Not Even Molten Lava Can Cool This Hot Housing Market
The eastern section of Hawaii’s Big Island continues to attract home buyers searching for a cheap piece of paradise
The eastern section of Hawaii’s Big Island continues to attract home buyers searching for a cheap piece of paradise
PUNA, Hawaii—In 2018, a large volcanic eruption spewed lava, rock and ash into the middle of a subdivision here, gobbling up more than 700 homes and displacing thousands of residents in a slow-motion disaster. Today, it is Hawaii’s fastest-growing region.
Land in an active lava zone, it turns out, is relatively cheap. Lured by a shot at attainable homeownership in paradise, island dwellers and mainland transplants alike have been flocking to this area in the shadow of Kilauea, driving up prices in the Puna District. Still, the area remains one of the last affordable refuges on the cheapest island in Hawaii, America’s most expensive state.
“In terms of the last bastion of affordability, Puna is it,” said Jared C. Gates, a Realtor who was raised on Oahu and came to the Big Island for college in the 1990s. He purchased his first home in 2005, a modest fixer-upper in Puna, on his salary as a waiter.
Over the past few years, he has been getting more business in Leilani Estates, the neighbourhood where the 2018 eruption began.
None of the homes that were inundated by lava have been rebuilt. Many homeowners have sold their properties to neighbours or the county in a federally funded buyback program, but that land remains vacant for now. The land has been so transformed that it is hard for remaining owners to know even where their property begins and ends.
“It took out roughly a third of the subdivision; totally surreal,” Gates said last fall. “And houses are selling there again.”
Among Gates’s listings that day was a three-bedroom, two-bath home with lush landscaping, two blocks from the mile-wide lava field where heat and steam still radiate from vents in the petrified landscape. “It’s a beaut,” he said. “It will sell.”
Three weeks later it did, for $325,000, cash.
The story of how serene-looking slices of suburbia came to inhabit an active volcanic rift zone is well-known here. In the 1960s, land speculators—aided by a new county government hungry for tax revenue—bought thousands of acres and carved it into lots of an acre or more that were snapped up by investors.
There were virtually no requirements that developers pave roads, place utility lines or build other essential infrastructure. To this day, there is no wastewater treatment plant or hospital. Many of the district’s 51,000 residents rely on filtered rainwater and cesspools to dispose of sewage.
Early buyers included Native Hawaiians looking for an affordable place to call home and mainland hippies intent on off-grid living. As home prices rose in Hawaii and across the nation, however, more working families and mainland retirees went hunting for deals on the Big Island.
County Councilwoman Ashley Kierkiewicz, who represents Puna, said rush-hour traffic on the rural, two-lane highway that connects Puna to Hilo, the county seat roughly 20 miles away, is so bad that she leaves her home 1.5 hours early to get to work.
County officials say rules tied to federal funding bar local government from building affordable housing in lava zones 1 and 2, which are the riskiest and make up most of lower Puna. State law also prohibits them from spending most local money on private subdivisions, meaning that roads are largely maintained by owner associations.
Hawaii County Mayor Mitch Roth said that while the county has added a new firehouse, police station and park facilities there in recent years, the county has limited funds to make major investments in high-risk areas.
“Are we going to invest public money in a high-risk place…knowing that whatever you build could be taken out by lava at any time?” said Roth.
The lack of some modern conveniences has scarcely slowed the flow of newcomers.
Like many places in the U.S., an influx of remote workers during the pandemic has helped send the housing market here into overdrive.
Among the recent arrivals are David Booth and his partner, Juan Polanco. The former Phoenix residents had been brainstorming tropical locations where they could slash their living expenses and ease into retirement.
“The attraction to the Big Island was affordability,” said Booth, 61, who now works remotely. He and Polanco, 59, paid cash for a 1,500-square-foot home that had been split into three units with separate entrances. “You can’t have this on any other island for this price point.”
The property sits on a 1-acre lot in Hawaiian Paradise Park, a subdivision located in the less-risky lava zone 3. Homes with repeated sales in the neighbourhood have seen a nearly 800% appreciation in price since 2000, according to data from the University of Hawaii Economic Research Organization.
