Real estate
on rebound

Are Hawaii home prices
back from the bust?

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By Lyn Danninger
ldanninger@starbulletin.com

The tale of the Japanese bubble is one Hawaii homeowners know well.

During the 1980s, property values on Oahu and parts of the neighbor islands shot sky-high as wealthy speculators from Japan bought real estate as fast as it became available.

As the squeeze continued, locals who ventured into the home market paid record amounts, particularly those who wanted to live in urban Honolulu.

Others moved to newly constructed bedroom communities in Central and West Oahu. The cost of Oahu housing became so high during this period that even the city and the state got into the act, creating sales lotteries for affordable housing at Ewa's West Loch and Kapolei.

As the decade came to an end, the Japanese bubble burst, Hawaii's economy faced recession and property prices all over the island started to slide.

Hawaii residents who bought homes as prices continued to soar saw their property values decline for most of the 1990s.

Now, housing prices in many of Oahu's neighborhoods are making a comeback. Homeowners who once considered themselves stuck are now increasingly able to refinance or sell their properties.

In fact, some neighborhoods are already hitting new highs. Others have a ways to go.

Beginning today, we offer a seven-day look at home prices and sales volume in the state of Hawaii.

We start on Oahu.

Signs of recovery

The state's most populous island is seeing brisk sales activity, stories of multiple offers, declining inventories and, in some neighborhoods, overbidding.

All the signs of a recovery from the doldrums of the past decade are there, real estate industry professionals say.

Herb Conley, managing partner with Century 21 All Islands, said the latest recovery cycle actually began in the summer of 1997.

"July 1997 was the first month since 1991 that sales increased," he said. "Each year since 1997, it's gone up in double digits."

But Conley believes a repeat of the soaring prices seen in the late '80s and early '90s is unlikely to happen again.

"This time we had no outside forces. What we haven't seen this time is dramatic price increases," Conley said.

Oahu's entire residential real estate market, including newly built homes and single-family and condominium resales, ended last year up 9 percent over the previous year, with 9,700 homes sold.

This year, despite some initial nervousness about potential economic fallout from the events of Sept. 11, buyer enthusiasm appears undampened. Inventory in some areas is shrinking fast and putting upward pressure on prices.

Bargain mortgage rates, which conventional wisdom says cannot last forever, are providing much of the momentum from the top to bottom of the market.

For example, more condominium resales took place in April than at any other time since the summer of 1990. Yet even with all the activity, housing prices have yet to rise substantially in many island neighborhoods.

"There is a lot of turnover and a record number of closings, but not record prices," said Ricky Cassiday, research consultant to Prudential Locations realty firm. "So in a sense it's a boom, but without the heat."

Also, some Oahu homeowners remain trapped in mortgages worth more than the homes that secure them because not all segments of Oahu's real estate market are recovering at an equal rate.

The series Today: East Oahu and the Windward side, in Business Tomorrow: Waikiki and Downtown Tuesday: Mililani and Central Oahu Wednesday: West Oahu and the North Shore Thursday: The Big Island Friday: Kauai Saturday: Maui county