASON E. KORTA: Have you received any general feedback from agents following the adoption of the practice changes?
JULIE MEIER: I, you know, for the most part, I think everyone, was sort of seeing this as the next Y2K.
JASON E. KORTA: Right.
JULIE MEIER: And this is going to be explosive. And they were nervous. And, and when it came out.
JASON E. KORTA: Yeah?
JULIE MEIER: You know what? They’re doing fine. They’re doing really well, with the new contracts. Umm . . . we got to explain sometimes, you know, with the sections on the compensation, and how that works, but for the most part what I’ve noticed that we’ve been seeing, too, is, and we’re only one month into this, but we still see that sellers know the value of giving that offer of compensation on behalf of the buyer, and so we are still seeing that.
JASON E. KORTA: Yeah, and you know, I love that Y2K analogy. I think it’s particularly apt. There was a time where people were worried that the calendars in computers, once they ticked over to the year 2000, would cause computers to think that rather than being the year “2000” it was really the year “1900”, because the calendars only had two digits for the year, and computers had no way to distinguish between the year 1900 and the year 2000, or to even conceive that the year 2000 was possible.
JASON E. KORTA: People were terrified of what would occur on January 1, 2000. Computer programmers from around the world, including my father, exerted a collective herculean effort to reprogram the calendar of every computer in the world to safeguard society against the feared calamity—planes crashing, missiles launching, power grids failing, bank ledgers erasing, traffic lights blinking hypnotic commands to dogs.
JASON E. KORTA: And it worked, the calamity didn’t occur. People like my father recognized the calendar problem and combined their efforts to solve it before, you know, hypnotized dogs began roving the streets.
JASON E. KORTA: I think that’s sort of what we did here, no? I mean, the industry protected against a calamity by preparing for the practice changes they knew was to come.
JASON E. KORTA: We had webinars, released new forms. People were calling the Legal Kokua Line. I think preparation goes a long way. You can really find a way to thrive in new environments, right, if you’re adequately prepared.
JULIE MEIER: That’s exactly right.
JULIE MEIER: I just want to remind everyone that you have until the end of the year for any of the members that are with HICentral, and also with RAM, the REALTORS® Association of Maui, there’s a mandatory MLS settlement course that you need to take. So you need to sign up for it and take it.
JULIE MEIER: For Maui, they did it the other day, and I think they recorded it, and you can watch the recording to satisfy that MLS requirement.
JULIE MEIER: For HICentral, they have, umm, sessions, I think, going through the end of the year.
JULIE MEIER: So sign up, because they are filling up, and you need to take that course, because if you do not take the course, if you do not do this mandatory training, you can lose your, umm, subscription to the MLS until it’s done. So we don’t want to see that happen. So please pay attention to that, because the MLS is a have to enforce it. That means that they’re doing their due diligence, too, to make sure that you know what’s expected.
JASON E. KORTA: Anything else you think that Hawaii brokers or agents should know?
JULIE MEIER: Just want to remind everyone, to please visit hawaiirealtors.com, if you have any questions or want to see the videos of the trainings that we’ve had. Also, one of the most important to me, NAR, umm, website available is facts.realtor. It is updated regularly. Sometimes it can be updated two times in one week. So always go there because those have most of the answers to what your questions could be to what the practice changes are.
JASON E. KORTA: Right. And, if you’re a principal broker or broker-in-charge and a member of Hawaii REALTORS®, and you have a question about this or some other legal topic, you can call and ask for legal guidance, just call the Legal Kokua Line. The information for that’s on the website that Julie just gave, hawaiirealtors.com.
JULIE MEIER: Sounds good.
JASON E. KORTA: Alright. Thanks, again, for being here Julie.
JULIE MEIER: Ah, thank you, it’s great to be here.
JASON E. KORTA: Alright, bye!
JULIE MEIER: Ba-bye!
DAVID LETTERMAN: Top ten effects of Y2K. Here we gooooo. Number 10!
JAMES EARL JONES: Stuff gonna ‘splode.
DAVID LETTERMAN: Yeah!
Outro
Thanks for listening to our episode. Our next episode will air October 15th. We hope you’ll join us then for the most recent Hawaiʻi real property data and for a discussion of a major issue of contemporary concern in Hawaiʻi real estate.
Before I conclude today’s episode, though, let me congratulate the now three-time World Surf League champion, John John Florence, a great achievement from one of Hawaii’s finest.
Aloha, a hui ho.
