Housing primed for ‘soft landing’
Oahu market experts expect real estate to avoid a dramatic fall
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Honolulu's residential real estate market might soon be coming in for a soft, but somewhat bumpy landing.
Higher inventory buildup and a 59 percent drop-off in high-end sales over the $1 million mark are among the signs that the cycle, which peaked in 2005, is gearing up to land. Consumer confidence, which has been sharply hit by the mainland mortgage crisis, the frenetic stock market and the rising cost of fuel and other necessities, could control the speed of the descent.
Single-family home sales dropped a dramatic 31.4 percent for single-family homes in June and 35.1 percent for condominiums. Home prices, however, remained more stable, according to statistics released yesterday by the Honolulu Board of Realtors.
More than half of single-family homebuyers paid more than $625,000 for a house in June, an 8.8 percent decline from the year-prior $685,000. Meanwhile, the median price paid for a condominium in June decreased a scant 1.9 percent to $327,500 from $334,000.
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Oahu's residential real estate market, which peaked in 2005, is moving full speed ahead for a landing fueled by the continued drop in consumer confidence in Hawaii and on the mainland.
Brace yourself. Experts have said that there will be a few bumps before the market comes in for a soft landing.
Sales on the decline
The number of homes sold on Oahu in June with the median price and percentage change from the same month last year:
| Homes |
| Sales |
| June 2008 |
232 |
| June 2007 |
338 |
| Change |
-31.4% |
| Median price |
| June 2008 |
$625,000 |
| June 2007 |
$685,000 |
| Change |
-8.8% |
| Condos |
| Sales |
| June 2008 |
355 |
| June 2007 |
547 |
| Change |
-35.1% |
| Median price |
| June 2008 |
$327,500 |
| June 2007 |
$334,000 |
| Change |
-1.9%
|
Source: Honolulu Board of Realtors
|
"We are going to see a soft landing, but it will have a sloppy, bumpy bottom for months to come," said Chason Ishii, president of Coldwell Banker Pacific Properties. "It's going to be down one month with signs of recovery the next and down again. We won't see sharp peaks and valleys."
Looking back, it was a wild, frenzied ride to the top of Oahu's frenetic residential real estate market when properties changed hands in a few weeks and buyers sent in multiple offers on tear-downs -- sight unseen.
Those days are gone. Now and in the months to come, it will be a frenetic ride to the bottom.
"No one knows how long it's going to take, but some of the signs are already there," Ishii said. "We have the highest inventory buildup in nearly a decade, and a 59 percent decrease in the number of closings in the $1 million market for the year has negatively impacted the market."
Single-family home sales dropped a dramatic 31.4 percent for single-family homes in June and 35.1 percent for condominiums. Home prices, however, remained more stable, according to statistics released yesterday by the Honolulu Board of Realtors.
More than half of single-family homebuyers paid more than $625,000 for a house in June, an 8.8 percent decline from the year-prior $685,000. Meanwhile, the median price paid for a condominium in June decreased a scant 1.9 percent to $327,500 from $334,000.
"The median price paid for a single-family home in June was 8.8 percent lower than a year ago, but remember that the price in June 2007, at $685,000, was the highest median ever achieved," HBR President Dana Chandler said.
Last month's single-family home median sales price strongly reflected the slowdown in the $1 million-plus market, Ishii said. In June 2007, there were 71 sales over the $1 million mark, he said. Last month, there were only 29, Ishii said.
"We are seeing the biggest drop-off in investors and second and third homebuyers from the West Coast, which has been hard hit by the mortgage crisis," Ishii said. "First-time homebuyers, who have greater difficulty getting loans, have also reduced their activity."
However, local buyers who already own properties and want to change their living situation are still consistently active on Oahu, he said.
"They know that it is clearly a buyer's market and some of them are taking advantage of the still historically low interest rates and their strong negotiating positions," Ishii said.
For the year, single-family home sales have dropped 25.7 percent and condominium resales have dropped 27.5 percent, leading some sellers to make repairs, help with closing costs, offer financing or accept offers that are contingent on other sales.
The annual sales rate, which reached 13,000 units at the peak of the market in 2005, now has fallen below 8,000 units, said Harvey Shapiro, HBR's research economist.
"The residential markets could see further slowing throughout the summer," he said. "However, I feel that the market has declined so much that we'll see demand pick up later this year."
Home prices, on the other hand, have remained relatively steady despite ongoing economic upheaval.
"Sales demand in the Oahu housing market has been slowing, but median prices are remaining within the same range we've seen since 2005," Chandler said.
The median price paid for a single-family home on Oahu has declined only 2.5 percent for the year and the median price for a condominium has increased by 1.5 percent.
