We attended a recent economic report from Paul Brewbaker at the State of Hawaii 100 Top Realtors meeting on Maui in June.

At that meeting Mr. Brewbaker reported that Maui should fare well in home price increases over the next several years. He feels that price increases should be in the 7% to 10% range until at least the early 2020’s. As you recall we had unsustainable increases in prices in 2004, 2005 and 2006 which was over 20% per year. That is what creates a bubble.

Our current increases in prices at 7% to 10% are sustainable at least for the short term. This is especially true for Maui as the demand for new housing is estimated at over 850 units per year (not even including mainland and foreign buyers) but there are estimated to be only about 350 permits issued per year.

With the projected increases in interest rates and the small increases in rates recently it should spur some buyers who have been sitting on the sidelines.

Paul Brewbaker’s idea on a way to increase affordable housing is to encourage developers and anyone to go ahead and build as many homes as possible at or below the median sales price which is currently at $575,000. The current County rules on affordable housing are resulting in less affordable housing, not more.

The County currently wants developers to provide 50% of any subdivision to be (in their definition) affordable, which is even lower than it should be. This seems to have pushed developers to pass on building on Maui and build where there are less restrictions.

So what it does all mean? Supply and Demand. Economists’ indicators are for increasing prices.