The picturesque islands of Hawaii, long coveted for their stunning landscapes and tranquil lifestyle, are facing a complex set of challenges in 2025. Despite global and mainland uncertainties in the real estate market, Hawaii’s housing prices have continued their upward trajectory—but not without cracks in the foundation.

In the first quarter of 2025, median home prices across Hawaii’s major islands, particularly Oahu and Maui, rose by 4.1% compared to the same period last year. However, behind this continued growth is a wave of affordability concerns, stagnant local wages, and the growing pressure of climate change that’s reshaping how both investors and residents view island real estate.

Mainland Influx vs. Local Displacement

A growing theme in the region is the dichotomy between wealthy mainland U.S. buyers and native Hawaiian residents. According to housing analysts, cash purchases from California and New York investors have kept demand buoyant—particularly in coastal luxury zones of Kauai and Maui—driving up property values and edging out locals.

Kailua-based real estate broker Ikaika Kamaka observes, “About 60% of our current clients are from the mainland, and they’re looking for second homes or investment properties. The local buyers just can’t compete at this level.”

That competition is changing the face of communities. In many neighborhoods, the population of long-time Hawaiian residents is thinning, replaced by seasonal residents and remote workers. According to a report from the University of Hawaii Economic Research Organization (UHERO), nearly 35% of working-class families in Honolulu now qualify as “cost-burdened,” spending more than 30% of their income on housing.

Tourism’s Slow Recovery and Its Ripple Effect

Tourism, Hawaii’s economic backbone, has only partially rebounded post-COVID. While arrivals have recovered to around 85% of 2019 levels, ongoing geopolitical instability and rising travel costs have dampened full recovery projections. This has impacted the rental market significantly.

Short-term vacation rentals, once considered golden assets, have seen a decline in occupancy rates. Platforms like Airbnb and VRBO have reported drops of 12% in some islands due to shifting traveler preferences and new state regulations aimed at preserving residential neighborhoods.

In response, some property owners are converting former short-term rentals into long-term lease offerings, putting downward pressure on rents but increasing competition for locals looking for stable housing.

Infrastructure and Climate Threats Add Complexity

Hawaii’s housing resilience also faces environmental tests. Rising sea levels, more frequent coastal flooding, and aging infrastructure pose real threats to property viability.

In January, flash floods in Hilo damaged more than 70 homes, prompting new zoning scrutiny. Several municipalities, including Honolulu, have introduced incentives for climate-resilient buildings, such as elevation requirements and reinforced foundations.

Still, buyers remain cautious. “We had a buyer pull out of escrow last minute in Lahaina because they learned that the property was in a tsunami evacuation zone,” said Lani Ho, a real estate advisor in Maui.

The Affordability Crisis Deepens

Despite its natural appeal, Hawaii remains one of the least affordable housing markets in the U.S. In Honolulu, the average home price hovers around $960,000—more than triple the national average. Even condos, once considered entry-level options, have risen beyond the reach of median-income earners.

State programs aimed at affordability, including the Hawaii Housing Finance and Development Corporation (HHFDC), have struggled to meet demand. In 2024, less than 1,000 affordable units were added statewide, far short of the estimated 6,000 needed annually.

In response, grassroots organizations are pushing for land trust models and cooperative housing, but progress has been slow. Experts say more drastic legislative and zoning reforms may be required to bridge the gap.

Looking Ahead: 2025 and Beyond

Despite these challenges, Hawaii’s real estate market is not in decline. Rather, it’s becoming more complex and segmented. Luxury markets remain strong, driven by out-of-state cash buyers and foreign interest. At the same time, middle and lower-income sectors continue to suffer from chronic underinvestment and policy inertia.

The outlook for 2025 suggests continued price increases in certain zip codes, especially those insulated from climate risks or those under development for master-planned communities. However, affordability concerns and climate vulnerabilities are forcing both government and the private sector to rethink traditional growth models.

Economist Dr. Raina Kulani of UHERO sums it up: “We may be at a tipping point. Either we innovate—socially, financially, and environmentally—or we risk creating an island paradise that few who were born here can still call home.”

The Bottom Line

Hawaii’s real estate scene in 2025 is a study in contradictions: robust yet fragile, lucrative yet exclusionary. While the state remains a magnet for affluent buyers, the housing needs of its local population continue to go unmet. Real estate professionals, policymakers, and community leaders face an urgent need to reconcile economic opportunity with sustainability and fairness.

As Hawaii looks toward the second half of the decade, one thing is clear—the status quo is no longer sustainable.