Oahu home sales may
cool but not collapse

Economist Paul Brewbaker
sees more price increases in less
expensive neighborhoods

It's likely that prized Oahu neighborhoods such as Kailua and Hawaii Kai, which are selling in the $700,000 to $800,000 median price range, will see less future price growth, Bank of Hawaii economist Paul Brewbaker said yesterday.

However, home prices in the island's less expensive neighborhoods will begin to pick up as buyers are priced out of other regions, he said.

"Everything won't settle at the same number, but everything will settle at a number that makes sense," Brewbaker said.

The median resale prices of Oahu single-family homes and condominiums hit records in August, and yet the total number of homes sold in the month jumped by double digits from a year earlier, the Honolulu Board of Realtors reported yesterday. The median price of a single-family home skyrocketed nearly 40 percent to $625,000 last month from $450,000 in August 2004.

Brewbaker said the islandwide median home price could easily reach $700,000 to $800,000 next year if market conditions hold, such as positive economic fundamentals, low mortgage rates and a limited supply of homes on the market.

While headline grabbers might describe such price appreciation as bubblicious, Brewbaker said it's far more likely that after Oahu's home prices peak the market will slow rather than collapse.

"Presuming that there is not a major reversal in economic conditions and fundamentals, the worse we can expect is that once we reach those high levels, home prices will stop rising and just stay there," he said.

Half of the 831 condominiums sold on Oahu last month went for more than $282,000, 35.7 percent more than a year ago.

"The handoff between single-family homes and condos has begun," Brewbaker said. Condominium rates will continue to appreciate faster as more buyers are priced out of the single-family home market, he said.

A year ago, Century 21 Realtor Celeste Cheeseman said she sold a Mililani Parkway condominium for $175,000. Today, the same property is in escrow for $288,000, she said.

"The market is starting to stabilize as far as single-family homes, but condos and townhouses are still firing away," she said.