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Economist unpacks disruptions to Kauai, Hawaii Island real estate

Tuesday, April 14, 2020 3:16 PM | Karin Shaw (Administrator)

In an historic joint presentation to three REALTOR® associations on two islands, prominent Hawaii economist Paul Brewbaker provided his insights on the impact of COVID-19 on the Hawaii economy, the real estate market, and prospects for Kauai and Hawaii Island specifically.

Brewbaker gave a wide-ranging hour-long live presentation to over 500 members and worked with home sales and active listing data through March 30, 2020.

As you know everything was fine until four weeks ago, and then we went off a cliff together,” Brewbaker said. “But for the contagion, really nothing was fundamentally wrong with the economy.”

He discussed the COVID-19 pandemic as a “Black Swan” event -- rare, unpredictable, and impactful, like the Sept. 11 terrorist attacks in 2001, the collapse of Lehman Brothers in 2008, and the global equity market meltdown in late 2018 as the result of the U.S.-China trade war.

“These events are worth remembering,” Brewbaker said. “They’ve never been as big as the one we’re experiencing right now, but when things go back to normal, normal will still have these shocks.”

He noted that Hawaii had just had its own “Black Swan” event with the 2018 eruption of Kilauea’s east rift zone in Puna. “The East rift zone eruption was a speed bump in increasing valuations,” Brewbaker said. “If you’re willing to bet that whatever made the neighbor islands attractive will continue to be factors influencing investor decisions going out into the 2020s, there’s no reason to believe a path like this couldn’t be restored.”

The key question put to Brewbaker was what the future would look like for Hawaii real estate. “If you say you’re doing forecasting right now, you’re not,” he said, noting that the current situation is of a scale never before observed. “But, I would expect a pull back in sale volumes and some compression in valuations.”

He was optimistic about some of the changes seen across the industry, such as transaction acceleration through paperless, all-digital tools, and the adoption of virtual tools for property showings and other work. He said, we might also see shift toward less dense, less urban communities.

When asked when things would stabilize in a “new normal,” Brewbaker said a lot depends on what Hawaii does right now.

“If we get the daily case counts down, we implement contact tracing, isolation, and quarantine, maybe in a year -- maybe in 18 months -- we’ll reach the day when a version of herd immunity or a vaccine becomes available,” he said. “But my own impression is that the state is not leading as much as following, and not following fast enough.”

Following Brewbaker’s presentation, he answered questions from REALTORS® during the video conference, then provided written answers to the remaining questions. Click here for the recorded video of his presentation, Download his presentation slides here, and find the written answers to your questions here.

West Hawaii Association of REALTORS®
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