The following is the transcript for a video narrated by Joe Kent that was posted Sept. 14, 2022, on the Grassroot Institute of Hawaii’s “Hawaii Matters” YouTube channel. To see the video itself, go to the end of the transcript.
Are outsiders buying up Hawaii?
Hawaii has the most expensive home prices in the nation, and a lot of people say that’s because of outside buyers. People say that outsiders from foreign countries or from the mainland are swooping in and buying up so many homes in Hawaii, and that’s the main reason housing prices are sky high, right?
Well, no. Actually, outside buyers aren’t the main reason for Hawaii’s high home prices.
I mean, it’s true that outside buyers do buy a lot of homes in Hawaii. In 2021, buyers from the mainland made up around 22% of home purchases in Hawaii, and buyers from foreign countries made up around 2%. So definitely, there are outside buyers, and they do affect the price of housing just like anyone buying a home affects the price of housing.
But that’s not the main reason for Hawaii’s record high home prices. The main reason our prices are so high is because Hawaii has the greatest number of housing regulations in the nation, and that has led to very few homes being built.
But hang on. You’re telling me that outside buyers — all those people from foreign countries or from the mainland buying homes here — they aren’t the main driver of Hawaii’s high home prices?
Well, yes, that’s what I’m telling you.
But of course, you don’t have to take my word for it. Just look at the data. Since 2010, the share of outside buyers in Hawaii has trended downward. So, over time, outside buyers have generally been buying a declining share of the homes in Hawaii. And yet, home prices skyrocketed.
Now, keep in mind that during the same timeframe, local residents have been buying a larger share of the homes. So, as you can see, there’s more to the story.
I mean, you’d think that states with lots of outside buyers would have high home prices, right? But that’s not necessarily the case.
If you just look across the nation, some states with high percentages of outside buyers have low home prices. Check out Vermont and New Hampshire. They actually have higher percentages of outside buyers than Hawaii, and yet they have much lower housing prices.
And other states with low percentages of outside buyers have high home prices. Like California, which has the nation’s third-highest median home price, but it also has one of the nation’s lowest shares of outside buyers. So, statistically, when you look across the nation, there’s no clear pattern.
I mean, just look at that chart. It just looks like a big blah. It looks like someone sneezed on the chart. I mean, there’s no clear trend line. It’s just all over the place. We call a chart like this “statistically insignificant.” There isn’t a clear relationship between the effect of outside buyers on home prices.
OK, so, then why are Hawaii’s home prices so high? Well, we did find one clear pattern when we looked out across the nation: housing regulations.
Now, take a look at this chart. The states with the highest housing regulations had very high median home prices, and the states with lower housing regulations had lower median home prices. Now, that’s a clear pattern — a clear relationship.
I mean, just look at Hawaii. We have the highest housing regulations in the nation, and we also have the highest median home prices in the nation. And that same pattern emerges in state after state. Regulations limit the supply of housing, and that increases the price.
And Hawaii’s regulations really limit the supply. I mean, on average, it can take over 10 years just to get approval to build a home.
Now, to learn more about Hawaii’s strict regulations and how they get in the way, click on the video in the description.
Now, if the government somehow allowed more housing to be built — even a little bit — that would probably help ease home prices.
But wait a minute — I mean, if more housing were built, wouldn’t all those homes just be bought up by outside buyers? Well, not necessarily.
I mean, it would probably be bought mostly by locals just like it is now. And it’s important to remember that outside buyers and local buyers are in different markets for different types of homes.
Local buyers are looking for less expensive homes, while mainland and foreign buyers are interested in the more high-end real estate properties — homes around luxury resorts or golf courses or along beaches or [in] luxury high-rise buildings.
If we just made it easier to build homes local residents could more easily afford, that would probably ease home prices.
So, what do you think? Do you agree or disagree? Leave a comment below; I’d love to know your thoughts.
And by the way, if you want to find all the data or charts for this research, you can find that in the description.
And again, if you want to learn more about why mansions are easier to build in Hawaii than less expensive homes, click on this video.
Thanks for watching, and I’ll see you next time.