Home-price outlook dim

STORY SUMMARY » | READ THE FULL STORY

Despite home prices expected to fall by 3.6 percent this year on Oahu, Hawaii real estate is still unreachable for many consumers, according to a new report.

Economists are now predicting single-family home prices to decline by 3.6 percent this year to $616,610 from $639,420 last year and by more than 5 percent in 2009 to $584,780, according to the latest construction report by the University of Hawaii Economic Research Organization.

However, the projected slowing of median household income is expected to keep housing costs high, the report said.

---

FULL STORY »

Oahu home prices are expected to fall even further than anticipated over the next few years, though homes are still unreachable for many consumers having difficulty acquiring mortgage financing, according to a new report.

Though relatively modest compared to mainland markets where prices have plummeted, economists now predict single-family home prices to decline by 3.6 percent this year to $616,610 from $639,420 last year and by more than 5 percent in 2009 to $584,780, according to the latest construction report by the University of Hawaii Economic Research Organization.

"The primary reason the home-price forecast is slowing is because of expected slower job growth or job loss," said UH economist Carl Bonham, co-author of the report. UHERO predicts zero job growth for 2008.

The latest home-price forecast was lowered from a year ago by about $17,000 for 2008 and $62,000 in 2009. In March, the median home price was expected to slide by 3 percent this year and 2 percent in 2009.

In addition, condominium prices are expected to fall 1 percent this year to $328,080 from $324,790 in 2007. It's expected to drop nearly 4.9 percent to $312,170 next year.

Even with a decline in home prices and more attractive mortgage rates, the projected slowing of median household income is expected to keep housing costs high, the report said.

Meanwhile, real permits are expected to fall 8.4 percent this year to $4.1 billion - 2.6 percent more than reported last year. Real permits are forecast to decline nearly 2 percent to $4 billion in 2009 before bottoming out in 2010 at about $3.9 billion in 2007 dollars.

Real residential building permits also are expected to fall 20 percent this year and 6 percent in 2009.

Despite skyrocketing energy costs in the first half of this year, UHERO expects deceleration in construction cost inflation over the next several years, with costs rising by 4.9 percent this year and 4.7 percent in 2009, before falling to 4.3 percent in 2010.

Economists predict that construction employment for 2008 will remain close to the 2007 average of 39,000 jobs. However, construction jobs are expected to drop to 37,000 jobs by 2010.

Despite the lower forecast, Hawaii has dodged the severe crisis seen in mainland markets because of the strength associated with military housing privatization, hotel and retail projects and state and local government spending on construction, Bonham said.

"While residential has been declining, other sectors have been picking up a little steam allowing the overall construction sector to be more stable than what you would see in California," he said.

The downward cycle is expected to be more mild than what we have seen in past cycles, Bonham added.

However, some developers say this is the worst downward cycle they have seen to date since global factors - including higher oil prices - are making everything more expensive while the mainland economy is in turmoil, unlike the mid-to-late 1990s when the national economy was stronger.

In addition, the tightening of the credit markets is affecting the ability for buyers to obtain higher mortgage loans necessary to purchase a home in Hawaii, said local developer Stanford Carr.