[ THE COST OF HOMES ]
Isle housing prices
have always been on
some kind of upswing
Changes in supply have resulted
in either stair-stepping increases
or sharp spikes since the 1950s
When Will and Marta Sanburn paid $110,000 for their fully furnished Portlock oceanfront home in 1970, people said they'd made a foolish buy because the property faced West, in the direction of the afternoon sun.
But when it came time to sell the house, the couple "came out very well," said Marta.
The couple, who are moving to Kahala Nui, an upscale retirement community, sold the property in June for $2.6 million, nearly 24 times their original purchase price.
"Will always used to joke that we were sitting on our assets," Marta said, adding that in the '50s, '60s, and '70s when interest rates were higher, people often bought their houses and expected to stay there.
When it comes to Hawaii's residential housing market today compared with 50 years ago, the more things change, the more they stay the same. Hawaii has always been an expensive place to own a home, and there were windows of opportunity that allowed people to obtain homeowner status and times when the window was closed.
"This idea that it used to be affordable and now it isn't is just plain wrong," said Paul Brewbaker, senior vice president and Bank of Hawaii economist.
According to data from the Building Industry Association of Hawaii, prices for the bulk of residential houses in the early 1950s ranged from about $14,000 to $20,000, with a median price of around $17,000. By 1957, the earliest data available from the Bank of Hawaii, $19,694 was the average Oahu single-family sales price, with average prices hovering between $21,365 and $23,069 by the end of the decade.
"Home prices in Hawaii were rising before jets. Home prices in Hawaii were rising after jets. Home prices in Hawaii will be rising after the creators of Star Trek figure out how to beam people from Orange County to Maui," Brewbaker said.
Hawaii's housing market wasn't any more affordable 50 years ago, but the difference is that home supply could much more easily respond to changes in housing demand, he said. From 1940 to 1975 when population, income and jobs grew, so did the number of homes, Brewbaker said, adding that since there was plenty of supply, prices moved upward smoothly at a steady pace over time.
But after the Land Use Commission was created to slow growth in the mid-'70s, the number of residential building permits declined sharply, falling from a peak of 13,160 permits issued in 1974 to 2,673 last year.
The abrupt drop in housing supply caused the pattern of price appreciation to shift to a stair-step profile. When demand greatly exceeds supply, housing prices will go up sharply in short intervals, peak at the point where people can't afford to buy them, and then plateau, Brewbaker said.
The median price paid for a single family home in July was $480,000, according to the Honolulu Board of Realtors, but Brewbaker has said prices could rise to $600,000 before they top demand and investments flatten for another seven to 10 years.
"Today's buyers have already missed the boat," he said.
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