O'ahu new home sales up 74 percent in October

By Andrew Gomes
Advertiser Staff Writer

In a bright spot in Hawai'i's economy, new home sales last month on O'ahu were brisk, sustained amid a slowing economy by some of the lowest mortgage rates in years.

The sales figures for the month following the Sept. 11 terrorist attacks were seen as a positive sign that consumer confidence and spending are holding up well in the face of widening job and wage cuts in the local economy.

But market analysts cautioned yesterday that they suspect sales momentum will slow in the next few months as the downturn in the economy lingers.

Residential developers sold 167 new homes last month, a 74 percent increase over the 96 homes sold the same month a year ago, according to an islandwide analysis by Prudential Locations research consultant Ricky Cassiday.

The results were the first increase in new homes sales for October in the past three years. And they coincide with a 13 percent increase in resales of existing homes on O'ahu last month.

Cassiday said sales in Mililani drove the bulk of the new home transactions, while the opening of four new projects, three of which were in Hawai'i Kai, provided an extra boost that created an anomaly for the month.

Yet even sales, or purchase contracts, year-to-date through October were up 6 percent — to 1,480. Year-to-date closings, or completed sales contracts, were up 16 percent to 1,322.

The 310 closings in October — three times the number in October 2000 — suggests that home buyers did not bail out of previously agreed-upon purchase contracts in the wake of the terrorist attacks that disrupted Hawai'i's tourism industry and sent shock waves across the local economy.

"Everybody in the whole industry is experiencing increased sales," said developer Stanford Carr, who began selling homes at The Peninsula in Hawai'i Kai on Oct. 5. "It's beyond what we had projected or expected. It's been great, thank God for that."

Carr said he has sold 31 of 40 available units for between $285,000 and $900,000, with sometimes as many as three or four back-up offers on a single unit.

Castle & Cooke Hawaii's Mililani and Royal Kunia projects reported 42 sales last month, compared with 27 in October 2000. Closings totaled 57, compared with 38 for the same year-ago month.

"We've been impacted by Sept. 11, but it's been offset by a low interest-rate climate that is bringing people into the market," said Bruce Barrett, sales manager and principal broker for Castle & Cooke.

Cassiday predicts that the fast pace will slow either in December or January as effects of job losses and wage reductions for thousands of Hawai'i residents begin to outweigh the benefits of rock-bottom mortgage financing rates.

"I know (sales) will slow down," he said. "There are two factors in effect: falling interest rates and a deteriorating economy — and employment and income trump affordability."

Barrett expects to begin to see signs of a slowdown in the first quarter of next year. Yet Carr hopes interest rates, combined with a recovering stock market and returning confidence in the U.S. economy, will be strong enough to avoid slowing the momentum of new home sales.

"We take it day by day, week by week, month by month," Carr said. "We're off to a good start. Hopefully it'll continue."

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.