O'ahu home sales reach highest level since 1987

By David Butts and Frank Cho
Advertiser Staff Writers

The O'ahu housing market continues to sizzle, with the resale of single-family homes reaching its highest level last month since the Honolulu Board of Realtors began keeping records in January 1987.

A total of 381 single-family homes were sold in October, topping the previous high of 369 in July 1987, the Realtors said. Condominium sales time dropped to a median of 24 days, the shortest on record, the Realtors reported.

The boom in home sales has been spurred by the lowest interest rates in three decades, and investors deciding to buy real estate instead of stocks, analysts said.

"The number of sales and speed of sales are very similar to what we had at the height of the Japanese bubble," said Harvey Shapiro, research economist for the Board of Realtors, referring to the period in the late 1980s and early 1990s when Japanese investors pushed up real estate prices in Hawai'i, only to have them collapse as they pulled out a few years later.

Experts say the hottest market area appears to be Hawai'i Kai, where sales are up 25 percent and the median sales price has risen to $515,000 through the first 10 months of 2002, compared to an average of 11 percent for the rest of the O'ahu market.

Ricky Cassiday, a residential real estate consultant with Prudential Locations, also said prices in the metro Honolulu area — from Moanalua through Manoa — are heating up, rising 16 percent during the same period. The median sales prices for a single-family home in town was $385,000 last month, up from $330,000 a year ago.

On the condominium side last month, 524 units sold. Already, more condos have sold in 2002 than were sold in all of 2001.

"It is very competitive," said Claude Phillips, president of Mortgage Plus. "If condos are priced reasonably, there is massive competition in terms of multiple offers."

Still condo prices are well below the peaks they reached during the bubble. The median price in October was $158,500, up 37 percent from a year ago, but less than the $208,000 high set in October 1990.

The number of condominiums sold rose the most in metropolitan Honolulu, up 23 percent from a year ago, compared with a rise of 21 percent in East Honolulu and an island average of 20 percent.

Leeward O'ahu condo sales were up only 18 percent, but the average price on those condos rose 30 percent to $114,000 from $87,500, Cassiday said.

For O'ahu single-family homes the median price was $355,000 in October. That's up 24.5 percent from a year ago, but down slightly from the $360,000 median price in September, and well below the peaks of the late 1980s.

"Prices in the single-family market moderated a bit, down from the record level during the height of the selling season," Cassiday said. "On the other hand, prices for condominiums are at their record high for this market cycle, median prices could continue upwards."

Prices have been edging up most of the year as buyers take advantage of low interest rates.

The 30-year fixed mortgage rate reached 5.98 percent in October — the lowest in 32 years of record-keeping.

Meanwhile, three years of stock market declines have convinced many investors of the need to diversify their holdings, and that has led some to buy real estate.

"We have seen a lot of investment deals," said Richard Lindberg, vice president of Mortgage Plus. "We have one client closing today who normally invests in the stock market."

She is buying housing in Hawai'i because her daughter is out here, Lindberg said.

Others say Mainland baby boomers are buying in Hawai'i as an investment and a possible retirement home.

Phillips said about half of the buyers he sees are investors, and about half of the investors are from the Mainland, with the others coming from Hawai'i.

Regardless of the cause, the increased demand has put a dent in inventory. There are 1,181 single-family homes on the market this month, Shapiro said. That's down from a peak of about 2,500 homes on the market at any point in 1996.

Shapiro said 1,551 condominiums are available for sale now compared with about 5,000 at the condominium market's peak in 1986.

The combination of low inventory and increasing demand has made it a sellers market, says Phillips.

"Our clients aren't in a position to dicker," he said.