Oahu home prices
hit $500,000

The record median price is
up 26.3% from a year ago,
Realtor figures show

Oahu's record home prices peaked again to start the new year, crossing the half-million-dollar mark, according to new figures from the Honolulu Board of Realtors.

Half the previously owned single-family homes sold in January went for more than $505,000, the board said, setting another record for the island. The price is 26.3 percent higher than a year ago, and up 2 percent from December.

"Buying a home is intimidating even in a buyer's market. I think the only thing that scared me more was childbirth," said Lehua Rosa Malott, who used the equity she has grown in her Makaha home to make a down payment on a $150,000 Kalihi apartment last month.

"I thought about putting it off because I was buying at the top of the market, but it was a good fit for me since I'll own it long enough to avoid any downswings," said Rosa Malott, who works as a counselor at the Hawaii HomeOwnership Center, which offers education and counseling to prospective home buyers.

The median price for condominiums hit $224,000 in January, up nearly 20 percent from a year earlier.

Low interest rates and a prosperous economy kept home buyers purchasing last month, though sales of single-family homes slipped 2.6 percent to 333, according to the Realtors board. Condo sales rose about 2 percent to 570. Total sales for the month jumped 23 percent to $3.79 billion from $3.08 billion a year earlier.

Prices on homes and condos likely will rise through the year and perhaps into next, but eventually will drop -- the only question is when, said Bank of Hawaii economist Paul Brewbaker, who forecasts single-family homes hitting $600,000 by year-end.

"You know it's over when you can't afford to buy your own house," he said.

However, Brewbaker said that second-home buyers, especially those who own first homes in higher-priced areas in California, could continue to fuel market prices past the point of local affordability.

"It might very well be the case that people on Oahu can't afford to buy these homes, but there are a ton of people in Southern California who will think that prices don't look so bad," he said.

John Riggins, owner of John Riggins Realty, said that while home prices have increased faster on the neighbor islands, plenty of West Coast buyers have started eying Oahu's resort areas.

"There seems like there's no end in sight," Riggins said.

Median prices in sought-after areas such as Kailua and Hawaii Kai have topped $750,000, pushing buyers to start looking at West Oahu, he said.

"We're now seeing folks who would have bought in Kailua or Hawaii Kai coming to the Leeward side," Riggins said.

If the current environment of low interest rates and steady growth in jobs and income continues, the housing market will remain strong into next year, said Leroy Laney, consultant to First Hawaiian Bank.

"All sectors of the economy are firing on all cylinders," Laney said. "Hawaii has been outperforming the nation in all respects, and that certainly will underpin local home affordability."

Despite the high prices, homes remain more affordable than in the early 1990s, during the Japanese bubble, said Harvey Shapiro, a research economist for the Realtors board.

"Mortgage rates will most likely rise in 2005, but if they remain below 6 percent, we expect that there will be minimal impact on our housing sales," Shapiro said.