University of Hawaii economists have a new more realistic way to measure increases in home sales. It’s detailed in a new report on state housing data.

When University of Hawaii economists were assembling “The Hawaii Housing Factbook,” they decided to look beyond a metric often used to show housing costs in the Aloha State – and how those costs have increased over time. 

The result: as much as home costs seem to have increased in the past two decades, the situation is worse than it has seemed, based on median home sales prices, a standard way of measuring the cost of buying a house.

“The normal way looks pretty bad,” said Justin Tyndall, an assistant professor of economics with the University of Hawaii Economic Research Organization and the factbook’s lead author. “But it’s even worse.”

University of Hawaii economists have created what they say is a better way than median home sales prices to measure increases in housing costs.

The problem with median sales prices is they don’t account for the quality of homes sold, the report explains. For instance, if only luxury homes were sold in a given period of time, the median price of all of those sales would naturally be higher when compared to a baseline year when a broad mix of luxury and more basic homes sold. That increase would happen even if the sales price of each home stayed the same. 

To account for this problem, UHERO looked only at individual homes that sold multiple times between 2000 and 2022 and tracked how those prices appreciated over time. That data was the basis for the UHERO Repeat Sales Index.  

It’s a widely accepted method of tracking housing prices, Tyndall said.

And when applied to Hawaii, the results are striking: the cost of housing over the past two decades has increased even more than it seemed based on median home sales.

Between 2000 and 2022, the median single-family home price increased by 260%, UHERO reported. That understated price appreciation since 2000 by 40% relative to the Repeat Sales Index, UHERO reported. Stated another way, UHERO said, “the median sales price shows a single-family home is currently 3.6 times as expensive as in 2000. The Repeat Sales Index shows prices are 4.7 times as expensive.”

The UHERO Repeat Sales Index represented one of the few surprises in the 86-page factbook released on Wednesday.

“Residents of Hawai‘i face the highest housing costs in the nation,” the report says in its introduction. “High housing costs lower the standard of living for residents and hinder the State’s ability to attract workers. Some households are forced to live in crowded conditions, some leave the state to find housing elsewhere, and some are forced to survive without housing at all.”

Such statements are hardly new. And Tyndall acknowledged as much, describing the document not so much as groundbreaking research but rather as a compendium of information previously reported by UHERO and other sources.

“In some of our other reports, we have a pretty clear finding,” Tyndall said. “Here we’re just trying to provide all the data we have available.”

Key takeaways?

“Housing is incredibly expensive, and we don’t build enough housing,” Tyndall said. “The result is a very high price. And depending on how we measure it, the prices might be higher than we think they are.”

Most Can’t Afford To Buy. A Third Can’t Afford Median Rent

Another thing underscored in the report: prices are not simply increasing, but accelerating to make home ownership out of reach for the vast majority of residents, particularly as interest rates have driven up the cost to borrow money. The report defines affordable as housing that costs no more than 30% of a person’s income.

Fewer than a third of households can afford to buy a single-family home and less than half can afford to buy a condo. The median rental price is unaffordable to a third of households.

“In 2012, households needed to earn 120% of the state’s median income to afford the mortgage on the median priced single-family home,” the report says. “In 2022, home buyers needed to earn nearly 180% of the state’s median income (or $150,000 per year) to afford the median home.”

The result: less than a third of households can afford to buy a single-family home and less than half can afford to buy a condo. Meanwhile, while rental prices have remained relatively stable, the median rental price is unaffordable to a third of households.

What this means for the current generation of residents is sobering. In a sidebar explaining the UHERO Repeat Sales Index, Tyndall and co-authors Daniela Bond-Smith and Rachel Inafuku explain the situation facing a hypothetical 22-year-old who might want to buy the same home the young person’s parents bought 22 years earlier.

To examine this scenario, the scholars looked at homes bought in 2000 and sold in 2022. They found 39 single-family homes in Hawaii that met that criteria. 

Such a home could be bought for an average of $334,000 in 2000, the report says. By 2022, the average price had increased by 340% to $1.47 million. 

“A young person wanting to buy the exact home their parents bought 22 years ago will need to pay 4.4 times as much,” UHERO reported. “Considering this type of scenario demonstrates why the 260% increase in median home price can actually understate the severity of the housing crisis as experienced by Hawai‘i residents.”

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