Home sales still strong
By Dan Nakaso
Advertiser Staff Writer
How hot is the O'ahu real estate market?
More single-family homes were sold in the first half of this year than were sold in all of 1995 or 1996. In May, the median price for a single-family home reached $360,000. That topped the median price for 1990, the last year of the Japanese-led investment bubble.
Hawai'i's real estate market is "very, very strong," said Alex Perriello, president and CEO of Coldwell Banker, a division of Cendant Corp.
The same can be said for much of the country. The National Association of Realtors is forecasting that 2002 will be the best year ever, with 5.4 million home sales, up from last year's record of 5.3 million.
The lowest interest rates in three decades are a key reason for the surge in home sales, but they are not the only thing driving this market, Perriello said. Demand is building from older baby boomers who are inheriting wealth, looking toward retirement and buying second homes; younger baby boomers who are reaching their peak earning years; and the children of baby boomers buying their first homes.
In addition, an increasing number of immigrants are "coming here with that American dream of owning a home," said Perriello, who was in Waikiki with 700 of the top sellers for his real-estate company.
The question for many agents and potential buyers is: How long will the boom last?
"What concerns me is that real-estate markets tend to peak two or three years after a stock-market peak," says Ian Morris, an economist at HSBC Securities in New York. The U.S. stock market peaked in March 2000.
That doesn't necessarily mean a big crash in housing prices is coming. Home prices traditionally don't tumble as far or as fast as stocks. A large number of economists believe prices in the most expensive areas may simply stagnate — or slow to a more normal rate of appreciation. They point to strong demand from immigrants and tight supply of new homes as factors that should keep home prices strong.
"It looks like the momentum will continue like it is for at least the rest of the year," said Guy Tamashiro, chairman of the Honolulu Board of Realtors.
Low interest rates are the key reason, Tamashiro said. And the market will stay strong as long as interest rates stay down, he said.
Hawai'i's home buyers are benefiting from interest rates at close to 6 percent for 30-year mortgages.
Ricky Cassiday, owner of the real estate consultant company data@work, said concerns of a local real estate bubble are unfounded.
"In Hawai'i, we saw the biggest bubble in U.S. history with the Japanese investment bubble," he said. "So we're used to that and we know the effects of it. We are way at the bottom of a cycle."
While single-family home prices are nearing the peak level set in 1994 when the median price for the year was $360,000, the median price for condominiums in O'ahu was $157,000 last month, still well below the peak in 1993 of $193,000.
"We've just started to climb upward and are nowhere near the top," Cassiday said. "That market can go up for a long time."
Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.
