Prudential CEO predicts slight gains this year

By LISA SCONTRAS
Custom Publishing Group

After posting record-high median sales prices of $590,000 for single-family homes and $269,000 for condominiums for the year in 2005, Oahu’s housing market is expected to sustain moderate growth in 2006.

And while some experts still believe that anticipated interest rate increases may temper market activity to some degree in the coming year, Prudential Locations president Bill Chee contends the strength of the market, along with underlying economic conditions, are expected to mitigate the predicted slowdown in residential housing activity.

“The economy is really chugging along,” says Chee. “Despite all that has happened — the war, the floods and increased energy prices — it remains resilient and continues to perform well.”
In fact, Chee doesn’t feel the slight rise in rates in 2005 had much of an effect on buyers.

“Normally, when interest rates go up — even half a percent — it excludes some people from the market,” Chee explains. “But with the popularity of exotic mortgages which made it possible for those people to still buy, rate increases didn’t really have an impact on their ability to purchase.”

Locally, the market’s near record-setting pace of appreciation in 2005 hit 26.9-percent increases in single-family home prices, and 28.1-percent increases in condominium prices — coming in second to the growth in 1990 of 31.5 percent and 38.6 percent respectively.

But according to Chee, unlike the downturn that followed the run up in the early 1990s, the outlook for 2006 is not so much a drastic change in market sales or prices but a more normalizing of the market.

“Prices are not going to go up 27 percent this year — that kind of growth is unsustainable,” Chee continues. “But rather, the balance between supply and demand we’ve struck means returning to the fundamentals. Sellers are going to have to work harder to achieve those numbers — and the true winners are going to have to return to the basics of a good marketing plan, realistic pricing and preparing their homes for sale.”

And buyers need to be more realistic too, according to Chee, by thinking more long term.

“In 36 years of doing business, never have I heard someone — who has held a property for 10 years — say that they regretted buying real estate,” maintains Chee. “I’ve heard people regret buying stocks, and I’ve known people who regretted not buying real estate. Ten years from now, it’s reasonable to expect that people will look back at home prices in 2006 and wished they would have bought something.”

Chee predicts that home sales on Oahu will continue to rise well into the next 12 months, just not as robustly as they did last year.

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