There are “;green shoots”;—signs of recovery—in Hawaii's real estate market, but they will need serious fertilizer to take root.

That was the assessment of a speaker's panel at yesterday's Hawaii Developers' Council annual mid-year real estate forecast.

“;I do see a pattern of stabilization showing up, which is the basis for the recovery that will occur,”; said economist Paul Brewbaker.

He called the current economy the “;Great Recession”; because it's not as bad as the Great Depression, but it's worse than a normal recession.

Shrinking inventory and growing affordability are among the most visible green shoots emerging in Hawaii real estate, the panelists said. But full recovery will not be possible until consumer confidence returns, the credit market eases and the health of Hawaii's tourism industry improves, nourishing these tender shoots, they said.

Hawaii's housing market has rebounded slightly in the last six months after experiencing a significant drop in single-family home and condominium sales following the Lehman Brothers collapse in September, which was like “;green shoots meet lawn mower,”; said Brewbaker, who is the principal of TZ Economics.

“;I would hazard a guess that that was the bottom for both of these cycles,”; he said. “;People freaked out after Lehman Brothers, but now they are over that.”;

While residential home sales may be stabilizing, Brewbaker said home prices will drop further.

“;Oahu prices are vulnerable to downside risk. I expect we could see another 10 percent drop and that the (single-family) median may be around $525,000 to $530,000 next year,”; he said.

Lower demand for residential real estate and declining sales this year caused Oahu's total sales volume to drop 40 percent off of an already lackluster year, said Harvey Shapiro, research economist for the Honolulu Board of Realtors. But as the market has weakened affordability has improved, Shapiro said.

While it took about 60 percent of a family's income to buy a median-priced single-family home in 1999, it took about 46 percent last year, he said.

“;2009 will be a slow year, but it's not going to be disastrous,”; Shapiro said.

Brewbaker said the market will need to stabilize before it begins to recover slowly.

“;In 2010 and 2011 no one will believe that the market is in recovery,”; he said. “;By 2012, a few people will believe and by then the hedge funds will have bought everything.”;

Meanwhile, tight control of Oahu's housing permits and limited inventory will result in another housing bubble, Brewbaker said.

“;I'm pretty sure that it will happen again, and likely in the 20-teens,”; he said.

Depressed economic conditions also have continued to wreak havoc on Hawaii's commercial, retail and resort real estate sectors.

Vacancy rates for Oahu office space dropped to 6 percent in 2006, but are now about 9.2 percent, said Norb Buelsing, president of A&B Properties Inc.

“;The good news is that inventory in office is not growing, and hopefully that means that there are opportunities,”; Buelsing said.

Oahu's retail real estate market has slowed, too, said Mark Bratton, president of Bratton Realty Advisors Ltd.

“;The marketing time to lease these properties has gone from 191 days to a year,”; Bratton said, adding that average retail rents are down 5.9 percent from year-end 2008.

PETCO, Longs Drugs, Safeway, Walgreens and Lowe's are expanding; however, many other retailers such as Hilo Hattie, Starbucks and Jamba Juice are downsizing, he said.

Hawaii's resort real estate has been particularly hard hit, said Joe Toy, president of Hospitality Advisors LLC.

Hawaii's hotel industry has lost $816 million since April 2008, Toy said.

“;They are averaging a loss of $51 million a month, or $1.7 million a day,”; he said, adding that the industry lost $300,000 during the three-hour panel discussion.