By LISA SCONTRAS
Custom Publishing Group

The housing boom may have ended, but sales at historically healthy levels will continue and price appreciation will return to more normal patterns across much of the country, according to the National Association of Realtors.

Local economists confirm the Hawaii housing market has cooled as well and that both sales numbers and price growth will slow this year to more normal levels.

“The statistics suggest that the period of rapid price appreciation has ended,” says Paul Brewbaker, Bank of Hawaii’s chief economist. “Transaction volumes have been declining for about a year and a half and median single-family home prices on Oahu have been essentially unchanged for two or three quarters.”

Single-family homes median sales prices on Oahu were $615,000 in third quarter 2005, $620,000 in fourth quarter 2005, and $625,000 in first quarter 2006. Brewbaker points out that in the four Mainland markets which recorded a higher median sales price in 2005— Silicon Valley, San Francisco, San Diego and Orange County — all have also seen almost flat-lined appreciation in the recent quarters.

“I would say when price growth stays about the same for three to five consecutive quarters, that’s a trend,” adds Brewbaker, who still predicts a 10- to 15-percent appreciation this year.

“I thought Oahu would break $700,000 this year,” he says. “I don’t know, I think Oahu still has a shot at it.”

Brewbaker, who is part of a collaborative team of economists which make up the University of Hawai‘i Economic Research Organization, is a little more optimistic than his colleagues. The UHERO predicts the median price for single-family homes on Oahu to be $634,000 for the year in 2006, $666,000 in 2007 and $685,000 in 2008.

David Lereah, NAR’s chief economist, says the overall market is responding to the improvements in inventory. He says with the supply of homes picking up in many areas of the country, pressure is coming off of home prices.

“By the time we report second-quarter data, I expect most areas will be returning to normal rates of price growth,” says Lereah. “Consumers generally can expect normal price appreciation for the foreseeable future, providing solid returns over time.”

Harvey Shapiro, research economist at the Honolulu Board of Realtors projects that demand will remain strong enough for prices to rise throughout the year, but much slower than last year.

“I’m looking for approximately 5 to 10 percent increases,” he says.

“The statistics for May are right in line with our predictions of more normal market conditions.”

If you look at condominiums, however, the research department at Prudential Locations LLC indicates the data tells a different story.

“Although the last three quarters show the rate of price appreciation for single-family homes slowing, the median sales price for condos is still gaining ground,” says Dan Tabori, executive vice president of operations who oversees the company’s research efforts. “Third quarter 2005 showed a 27-percent increase over the same period one year prior, and in the fourth quarter that rose to a 31-percent increase. In the first quarter this year, the median sales price is up 34-percent over the year before to $309,000. This type of increase suggests that there is still some growth potential in the condominium segment of the market.”

Single-family home inventory went up 81.4 percent on Oahu in the first quarter of 2006, and 82.4 percent for condominium units, according to the Honolulu Board of Realtors.

But even with increasing inventories, Leroy Laney, professor of economics and finance at Hawai‘i Pacific University, says the forecast suggests a leveling off of prices more so than huge price drops in any of the segments.

“It’s not likely we’re going to see any big declines,” says Laney. “Although we shouldn’t rule out some declines. After the kind of appreciation we’ve seen, it’s only normal.”

Laney still regards interest rates as a positive economic factor.

“If you bought your first home 30 years ago as I did, you’ll agree that mortgage rates are still a bargain,” he says. “Rates have gone up some, and may go up some more, but overall, they’re still low.”

Low interest rates together with the fact that the stock market has not been performing is what has made real estate the asset of choice among baby boomers, says Laney.

But, he says, it’s only rational to realize that at some point, price increases have to slow down.

“If we can have a soft landing without any popping of the bubble, that’s a good thing,” says Laney.

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