Quick summary: Sales are down, interest rates are easing, visitor numbers dipped over the summer, and short-term vacation rental regulation is moving forward.
Overview — the one word: Down
In this month’s market update with Dan Palamino (KW Big Island / The Hawaii Team) the recurring theme is “down.” Home sales and visitor counts were lower than last season, but interest rates have begun to ease and regulatory changes for short-term vacation rentals are progressing — not disappearing.
Sales: Buyers Have the Leverage
Overall real estate activity on the Big Island is slow. Both single-family homes and condos are seeing fewer transactions. Condos are an interesting exception: after a spike in inventory earlier this year, the condo inventory has dropped roughly 20% — partly because some units sold, but largely because sellers pulled listings and decided to wait for a better market.
Right now the leverage is squarely with buyers. Many potential buyers are sitting on the sidelines waiting for lower rates before they move forward.
Interest Rates — a different way to think about “6–7%”
At the start of September, 30-year fixed mortgage rates were averaging about 6.5%. That number may not sound low to everyone, but consider this thought exercise: would you personally lend $651,000 at 7% for 30 years? Most people wouldn’t — yet banks are doing exactly that. The takeaway: a 6–7% mortgage rate is better than it may feel on paper, and there’s growing expectation for Federal Reserve rate cuts.
Because of weak jobs reports and cooling economic indicators, a Fed meeting in mid-September is widely expected to announce a rate cut (markets were pricing in at least a quarter point at the time of this update). If mortgage rates drift below 6%, buyer activity is likely to accelerate quickly.
Visitor Traffic & Impact on Rentals
Visitor counts were down over the summer — roughly 4–6% islandwide in July — translating to about 8,000 fewer visitors for the Big Island that month. That drop feeds directly into the short-term rental market: current occupancy rates for STRs on the island are hovering around 37–41% (about 40%).
Seasonality still matters — Ironman in October and the winter months typically bring more bookings and guests — but the summer dip and fewer Canadian visitors (about 4% fewer Canadians at the time of the update) were notable contributors to the softer demand.
Short-Term Vacation Rental (STVR) Regulation — progress, not prohibition
The Hawaii County Council considered three bills to regulate short-term vacation rentals. Only one has passed so far: the bill requiring hosted rentals (where the owner lives on the property and rents a portion) to be registered, to have TAT and GE licenses, and to hold a hosted rental permit.
The two other bills remain under consideration. A county study concluded STVRs generate about $700 million for the Big Island — compared with roughly $500 million from hotels — so broad elimination of STRs is not seen as feasible. The likely path is continued regulation rather than removal.
Key Takeaways
- Buyers hold the leverage while rates sit above 6% — but that can change quickly if rates drop below 6%.
- Condo supply dropped ~20% because some sellers pulled listings rather than sell into a slow market.
- Visitor totals were down over the summer, and STR occupancy is currently low (~40%), affecting rental revenue short-term.
- STVRs are here to stay in some form — regulation is progressing to bring hosted rentals into compliance and taxation, while other bills are still pending.
What This Means for Buyers, Sellers & Investors
Buyers: If you’ve been waiting for rates under 6%, be aware that a meaningful drop would likely trigger a sudden uptick in competition. If your timeline is flexible, monitor rates — if they slip below 6%, expect more buyers to act fast.
Sellers: Inventory is tighter in some segments (notably condos that were pulled), so pricing and presentation still matter. If you need to sell now, work with an agent who understands how to market to buyers who currently hold the negotiating power.
Investors / STR owners: Keep an eye on permit and tax requirements for hosted rentals and be prepared for regulatory changes. With occupancy lower currently, focus on seasonality, targeted marketing, and managing operating costs.
