Real estate agent Margaret Murchie lost two luxury home sales earlier this year after her customers read a forecast from Moody's Economy.com that predicted Honolulu's home values would fall 31 percent by 2011.

“;People here on the islands tend to believe what they read,”; said Murchie of Coldwell Banker Pacific Properties. “;The media is very influential and can create consumer anxiety to make a move.”;

The forecast, which was the 13th worst of 381 metro markets, garnered widespread media attention. However, despite dour predictions, Murchie and other Realtors are still making sales, and prices are still rising in some Honolulu neighborhoods.

That's the problem with macro- level real estate reporting, it doesn't give the whole picture, said Hawaii economist Michael Sklarz, co-founder of Sherborn, Mass.-based Collateral Intelligence, which has an office in Honolulu. Sklarz, who is not a member of the real estate industry, has spent the last 25 or so years of his career challenging the notion that an entire real estate market can be defined by a single median measure.

You can't judge a book by its cover and Sklarz says you can't estimate the value of all homes and condominiums in Honolulu's real estate market using one median price, either.

“;Most convention data is too broad to be meaningful,”; Sklarz said. “;It overstates the decline in these metros, and the average person on the street then assumes that every home in the market is down by that much.”;

Drilling down to value

The vulnerability of Oahu's housing market has been garnering negative media attention for some time. However, according to Sklarz's micro-level research, it's not all gloom and doom. From the fourth quarter of 2007 to the fourth quarter of 2008, home values in Hawaii Loa Ridge, Aiea Heights, Coconut Grove and Enchanted Lakes were still growing and values in Waialae Iki had only slipped slightly, he said.

Conventional ways of using data from the entire market to judge specific real estate performance fall short because when it comes to Oahu real estate or any other region, the data is different down to the ZIP code, neighborhood or even the individual home, Sklarz said.

“;To get a real measure of the market, you have to drill down the numbers to a granular level,”; he said. “;There can be hundreds of neighborhoods within each ZIP code and they all perform differently.”;

When Honolulu's ZIP codes, neighborhoods and even individual properties are put under a microscope, they exhibit a huge range of price performance, he said.

“;That is particularly the case in Hawaii,”; said Stan Humphries, vice president of data and analytics at Zillow.com, a free online real estate community. “;Across the Honolulu cities that we measure, there is a 16 percentage-point difference in the year-over-year performance.

According to Zillow's latest home-value index, Ewa Beach is down 13.7 percent year over year. However, Laie is up 2.8 percent on a year-over-year basis, Humphries said.

Zillow statisticians use a propriety algorithm to calculate what they call a home's Zestimate — the home's estimated market value on Zillow.com. The company calculates its home-value index by using the median zestimate for a given region and adjusting it for bias.

“;There is a substantial amount of local variation in real estate performance,”; he said. “;We need transparency down to the house level.”;

Zillow, whose primary focus is providing free home-value information to consumers, has valuations dating back to 1996, Humphries said.

“;While tracking median prices and sales activity provides useful data points, the more granular you can get in a metric, the better,”; he said.

Neighborhoods differ

There's no doubt that the Honolulu market is in a downturn, but market conditions are not dropping everywhere, said Bill Chee, president and chief executive of Prudential Locations LLC, where Sklarz first began to pioneer his real estate data.

“;It all comes down to which neighborhood that you are discussing,”; said Chee. “;If you took the average price and it went down, it has nothing to do with you unless you were impacted.”;

For instance, Sklarz calculates the islandwide price paid per square foot on Oahu was $407 during the fourth quarter of 2008, a 9.98 percent decline from the same period in 2007. However, when you examine the ZIP code level on Oahu, some areas have observed higher or lower price declines, he said.

Upper Makakilo, where the median price per square foot fell to $311 in the fourth quarter of 2008, led the market decline with a 19.43 percent drop from the fourth quarter of 2007. However on the other end of the spectrum, Hawaii Loa Ridge's $548 median price per square foot, represented a 9.6 percent market gain from the prior year.

