By LISA SCONTRAS
Custom Publishing Group

As the local real estate market transitions from a selling frenzy to more stable territory, the landscape has changed significantly. Analysis of home sale statistics reported last week reveal some less obvious facts that may help buyers and sellers navigate the future.

One such fact is the Months of Inventory Remaining figures — which in August were at 5.1 months for single family homes and 5.4 months for condos. Months of remaining inventory is a market indicator that combines supply and demand into a single statistic by projecting how long the current listings (supply) will last at the current sales rate (demand).

While the August numbers are slightly higher than the July figures, and more than double the all-time low figures in May 2005 of 2.0 and 1.2, respectively, inventory levels are still relatively low when compared to the 15 to 20 months of inventory remaining throughout most of the 1990s.

"In fact, it's because inventory is still pretty low that will prevent us from seeing any meaningful declines in price," says Mike Sklarz, head of analytics at New City Corporation.

Sklarz, who tracks Mainland markets as well, says that cities like Phoenix and Las Vegas are having problems because of the new inventory created with lots of new construction.

"We can learn a lot from tracking those markets," he says. "We've always very closely tracked the California markets — primarily Orange County and Los Angeles.

"California peaked out at least a year ago, and usually they lead Hawaii by 12 to 24 months — so that we've peaked out recently is right in line with that trend."

Experts stand by their predictions that prices will level off rather than drop much.

"We will most likely see sideways appreciation for the next three years at least," says Sklarz. "There are two ways for markets in general to correct: prices can come crashing down — like they often do in the stock market, or they can correct over time. Real estate markets tend to correct through time."

Ricky Cassiday, market analyst and president of Data@Work agrees.

"Prices will definitely plateau, but the jury's still out when you say, ‘Will they drop?'" says Cassiday. "Sometimes I think there is some momentum left. I don't see why they shouldn't go up with the level of inflation, anyway."

When asked about the significant drop in median prices on the North Shore in August, both Cassiday and Sklarz recommend looking at the quarterly rather than the monthly statistics as the monthly numbers can be skewed dramatically by one sale.

"Real estate doesn't fall that much in a month," says Sklarz, referring to the 49-percent drop in price from July to August. "You would have to know how many sales went into the number?"

"Real estate cycles really play out over years, so looking at the monthly numbers, it's easy to make more out of something than is really there," he says.

Cassiday says he definitely doesn't see prices down in the long run and even has a hard time seeing them come down much at all.

"Hawaii is fairly unique relative to the rest of the world," says Cassiday, who believes the housing environment here is still positive. "It is so small relative to the number of people who like it."

"Florida is for New York what Hawaii is for California," says Cassiday. "Demand is still strong."

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