The features of the U.S. real estate scene, whether commercial or residential, are highly specific to each different regional market. Properties considered expensive in one state might be deemed affordable in another. Investors looking to buy property in Utah consider different criteria than those in California. At the same time, supply and demand play a major role in determining the value of a property. If you want to have a clear overview of a specific market, you must study it and set your expectations accordingly.
Wanting to get an inside look into the dynamics of the U.S. real estate scene, we launched our Expert Insights series, a set of Q&A interviews with industry professionals from all over the country. In each episode, we talk to a different real estate agent, who shares with us part of their vast expertise regarding the market they’re active in. Each interview offers a brief market analysis that includes powerful insights and fact-based forecasts.
Low-Supply and High-Demand, Two Key Characteristics
The Honolulu real estate market is known as one of the most expensive in the whole country. According to the Honolulu Star Adviser, the median home value hovers around $760,000, which is over three times more than the median national home price of about $240,000. Even so, the demand is high, while the supply stays low, which drives prices up. We contacted George Krischke, principal broker at Hawaii Living, to talk to us about the Hawaiian market.
Born in Germany, Krischke moved to Hawaii in 1991. He started out as a real estate investor but soon became a licensed realtor® acknowledged for his work ethic and his negotiation skills. A specialized buyer’s and listing agent, he has built a strong client base over the years. Owning 36 rental homes and condos, Krischke attributes his success to a mix of experience, integrity, and market knowledge. Below, you can discover a short, but comprehensive analysis of the Honolulu real estate scene.
Q: How did you end up working in this field and what drew you to it?
A: I have been a licensed realtor in Hawaii since 1995, but initially I started out as a real estate investor, when I bought 12 rental houses in 12 months, starting in 1992. I was working three jobs simultaneously and aggressively looking for properties to invest in. I guess I was ambitious. In 1995 a realtor® suggested that I should get my real estate license instead of burning out working my three jobs. I realized that if I can help myself with my knack for real estate, then I can help others achieve their dreams. I got my real estate license mid-1995, I quit my other jobs, and I have been assisting real estate buyers and sellers ever since.
Q: What does it take to be a successful broker in this highly competitive market?
A: Upholding my client’s best interest above all. Sometimes I might have concerns about my client’s buy or sell decision, and I will recommend against doing it, to protect them. My clients know that I care. They value my opinion and become loyal, referring business as a result. Honolulu is a small market and integrity is crucial.
Q: Describe your most challenging project so far. How did you deal with it?
A: Over the years I had gained experience in working on several new Honolulu residential construction projects. In 2005 I was selected to become the sales manager for a new 38-story high-rise condo project that was going to be built. I interviewed 101 top agents to assemble and train the sales team. I dedicated all my time to get the project market-ready. Then, overnight, the developer had sold the development rights to another developer and all my efforts from the last six months evaporated instantly. The lesson is a typical one for realtors® to learn: real estate deals don’t always come through. It is prudent to have some savings or rental properties that pay the bills when there is no paycheck.
Q: Are there any investment/development clusters/submarkets in Honolulu right now? Where is development focused and why?
A: Hawaii real estate is a global commodity with limited supply and never-ending demand. We have a shortage of housing at every price level. Developers tend to focus on the market segment that has the biggest profit margin, which is luxury condos above $1 million. The affordable housing segment is under-represented. For resale values, condotels—condos that allow legal short-term vacation rentals—have seen the biggest appreciation during the last 12 months. These condotels are valued based on the rental income they generate, and, since tourism is strong, they get bid up in price.
Q: In your opinion, what are some of the strengths of the Honolulu real estate market, and what are the challenges? How do you deal with them?
A: The strength of the market is in its never-ending demand. After the financial crisis, during the great recession, Oahu’s median sales price dropped a mere 10%. That’s all. Since then, the median sales price has been moving up ~4% every year. There is remarkable resilience in the Honolulu/Oahu market. The challenge is the shortage of supply.
Q: How do you think the Honolulu residential real estate market is faring compared to other bigger/more established markets?
A: Honolulu is like Manhattan. You must have a good paying job or lots of money to live here. Except, most jobs don’t pay like in Manhattan. Which means you must have lots of money to live here.
Q: Where do you think the Honolulu real estate market is heading in 2018? Are there any major/exciting developments scheduled for delivery this year?
A: We expect the Honolulu median sales price to move up another 4% during 2018.
Q: Is there a certain project or initiative in the works that you think will have a big impact on residential development in Honolulu?
A: Honolulu is building a train that will connect the west side of the island with the central Ala Moana/Kakaako district. It will take a few more years to complete, but the new train will be a driver for transit-oriented development for some years to come.