Homes on Oahu
hit price records

About half the homes sold for
more than $525,000, according
to the Realtors board

Strong demand coupled with a historically low number of properties for sale boosted Oahu home and condominium prices to record heights in February, with further increases expected.

About half the homes sold on Oahu last month reaped more than $525,500, up from $410,000 in February 2004, and half the condos sold for more than $235,000, up from $188,000 a year earlier, according to data released yesterday by the Honolulu Board of Realtors.

The previous record price for homes was $505,000, set in January. Condos last hit a record $229,300 in November.

While few economists and real estate professionals believe home prices have hit the high-water mark, the volume of single-family home resales dropped while prices rose.

A total of 266 single-family homes changed hands last month, down from 293 sold a year earlier. February was also the second consecutive month in which sales declined from the month earlier.

Condo sales rose 16.9 percent, partly because of rising single-family home prices and declining inventory, said Harvey Shapiro, research economist for the board of Realtors.

"We are in an inventory crisis, and that's affecting prices," Shapiro said. "If you are trying to buy, it's a difficult time -- the reverse of what sellers were experiencing in the 1990s."

The number of sales listings for single-family homes dropped to 858 in February from 961 in January, Shapiro said. The number of available condos shrank to 1,202 in February from 1,378 in January.

"There aren't a whole lot of choices out there, and we were really getting discouraged," said Jason Arnold, whose family rented for three years before buying a 700-square-foot condo in Salt Lake for $195,000 last month.

"We consider ourselves really lucky," Arnold said. "Other condos in the same complex that aren't as nice are already selling for more."

"We are at levels significantly below the inventory at the height of the Japanese bubble, and that will continue to put pressure on prices to go up," said Herb Conley, managing director of Coldwell Banker Pacific Properties.

According to Conley's calculations, half of Oahu's buyers can afford a home priced at the median, which is the number at which half of the homes sold for more money and half sold for less.

At today's prices the typical four-person family, with a median household income of $77,000 a year, can afford to purchase a home, Conley said. However, when home prices rise near $550,000, fewer people will be able to afford a home.

"We still have a ways to go to get to that," Conley said. He added that residential real estate prices likely will continue rising as long as demand stays high, inventory stays low, incomes continue rising and interest rates hold steady.

By the end of the current market cycle, prices are likely to top out above $600,000, with condos hitting $300,000 or more, Conley said. Prices would have to hit $700,000 to be comparable to prices during the height of the Japanese bubble in the early 1990s.

Since the market has been primarily fueled by local folks buying and selling on Oahu, it is likely to stay stronger longer than it did when Canadian investors gobbled inventory in the 1970s and Japanese buyers came in during the 1980s, Conley said.