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Oahu’s Perpetual Housing Shortage

Oahu is one of the most expensive and unique real estate markets in the U.S. Population growth has been outpacing the construction of new housing options on Oahu for years now, increasing competition and pushing median prices upward. Combine the growth of the state with the shortfall of construction permits and you have a highly competitive real estate market.

The median price for single-family homes (SFHs) is above $700,000 and $355,000 for condos. However, there are still plenty of options for homes at all price ranges. More importantly, the highly competitive environment means once you own, your home value (equity) is all but certain to grow. Home values have increased an average of 6 percent per year since 1977, and during periods of high demand (price runs) yearly appreciation can hit 15 percent to 20 percent. Investing in Oahu real estate is investing in your future.


If you remember Economics 101, markets are all about supply and demand. Paul Brewbaker, former Chief Economist for Bank of Hawaii and owner of TZ Economics, investigated the housing shortage on Oahu. He determined that 3,500 new housing units are needed per year to keep up with normal population growth. However, Hawaii approves at most 1,500 units per year for new development. This creates an accumulating housing units each year. This years now, and Oahu is in the midst of a shortage that will likely never be resolved.

You’re probably thinking, “Construction is currently non-stop in Kakaako, Ala Moana and Waikiki. Surely that will help to solve this issue?” Taking into account that have an estimated completion date up to 2018, some 2,800 units will be added to the Oahu market. Using Brewbaker’s estimates, Oahu will issue at most 4,500 permits for new properties and need 10,500 additional new housing units from 2016 to 2018 (3,500 units multiplied by three years). Even if all 2,800 units are completed as planned, Oahu will still need 6,000 more to keep up with demand.

The combination of low supply and high demand make Oahu real estate one of the best investments in existence.


Median price is a common but it doesn’t paint the full picture. What causes median prices to consistently increase? Locations’ Research Department created a metric, Bid-Ups, that measures the level of competition for properties. Locations is the only real estate company in Hawaii that measures Bid-Ups. Competition is measured as the percentage of sales above the original list price that received multiple offers.

Bid-Ups are the mechanism that push up median prices and the best measure of competition on Oahu. The higher the percentage of Bid-Ups, the more competition there is, and the higher median prices will be go. For prospective homeowners, this is an incentive to start moving home right away. The percentage of Bid-Ups is at an all-time high and expected to keep increasing. There are two options: owning a home and enjoying a consistent increase in equity, or spending more money on rent.


The highly competitive Oahu market presents an incredible opportunity. Average rents here are the most expensive in the country and have doubled in the last 10 years. And Bid-Ups demonstrate that prices and competition are increasing. When you become a homeowner, the market conditions will grow your wealth instead of shrinking it. Consult a Locations agent today and see what’s possible.

Our agents can help you leverage this information to compete successfully in this market and meet your real estate goals. The longer you wait, the more expensive your future home becomes.

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