Supply of Rentals is UP! Rents are coming Down in Hawaii! Well, a little bit!!!
Most of us in the property management business have recently recognized that the market has softened and that we are not getting the number of qualified tenants applying for a rental to which we have grown accustomed over the past several years. Mostly, we have attributed it to home owners who, being unable to roll their investment homes quickly, have put them on the rental market. But there may be more to this than meets the eye of the casual observer.
According to the Hawaii's Business Today suppplement in the "Honolulu Advertiser", a recent "study shows rents dipped 1% last year". My guess is they have already dipped more than that this year. This dip last year represents the first dip in over nine years according to Ricky Cassiday, a local housing market researcher. Cassiday says that rents dropped to $1,608 in 2007 from $1,629 in 2006. That doesn't seem like much, but it is significant to the property manager who is experiencing more difficulty in placing rentals quickly and is seeing homes languash on the market for two to three weeks whereas we are accustomed to having several applicants for each market priced property at the first showing.
Cassiday has noted that a lot of multi-story condo units have been added to the rental market from several new or reasonably new residental buildings over the last few years. I believe these are those where mainland or Asian investors bought units as investments that didn't pan out and are trying to salvage a bad business decision by rolling their units to the rental market. These units are generally in high rise buildings. About the only real estate available to builders in Hawaii is Vertical Realestate that is created by the building of new high-rise buildings. This of course brings both advantages and disadvantages as Honolulu becomes ever more dense and croweded.
The question is, where do we go from here? My guess is the market will continue to soften for a few more months, but will find its footing by the first quarter of next year. Time will tell.