While Sklarz's methodology is getting more play on the mainland, Murchie estimates that many of Honolulu's real estate community are still unaware of his research. However, she hopes that the uncanny accuracy of his micro-level data will attract more local attention, she said.

“;We have areas that are much healthier in all aspects of the market and those that are suffering more right now,”; Murchie said. “;(Sklarz's information) is a pretty accurate picture of what is going on in the neighborhoods.”;

While there are some listings in Hawaii Loa Ridge that have languished on the market, Murchie said that she has had a lot of success in the neighborhood and Coldwell Banker has realized some incredible sales in the past six months.

“;One of our listings sold in 16 days for $4.8 million,”; she said. “;Another of our Coldwell Banker listings sold for $6.8 million in less than six months and the same house sold for $3 million in 2006, $5.95 million in 2007 and $6.8 million in 2008.

But, selling prices aren't determined strictly by size and location, Murchie said. “;Our Hawaii market is very complex. Location, views and quality of design and construction are important,”; she said. “;Some homes are just special.”;

Of course, whether or not this information is relevant depends on the situation, Chee said.

“;For most people, it doesn't really matter if the price goes up and down if they aren't refinancing, selling or buying a home,”; he said. “;However, don't you think, this is the kind of information a consumer deserves to know?”;

Banks and lenders are starting to pay more attention to this data, too, Sklarz said.

“;We've begun to work with the big banks because they need to know if it makes more sense to modify a loan or resell the property,”; he said. “;They need to know the net present value to make these decisions.”;

Macro versus micro

But while the real estate and lending industries have begun to understand and use micro-level data to interpret specific market performance, consumers are still being inundated with reports that indicate free-falling housing prices without geographic, price level or other qualifications, Sklarz said.

Macro models, which represent the bulk of the forecasting methods, often throw all property types, price brands and characteristics such as size, style and year built into the mix, he said. “;Most of these like Moody's know nothing about the Hawaii market,”; Sklarz said. “;They have metro-level data so they don't really know the fundamentals to determine what's going on in our market. It's not a good idea for people to take them seriously.”;

On the contrary, micro-market models more accurately reflect price trends on an individual property basis because they narrow the forecast down into neighborhood geographies, property types, and property characteristics, he said.

Homeowners or prospective buyers or investors or lenders who use data from the National Association of Realtors, the U.S. Census Bureau, the Office of Federal Housing Enterprise Oversight (OFHEO) house price index, the S&P Case-Shiller National Home Price Index and data vendors such as First American CoreLogic to set home values may find huge swings as they move from source to source, Sklarz said.

“;The Case-Shiller index is biased downward compared to the typical home in a market,”; he said. “;Most owners fare much better than suggested by Case-Shiller.”;

The NAR's median home prices and OFHEO's house price index often are upwardly biased, he said. The Census Bureau's statistics sometimes show high volatility, Sklarz said.

Many home price series and indexes rely on paired sales, list prices or fail to properly account for physical characteristics such as size, he said.

“;When you look strictly at past sales prices, it's like looking in the rear-view mirror of a car,”; Murchie said. “;It is scary to think that our government and the Wall Street “;cleanup crew”; may make decisions based on this data.”;

When unfiltered and unqualified negative data are used to define a real estate market, it can become a self-fulfilling prophecy, Chee said.

“;They often drag in a lot of national components that don't exist here,”; he said. “;We don't have the foreclosure and subprime problems that Florida, Arizona and Nevada have experienced.”;

Chee said he can't recall the last time that Moody's Economy.com actually got a Honolulu forecast right, but it is hard to refute information once it is out there. “;I think they are doing a lot of damage,”; he said.

Downward forecasts have the power to stop sales because psychology plays a strong role in real estate, Sklarz said.

“;Real estate is a big ticket item so people have to feel comfortable about their job prospects and about the market's prospects to purchase a home,”; he said. “;It's different than just buying a hamburger.”;