Condo closings fall in wake of short-term rental phase-out bill announcement :

Closings of condominium sales have dropped by double-digit percentages in the three months since Mayor Richard Bissen announced a proposal to phase out thousands of short-term rentals in apartment-zoned districts, according to monthly statistics from the Realtors Association of Maui.

Although too early to declare a long-term trend, the downturn could be an early sign of a cooling off in Maui’s hot real estate market that has put purchases of homes and condominiums beyond the reach of most long-term island residents.

Bissen announced a bill to make short-term rentals unpermitted uses in apartment districts during a news conference in early May. The proposal has been reviewed by county planning commissions, and now the measure is pending before the Maui County Council.

Here’s how Maui County condo sales volume tracked in the two months (March and April) before the bill’s May 2 announcement, and then the next three months (May, June and July) after. Association market statistics show:

• March: 122 condo sales in 2023 and 93 in 2024; minus 23.8%.
• April: 90 in 2023 and 106 in 2024; plus 17.8%.
• May: 91 in 2023 and 76 in 2024; minus 16.5%.
• June: 93 in 2023 and 59 in 2024; minus 36.6%.
• July: 76 in 2023 and 64 in 2024; minus 15.8%.

RAM President Lynette Pendergast attributed the downturn in sales volume, in part, to uncertainty about short-term rental laws, although high list prices for properties and interest rates also play a role.

“The uncertainty surrounding short-term vacation rentals is certainly a significant factor, especially in the condo market where such properties are frequently used for short-term stays,” Pendergast said in an email. “However, it’s important to note that this is just one part of a larger picture. Interest rates and the high prices we’re seeing for single-family homes are also major influences on the market.”

In an email response to a Maui Now query, Bissen said the downward trend in condo sales volume is a positive indication toward housing affordability for island residents.

“It makes sense that uncertainty around the TVR phaseout could be impacting the condo resale market,” he said. “This data shows that condo owners, the vast majority of whom are not local owner-occupants, are more interested in selling, and fewer buyers are interested in paying the higher prices of the recent past. These are desirable trends for local housing affordability, and we expect that these trends will intensify if the County Council approves the phaseout, making it cheaper for local residents and long-term rental landlords to buy these units.”

While the number or volume of sales has taken three-month a hit, sales prices have not followed a similar downward trajectory. Compared with the month a year earlier, median condo sales prices were up 1.3% in May, no change in June and down 6.3% in July — an average price reduction of 1.3% over three months.

In comparison, median sale prices of single-family homes rose in each of the last three months: up 2% in May to $1,297,500, 30.8% to $1,350,000 in June and 0.8% in July to $1,210,000 — an average price increase of 11.2% over three months.

Pendergast said the noticeable decrease in the number of closed sales for both single-family homes and condominiums in July “reflects the dynamic nature of our housing market, influenced by various economic factors, consumer preferences and uncertainty surrounding short-term rental laws.”

When asked to elaborate on her comment about “short-term rental laws,” Pendergast said she was taking into account “the overall environment of regulatory changes affecting vacation rentals on Maui.”

Bissen’s proposal to make vacation rentals an unpermitted use in apartment districts came shortly before Gov. Josh Green’s signing of Senate Bill 2919, which clarified the counties’ authority to regulate vacation rentals.

“Both of these bills contribute to the uncertainty in the market, and together they have created a cautious atmosphere among both buyers and sellers, particularly in the condo market where vacation rentals are most common,” Pendergast said.

The vacation rental phase-out measure ultimately aims to motivate owners to convert vacation rental units into long-term housing for residents, although numerous apartment owners say the units are…