Kapolei project
delayed yet again

Slow market conditions
in Ewa have stalled the state-
backed development

By Rob Perez
Star-Bulletin

Leeward Oahu's sluggish housing market has prompted the state to issue another extension for a stalled project in Kapolei.

The Housing Finance and Development Corp. earlier this month approved a one-year extension for reaching a loan agreement with Makai Village Partnership, which plans to build more than 600 homes in the state-backed Villages of Kapolei.

The agency last year approved a similar extension, hoping the market would recover sufficiently in the extra year to get the 653-home project back on track.

But Kathy Inouye, chief operating officer for the developer, said that although positive signs are emerging, more are needed before construction can begin.

She said pricing, in particular, still seems to be soft. "I'm hoping that we've seen the bottom," Inouye said.

In the first four months of this year, prices for previously owned houses in Leeward and Central Oahu fell 3.3 percent, to $237,000, compared with the comparable period in 1997, according to Mike Sklarz, research director for Prudential Locations Inc.

For condominiums, the drop was even greater. The median price -- the point at which half sold for more, half for less -- plunged 16.7 percent to $100,000, according to Prudential Locations.

"This is really the story," he said of the continued weakness on the price front.

The falling prices, however, helped spark a surge in resales in Leeward and Central Oahu.

Single-family resales jumped 44 percent through April, while condo deals climbed nearly 27 percent.

For developers, the price weakness in the resale market puts downward pressure on the new-home market, which can eat into profits.

Several years ago developers were selling single-family homes in Kapolei for $320,000 to $450,000.

"With the resale market so far below that, even if developers can build, they have to question what prices they can get and still make a profit," Sklarz said.

He said Leeward house prices likely have hit bottom but expects the condo market to fall even more.

Inouye said her company probably won't decide until next year when to start the Kapolei project.

One indication of the sluggish market: MVP is required to get 324 applications for so-called affordable housing before it can begin site work on the development's first increment, where the bulk of the affordable housing will be built.

The company has received less than 85 applications, HFDC said.

Although the residential portion of the development is on hold, MVP is continuing to develop Kapolei Middle School and is on target for a fall 1999 opening, Inouye said.