Oahu home and condo prices hit record high
Inventory and sale time have jumped this year as affordability continues to sink
» Local retailers will see double-digit rent hikes
Median prices on Oahu's single-family homes and condominiums set records in the second quarter, but that hasn't changed most expert opinions that the market remains very much a mixed bag.
At a mid-year real estate forecast presentation yesterday before the Hawaii Developers' Council, Honolulu Board of Realtors Research Economist Harvey Shapiro said that more than half of the single-family homes sold on Oahu during the second quarter hit $665,000. Likewise, the median price paid for a condominium rose to $328,000, he said.
Despite those increases, Shapiro said that he expected to see a continue reduction in demand for housing, but with median prices finishing the year at plus or minus five percent.
While homes were snatched up after only 25 days at the peak of the market in 2005, by last year the average had risen to 51 days, he said.
Inventory has also risen, Shapiro said. During the peak of the market, inventory averaged 1,000 or so units on either side of the market but has climbed and held at 1,800 single-family homes and 2,300 condominiums, he said.
Affordability on Oahu has also decreased, Shapiro said. In the early 2000s, the average family had to put 30 percent of its income toward the purchase of a single-family home and 15 percent for a condominium Now, the percentage is more like 52 to 53 percent for a single-family home and 26 to 27 percent for a condominium, he said.
The combination of slowing sales and rising prices brought the total dollar sales volume of home sales in the first half of this year to $2.64 billion, down a few million from the $2.8 billion generated in the first half of last year.
For the last six to nine months of 2006, the total sales volume for Oahu's residential real estate market was unusually low, but it began to perk up somewhat in March of 2007, said Paul Brewbaker, chief economist for the Bank of Hawaii.
Brewbaker said the change prompted him to call Shapiro to say, "Hey brother, things are coming up, eh?"
Still, Brewbaker said he does not expect to see a lasting market shift for about another five to seven years -- the typical cycle length for an up market in Hawaii.
"I once told a Realtor that it would change on Oct. 26, 2012 -- now that's kind of become urban legend," he said.
While Honolulu's real estate community expects to see a healthy housing market moving forward, the big question will be what the Federal Reserve will do with interest rates, Shapiro said.
"Rates are very important to the housing industry," he said, adding that the market has seen fixed-rate mortgages rise and the end of low introductory teaser rates on adjustable-rate mortgages.
"I don't believe people shop prices, I think they shop their monthly costs," he said, adding that even a percentage point shift upward can significantly impact consumer buying power.
Still, relative to the priciest California areas, Oahu was one of the cheaper markets during the first quarter of 2007, Brewbaker said.
"There is less risk of prices falling when we are a relatively attractive market relative to certain cohorts," he said, adding that Oahu's prices are still below San Francisco and Orange County, Calif.