Properties in lava zones 1 and 2—some with sweeping oceanfront views—were far cheaper, Booth said. In the end, the risk of losing their nest egg to a natural disaster, and the difference in insurance rates, were deal breakers.
They are getting used to bringing in their drinking water and dealing with vicious fire ants. The slow-paced lifestyle and prospect of early retirement are worth it, he said.
They have listed the two other units as vacation rentals, and their first guests arrive next week.
“We are overwhelmed with the amount of beauty here and just how much more relaxed we feel,” said Booth. “We’re building a whole new life here.”
Three years ago, Travis Edwards, 48, was driving delivery trucks and living with his mother in Southern California’s Inland Empire.
He was sick of the traffic, wildfires and car thefts, he said. Upon retiring, his mother sold her house and paid cash for a 1-acre lot with two units in Leilani Estates, surrounded by avocado and citrus trees. Lava insurance rates in lava zone 1, the riskiest area that encompasses the entire subdivision, were so high that they simply stopped paying for it, he said.
He mostly shrugs off the dangers, reasoning that they would be reckoning with fires and earthquakes on top of a lower quality of life back in Southern California.
“It’s just paradise,” said Edwards, who now drives limousines part-time. “The rest of the world doesn’t exist when you’re here.”
Rising prices on the east side have left Puna native Chantel Takabayashi feeling stuck. A single mother of three, she works 16 hours a day as a state prison guard in Hilo. She would like to buy a home closer to work and better schools but has been priced out of most neighbourhoods she has considered.
“I make pretty decent money and I work long, endless hours, and I still can’t afford better housing,” she said.
Liz Fusco, who manages more than 100 rental properties for Hilo Bay Realty in Pahoa, said that during the pandemic, she saw three-bedroom homes in parts of Puna that once fetched $1,500 a month rent for as much as $2,300.
Most of the applicants were mainlanders, she said, with stellar rental histories, plenty of income and pristine credit. Units that would typically take more than a month to rent were getting leased in three days.
Tina Garber, who has lived in the Puna area for 21 years, has been displaced twice in the past 18 months after the homes she was renting went up for sale.
Currently, she is paying $750 a month—three-quarters of her monthly income as a housecleaner—for a 400-square-foot studio surrounded on three sides by cooled lava. Her landlord just told her it will be listed for sale in April.
“People that come over here with money, they do not realise that it is so hard to make it here,” Garber said. “They think, ‘Oh, a good deal in Hawaii.’ But it puts a lot of pain and suffering on local folks.”
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Unmarried home buyers say they are giving priority to a financial foundation over a legal one
The big wedding can wait. Couples are deciding they would rather take the plunge into homeownership.
In reshuffling the traditional order of adult milestones, some couples may decide not to marry at all, while others say they are willing to delay a wedding. Buying a home is as much, if not more of a commitment, they reason. It helps them build financial stability when the housing market is historically unaffordable.
In 2023, about 555,000 unmarried couples said that they had bought their home in the previous year, according to a Wall Street Journal analysis of Census Bureau data. That is up 46% from 10 years earlier, when just under 381,000 couples did the same.
Unmarried couples amounted to more than 11% of all U.S. home sales. The percentage has climbed steadily over the past two decades—a period in which marriage rates have fallen. These couples make up triple the share of the housing market that they did in the mid-1980s, according to the National Association of Realtors.
To make it work, couples must look past the significant risk that the relationship could blow up, or something could happen to one partner. Without a marriage certificate, living situations and finances are more likely to fall into limbo, attorneys say.
Mark White, 59 years old, and Sheila Davidson, 62, bought a lakeside townhouse together in Newport News, Va., in 2021. But only her name is on the deed. He sometimes worries about what would happen to the house if something happened to her. They have told their children that he should inherit the property, but don’t have formal documentation.
“We need to get him on the deed at some point,” Davidson said.
