REAL ESTATE REMAINS A STABLE INVESTMENT IN OAHU
Oahu home prices retain high median
Last year’s record holds despite declining sales on pace for 10-year low
By Andrew Gomes
Advertiser Staff Writer
For nearly four years, sales of O’ahu single-family homes have been declining, yet the median home price stays stubbornly high.Sales are on pace to set a 10-year low this year, but prices are hovering just a bit under last year’s record.
The relative price stability is baffling many consumers and a few real estate agents who have been anticipating a moderate price decline, or worse.
But local economists and traditionally optimistic real estate agents say they aren’t surprised by the resiliency in O’ahu home prices that contrast with many Mainland housing markets, where median prices are down 10 percent to 30 percent after big price run-ups in recent years.
“I think the other shoe has yet to drop … but it’s unlikely to be fairly severe,” said Byron Gangnes, a University of Hawai’i economics professor.
Mike Sklarz, a local economist and housing market statistician, said O’ahu home prices are following a historical pattern of flattening after a steep increase. “It’s more like a staircase pattern — up and then sideways,” he said.
Sklarz and other economists said several factors — including population growth, low unemployment, stable personal income, attractive interest rates and relatively low foreclosures — have helped maintain home prices despite the relatively big sales slowdown.
Out of 1,413 previously owned single-family homes sold on O’ahu in the first six months of this year, the median price was $629,000, down 2.5 percent from $645,000 in the same period last year, according to Honolulu Board of Realtors data.
The slight settling follows a near-doubling of the median sale price from $299,900 in 2001 to $590,000 in 2005. Last year, the median was a record $643,500.
While prices are essentially flat, sales are down 26 percent this year through June. That pace, if carried through the full year, would result in about 2,700 sales, or the lowest level since 2,500 sales in 1998.
The sales drop also is on top of three years of declines between 2 percent and 13 percent since the 2004 peak of 4,702 sales.
large submarkets
Overall, O’ahu’s median home price this year has been roughly balanced out by a few large submarkets — urban Honolulu, Pearl City-’Aiea and Wai’alae-Kahala — where median prices are up 5 percent to 8 percent, and the island’s biggest housing submarket — the ‘Ewa Plain — where the median price is down 9 percent.
By comparison, some Mainland housing markets are experiencing double-digit median price declines, including cities in California, Arizona, Nevada and Florida. According to the latest available data from the National Association of Realtors, the median home price average for about 150 major metropolitan areas was down 7.7 percent in the first quarter.
In many Mainland cities, median prices have tanked in part because so many borrowers obtained risky loans that have led to stunning rates of foreclosure. Developers also oversaturated markets with new homes that hurt median prices after sales fell sharply.
On O’ahu, lenders say borrowers were more conservative with the loans they took out. Developers also are constrained from wild overbuilding because of limited land and development regulations.
The constraints on new-home construction naturally helps keep supply relatively tight, which can lead to soaring prices when demand is extremely high and only mild price declines when demand is weak.
During O’ahu’s previous housing market downturn, which stretched from 1991 to 1999, median prices declined 18 percent, or 1.8 percent per year on average.
During the nine-year slump, the biggest decline in sales was a 30 percent drop in 1991, and the median price declined 3.4 percent that year. In 1995, sales fell 25 percent and the median price declined 3.1 percent. The biggest single-year price drop was 8.4 percent in 1997 as sales were rebounding.
“Prices remained pretty stable throughout that period,” Gangnes said. “We’ve typically not had big price declines on O’ahu.”
