Home price climb finally over

The median declines for the first time since the boom, but experts predict a soft landing

This time last year, real estate watchers were scratching their heads wondering just how high the market could go.

Now the most popular question is, "How low can it go?"

The median price paid for a single-family home on Oahu slid 4.8 percent in November, which marked the first year-over-year decrease in home prices since the market took off in the late 1990s, according to the Honolulu Board of Realtors.

The situation was the same on Kauai and the Big Island last month, as the once-frenetic real estate market finally saw prices headed groundward.

Less inventory and reduced demand has transformed one of Hawaii's hottest real-estate cycles into a slower-moving, buyer's market. The good news: It looks like a soft landing. Bank of Hawaii Economist Paul Brewbaker still says, "This ain't no stinkin' bubble."

Scott Higashi, vice president of sales for Prudential Locations LLC on Oahu, agreed: "We're still nowhere near a monumental fall in value. During this cycle, we don't expect to see any double-digit rises or falls."

While November's results might have caused some of Hawaii's most recent buyers to experience remorse, median prices have been essentially flat for about 18 months, Brewbaker said.

While Brewbaker cautioned that one month does not a trend make, he said at this point in the market he would have been more surprised to see a modest home price increase than an equivalent decrease.

"I don't expect to see any real significant upward movement in prices until sometime between 2008 and 2012," he said.

The change in sales volume is more dramatic, Brewbaker said. "We have 25 percent less trades on Oahu than there were two years ago, which means either one out of every four Realtors needs to get out of the industry, or that everyone has to make do with less business," he said. "Either way, that's not good."

While the drop in sales volume may have real estate agents hurting, the drop in prices has sparked broader interest. The November 2005 median was $640,500. Last month, Oahu buyers paid a median $610,000 to purchase a single-family home. They also bought 19.9 percent fewer of them.

Lowered tolerance for high home prices was also reflected by an increase in prices paid by condominium buyers on Oahu. The median price paid for a condominium on Oahu rose 6.9 percent to $310,000 from the year-ago $290,000 as more buyers sought lower-priced inventory, said Harvey Shapiro, research economist for the Honolulu Board of Realtors.

Oahu's condominium sales outnumbered single-family home sales by 128 units, even though condo sales dropped 32.5 percent last month as the real estate market continued to stabilize.

Last month, there were fewer new listings, 474 single-family homes and 672 condominiums became available, compared with 628 and 1,003 during the same period last year, which helps achieve this balance, said Mary K. Flood, president of the Honolulu Board of Realtors.

Oahu is coming off a period of very high sales in 2004 and 2005 and returning to a more normal marketplace, Shapiro said.

"We had 13,000 sales per year in the third quarter of 2005, as compared to 4,000 a year in 1995 and 1996," he said. "Now we're at about 10,500 units."

Sales in a normal Oahu market range from 7,000 to 8,000 a year, he said.

Buyers, sellers and real estate industry professionals found that they were dealing with similar market conditions on Kauai and the Big Island.

Kauai's single-family home sales decreased 20.5 percent from the previous November and condominium sales declined 60.94 percent during the same period, according to data released yesterday by the Hawaii Information Service.

The median price paid for a single-family home on Kauai fell 14.43 percent to $590,000, a decline of $99,500 from November 2005. The median price paid for a condominium fell by 9.53 percent to $415,240, a drop of $43,760 from the prior year.

On the Big Island, the median sales price and sales were down for both single-family homes and condominiums in November.

More than half of single-family home buyers paid at least $370,000 for a single-family home; that's a 3.65 percent drop over the previous year's $383, 999 median. The median price paid for a condominium fell 10.07 percent to $335,000 from $372,500 in November 2005.

The Big Island's single-family home sales fell about 32 percent, and condominium sales fell about 66 percent in November.

"We're seeing asking prices come down more than selling prices come down," said Mary Begier, who owns Mary Begier Realty on Oahu and the Big Island. "The soft landing is good. It means we all get to be humans again."