ILLUSTRATION BY KIP AOKI / KAOKI@STARBULLETIN.COM

Market slowdown reaches Hawaii

Hawaii, it appears, has caught the mainland's cold.

Although the median price of homes in the state continues to rise, sales have been decreasing for several months and market observers believe it won't be too much longer before prices begin leveling off.

Harvey Shapiro, research economist for the Honolulu Board of Realtors, expects prices to rise through this year before stalling.

"If history repeats, it will plateau," Shapiro said. "The '90s were atypical where we had price decreases. Historically, we have periods of large increases and then flattening out where the prices stabilize."

The signs of slowing sales are appearing statewide.

In March, single-family home sales fell 16.6 percent on the Big Island and 14.6 percent on Maui while edging up 4 percent on Oahu and 4.3 percent on Kauai. Condo sales declined 29.5 percent on the Big Island and 23.6 percent on Maui while rising 2.8 percent on Oahu and an unusual 96.4 percent on Kauai.

It's no longer a seller's market where almost any price goes and buyers fall over themselves making offers above the asking price.

"I think its pretty clear a buyer in the market has more choices and can take their time and make an informed decision whereas last year and the year before the market was so fast they had to jump," Shapiro said.

DENNIS ODA / DODA@STARBULLETIN.COM Saint Louis Heights resident Allyson McAdams grabbed a box to sort through Christmas decorations last April to decide what was worth shipping to Arizona. Her family was forced out of Hawaii because of the high-priced housing market.

"Prices are negotiated a little more," he said. "We've gotten to prices, especially on houses, where there are people who can't afford them or can't qualify. And we started to get more supply because of the prices going higher and more people putting their property on the market. Before the supply was very low and the demand was high. Now, we're getting more of an even supply and demand."

Gordon said he still sees good demand even though there's a larger supply. He said he's seen a gradual increase in the price of condos, which in March had a median price of $312,000 on Oahu. Single-family homes, which had a median price on Oahu last month of $650,000, are leveling off, Gordon said.

Nevertheless, Shapiro doesn't think it's too late to get into the housing market.

"I would recommend people buy at this time because prices will be going up," he said.

Bank of Hawaii Chief Economist Paul Brewbaker believes prices will continue to rise modestly at a decelerated pace characterized by low-single digit rates.

"But leveling off is probably as bad as we see things occurring at the moment," he said. "And I wouldn't expect too much of a decline, if any, in median prices although the high end may be somewhat more vulnerable than the middle."

Leroy Laney, a professor of economics and finance at Hawaii Pacific University, said volume tends to drop off before prices are affected.

"At some point we're going to see prices stabilize, hopefully with a soft landing," said Laney, who also serves as a consultant for First Hawaiian Bank.

During the mid-'90s, median prices fell about 20 percent over a period of four to five years. But Laney doesn't expect a repeat of that scenario.

"The real estate market typically doesn't behave like the equity or bond markets," he said. "They don't go up or down. They usually go up and then plateau before waiting a decade and then having another rise. But that doesn't mean it can't go down some."

Laney said a real estate market that keeps going straight up isn't good for the Hawaii economy because it hurts recruiting on the mainland.

"We would become more insular because we wouldn't be able to avail ourselves of the talent from somewhere else." he said. "It also would encourage migration for people who grew up here but can't continue here because they can't afford to own a home."