White and Davidson both had previous marriages, and decided they don’t want to do it again. They also believe tying the knot would affect their retirement benefits and tax brackets.
Couples that forgo or postpone marriage say they are giving priority to a financial foundation over a legal one. The median homeowner had nearly $400,000 in wealth in 2022, compared with roughly $10,000 for renters, according to the Federal Reserve’s Survey of Consumer Finances.
Even couples that get married first are often focused on the house. Many engaged couples ask for down-payment help in lieu of traditional wedding gifts.
“A mortgage feels like a more concrete step toward their future together than a wedding,” said Emily Luk, co-founder of Plenty, a financial website for couples.
Elise Dixon and Nick Blue, both 29, watched last year as the Fed lifted rates, ostensibly pushing up the monthly costs on a mortgage. The couple, together for four years, decided to use $80,000 of their combined savings, including an unexpected inheritance she received from her grandfather, to buy a split-level condo in Washington, D.C.
“Buying a house is actually a bigger commitment than an engagement,” Dixon said.
They did that, too, getting engaged eight months after their April 2023 closing date. They are planning a small ceremony on the Maryland waterfront next year with around 75 guests, which they expect to cost less than they spent on the home’s down payment and closing costs.
The ages at which people buy homes and enter marriages have both been trending upward. The median age of first marriage for men is 30.2, and for women, 28.6, according to the Census Bureau. That is up from 29.3 and 27.0 a decade earlier. The National Association of Realtors reported this year that the median age of first-time buyers was 38, up from 31 in 2014.
Family lawyers—and parents—sometimes suggest protections in case the unmarried couple breaks up. A prenup-like cohabitation agreement spells out who keeps the house, and how to divide the financial obligations. Without the divorce process, a split can be even messier, legal advisers say.
Family law attorneys say more unmarried people are calling for legal advice, but often balk at planning for a potential split, along with the cost of drawing up such agreements, which can range from $1,000 to $3,000, according to attorney-matching service Legal Match.
Dixon, the Washington condo buyer, said she brushed off her mother’s suggestion that she draft an agreement with Blue detailing how much she invested, figuring that their mutual trust and equal contributions made it unnecessary. (They are planning to get a prenup when they wed, she said.)
There are a lot of questions couples don’t often think about, such as whether one owner has the option to buy the other out, and how quickly they need to identify a real-estate agent if they decide to sell, said Ryan Malet, a real-estate lawyer in the D.C. region.
The legal risks often don’t deter young home buyers.
Peyton Kolb, 26, and her fiancé figured that a 150-person wedding would cost $200,000 or more. Instead, they bought a three-bedroom near Tampa with a down payment of less than $50,000.
“We could spend it all on one day, or we could invest in something that would build equity and give us space to grow,” said Kolb, who works in new-home sales.
Owning a place where guests could sleep in an extra bedroom, instead of on the couch in their old rental, “really solidified us starting our lives together,” Kolb said. Their wedding is set for next May.
Homes and weddings have both gotten more expensive, but there are signs that home prices are rising faster. From 2019 to 2023, the median sales price for existing single-family homes rose by 44%, according to the National Association of Realtors. The average cost of a wedding increased 25% over that time, according to annual survey data from The Knot.
Roughly three quarters of couples move in together before marriage, and may already be considering the trade-offs between buying and renting. The cost of both has risen sharply over the past few years, but rent rises regularly while buying with a fixed-rate mortgage caps at least some of the costs.
An $800 rent hike prompted Sonali Prabhu and Ryan Willis, both 27, to look at buying. They were already paying $3,200 in monthly rent on their two-bedroom Austin, Texas, apartment, and felt they had outgrown it while working from home.
In October, they closed on a $425,000 three-bed, three-bath house. Their mortgage payment is $200 more than their rent would have been, but they have more space. They split the down payment and she paid about $50,000 for some renovations.
Her dad’s one request was that the house face east for good fortune, she said. Both parents are eagerly awaiting an engagement.
“We’re very solid right now,” said Prabhu, who plans to get married in 2026. “The marriage will come when it comes.”