Posted on: Thursday, October 10, 2002

New homes keep selling

By Andrew Gomes
Advertiser Staff Writer

Hawai'i home builders continued their selling surge in August and expect business to remain strong for the rest of the year after dodging a prolonged West Coast dock shutdown that could have disabled what has become a lead driver of the state's slowly growing economy.

Consumers signed purchase contracts to buy 254 new homes on O'ahu in August, a 54 percent increase over the 165 sale agreements in August 2001, according to industry data compiled by market analyst Ricky Cassiday for Prudential Locations.

Average prices also were higher — at $352,477 vs. $295,389 for the comparable periods.

In a signal, however, that the peak of the annual selling season is past, the number of sales agreements in August was lower than the previous month, when 15 more units were sold. That was a 7.2 percent decrease after four straight month-over-month increases.

Still, developers said yesterday that they don't expect the typically slow fall season and holiday season to derail year-over-year increases that have prompted many to ramp up construction to satisfy demand currently outpacing supply.

"We keep chugging along," said Bruce Barrett, sales and marketing vice president for Castle & Cooke Hawai'i, the state's largest developer of homes. "Right now, there's so much demand we cannot meet. We're trying, but we're limited by the resources we have right now."

To help satisfy demand, developers are rushing projects into the pipeline and advancing phases of existing projects where they can.

After some delays, Castle & Cooke hopes to start sales in January at the Renaissance, a 230-unit project in Waipahu, and deliver the first units next summer.

Another builder advancing timetables for new projects is Schuler Homes, which would like to begin sales by the end of the year at High Pointe, a new 143-unit project in Makakilo.

Driving demand are low interest rates allowing more people to afford their first home or a larger home.

Also fueling purchases, according to Bank of Hawaii chief economist Paul Brewbaker, is personal income that grew 2.1 percent in Hawai'i during the first quarter.

In addition, he said, the job count is on pace to reach pre-9/11 levels by the end of this year.

Brewbaker said that the residential real estate development industry has not seen such growth in a decade and that the industry is leading the state's economic recovery.

Residential construction has grown to 60 percent of all private construction in the state during the 12 months through June, up from 46 percent in the 12 months ended June 1998, he said.

The majority of new-home sales are on the Neighbor Islands, where combined residential development has been a bigger business than on O'ahu for the last four years.

According to data tracked by Brewbaker, total Neighbor Island residential building permits were roughly $150 million greater than on O'ahu for the first half of this year, though he said O'ahu building is beginning to catch up.

"It's really residential (development) that's pushing us ahead," he said.

Typically, sales drop off in the last few months of the year, but industry experts said they don't expect much of a slowdown because a growing number of people are becoming convinced that it's a good time to purchase their first home or upgrade while interest rates hover at historically low levels.

"With interest rates as low as they are, people are going to take advantage as long as it lasts," said Richard Dunn, executive vice president of Haseko Realty Inc.

Cassiday said sales last year in September outnumbered August sales slightly — a reversal of typical seasonality that he suspects may be repeated this year despite the big sales numbers in the last several months.

Dunn said August was Haseko's best month ever, with 61 sales at the company's West O'ahu project Ocean Pointe, where homes sold ranged in price from $175,000 to $390,000.

"It's just been unprecedented," added Vicki Gaynor, vice president of Haseko's development arm Haseko Homes.

Developer Stanford Carr said the resumption of shipping to Hawai'i saved the industry from what could have been serious trouble if the West Coast port lockout had lasted a couple more weeks or longer.

Some developers also have been setting up their own general liability insurance to avoid rising premiums due to increased perceived risks of terrorist attacks, class- action lawsuits in California and insurance company losses in the stock market.

Schuler President Mike Jones said the company is working on providing insurance that would cover subcontractors. Carr said he already has established his own policy that provides general liability and workers' compensation insurance.

Having sidestepped potential troubles, the industry continues its track to finish the year well ahead of last year.

This year through August, developers sold 1,492 homes on O'ahu, up 32 percent over the same period last year when there were 1,127 sales.

Total completed sales, which normally lag behind new contracts by a few months, are up 12 percent at 1,012 for the year through August, compared with 902 during the year-ago period.

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