Pele’s Affect on Big Island Home Prices

How will the ongoing volcanic activity on Hawaii Island impact property values and transactions? The answer is surprising and varied.

VOG

This picture is the VOG concentration map for Friday May 18, 2018. At first look, one might say “who would ever want to live there?” It’s easy to make quick assumptions that with the VOG, and now active eruptions, our Big Island wouldn’t be the first place someone would want to call home. Yet, thousands do call Hawaii Island home, and wouldn’t want to live anywhere else. So let’s take a look at both sides of the coin and get an idea of what is in store for those on our “most active” island.

Home Prices Will Rise:
Many families have already lost their homes due to the current volcanic activity. If lava were to cut access to other communities, even if homes were not destroyed, the result would be several thousand people displaced from their homes. These people cannot live in Red Cross shelters permanently. They would need to find new permanent housing. There are also many that live in the affected areas that, while they felt they understood the risk of living in an active volcanic area, it wasn’t until now that reality sunk in. Many of these residents will permanently move away. One thing most of these people have in common is there continued desire to reside on “their” island. With the potential for hundreds looking for a new home on an island already short on inventory, it is projected by some that the shortage will cause home prices to rise. It is important to note that this influx of new buyers will not affect all areas or all segments of real estate. Those opting to move are doing so from an area with some of the historically lowest home prices. You won’t see a ton of folks opting to move from Puna to Waikoloa.

Home Prices Will Decline:
One of the greatest fears expressed by many I spoke to this week in the real estate industry on the Big Island is that mainland buyers will opt for another island to consider over Hawaii Island. The VOG has been so bad this month, said a colleague, even he was considering a move from Kona to another island.
There are also those that just don’t want to live close to an area where one day they could wake up and be in the same shoes as those now affected by the eruptions. The key word here is close. If you look at this map, you will notice that many areas far away from the current activity have historic lava flows just 100-200 years ago. In the world of geology, 100-200 years represents a blink of the eye. For many, now seeing what others are going through, they will consider moving, or choose to buy somewhere else.

So what should we expect? Inventory of homes on the Big Island that are listed for less than $300,000 should remain in short supply – no matter where on the island they are. Expect prices to rise, and some bidding wars will arise. In contrast, expect sales to drop for properties above $300,000. With the corresponding lag in sales, we may see prices also decline.

How this story ends is still anyone’s guess. The good hard-working people of Puna surely didn’t need this. Nor did the business owners in Hilo who are affected by the cruise ship now passing their port. People being displaced, businesses suffering. The only good side is that no lives have been lost. Madame Pele is writing her own story. Let’s all wish for a happy ending.