By LISA SCONTRAS
Custom Publishing Group

As expected, Oahu home prices are leveling off as sales activity returns to more moderate levels. Sales statistics for the month of August are right in line with what experts predicted as the eight-year long period of expansion takes a breather.

According to data compiled by the research department at Prudential Locations LLC, prices in some of the neighborhoods on the Island went up slightly, some dropped, and some essentially stayed the same in contrast to the records set in previous periods.

“But just because we aren’t continuing to see double-digit price increases, doesn’t mean bubble,” says Scott Higashi, Prudential’s executive vice president of sales. “Comparisons to the all-time-high prices set recently will likely level off or even dip slightly — they just can’t continue to appreciate indefinitely — it’s all part of the natural cycle.”

Still, there are some areas that have appreciated. In comparison with a year ago, condo prices are up in Salt Lake, Ala Moana, Makiki, Kapiolani-University, Waialae-Kahala, Hawaii Kai, Kailua, Ewa, Makakilo, Central Oahu, and Pearlridge-Aiea. Of these, the top three areas with the largest price growth were Kapiolani-University which was up 26.5 percent, Pearlridge-Aiea which was up 22.3 percent, and the Waialae-Kahala area which was up 22.1 percent in August.

In other words, the median sales price for condos in Kahala — where half the buyers paid more and half the buyers paid less — was up to $532,500 from $436,050 the same time last year, according to Prudential Location figures.

Appreciation of single-family homes on the Island are essentially flat in comparison with prices a year ago, with a couple of exceptions.

“West Oahu, specifically Pearl City-Aiea area is still showing price gains,” notes Higashi.

Showing a 35-percent price growth from this time a year ago, anda 27-percent increase from July, the neighborhood of Pearl City-Aiea is most definitely the exception in an otherwise cooling housing market.

The biggest drops in prices have taken place in the North Shore single-family homes market and the Kaneohe condo market with a 51-percent and 9-percent drop, respectively from August 2005 figures.

Surprisingly, even in the areas where price growth has continued, including the Pearl City-Aiea area, activity level has dropped off when compared to peak periods, according to the Prudential Locations data.

But all of this too, is just part of the normalizing of the market.

Harvey Shapiro, research economist at the Honolulu Board of Realtors, says “The housing market on Oahu is currently in a state of transition, still adjusting to lesser sales as demand returns to a more normal pace.”

“We had an exceptionally long period of expansion — more than eight years starting from the second quarter of 1997 through the third quarter of last year,” Shapiro says. “Historically, previous ‘up’ phases in Oahu real estate cycles lasted no longer than five years before normal conditions were restored.”

Mary K. Flood, president of the Honolulu Board of Realtors, says “In August 2006, sales were approximately 30-percent less than last year. However, August 2005 was the best sales month last year and was also the peak sales month in this cycle.”

Looking forward, Higashi says there are still lots of sales taking place creating lots of opportunities for buyers.

“There is no crash on the horizon,” he says. “I think sales will continue to drop slowly, and prices will continue to appreciate slowly. Median prices will land around a 7- to 8-percent increase by the end of 2006.

“I think 2007 will probably see stable pricing with single-digit increases overall, with the number of sales probably staying low but stable too.”

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