Home sales expected to remain strong

By David Butts
Advertiser Staff Writer

Condominium and home sales in the Wai'alae Nui/Kahala area, as well as the rest of O'ahu, continue to boom. Richard Ambo • The Honolulu Advertiser

A total of 3,906 single-family homes sold last year, the largest number since the Honolulu Board of Realtors began keeping records in 1985 and a 14.7 percent increase over 2001. The dollar volume for single-family homes and condominium sales rose to $2.62 billion last year, a 31 percent jump over 2001, making real estate one of the few bright spots in an otherwise slow economy.

"Last year was extremely strong," said Herb Conley, managing director of Coldwell Banker Pacific Properties, the state's largest residential real estate firm. "It was much stronger than anyone predicted. It's still extremely strong."

To put last year's $2.6 billion sales total in better perspective, it was $1 billion more than home sale proceeds in 1999.

The median price of single-family homes was $335,000 last year, up 11.7 percent. That has led to stronger sales in the condominium market, said Bill Chee, chief executive officer of Prudential Locations. As prices rise for single-family homes, buyers switch to the more affordable condominiums. In all 5,406 condos sold last year, compared with 4,261 a year earlier. The median price for condos rose to $152,000, from $133,000 in 2001.

"It has been good across the board," said Chee, adding that Prudential Locations increased the staff by more than 40 percent last year to handle the booming business.

The strong year was capped off by December sales that Conley said had never been so high for the last month in any previous year.

December single-family home sales totaled 347 units, up 33.5 percent from December 2001, and the median sales price was $350,000, up 13.5 percent.

In the condo market in December, 487 units sold at a median price of $160,000. That's a 46.7 percent jump in units sold from a year earlier and a 23 percent rise in median price.

Only three other months last year had higher sales figures for single-family homes and condos than December. The median sales price of condos last month was the highest of the year, although single-family home prices were higher in May, August, September and October.

Industry experts say real estate sales should continue to boom as long as interest rates, which fell below 5.7 percent for a 30-year loan in December, stay low.

"My feeling is there is a lot of pent up demand being satisfied now," said Harvey Shapiro, research economist at the Board of Realtors. "It should continue as mortgage rates are low. The market has been weak for so long. This is long overdue. There is no sign of letting up."

Hawai'i's housing market has been expanding since a low point in 1996, creating a surprising six-year growth spurt going on seven.

"It is unheard of," Conley said. "We've never had an expansion cycle that has lasted this long."

Causing the cycle to last as long as it has are interest rates and price increases that have not been as radical as in past cycles, according to Conley. "If prices rise too quickly, you price the bottom out of the market," he said.

Added Shapiro: "We are in a period of reasonable, or moderate growth, after a decade of decline. I believe these prices will be sustained and we won't have the bubble."

An uptick in inventory, which shrank over the past decade, is helping to keep price increases moderate.

Shapiro said condo inventory bottomed in July at 1,403 units, then rose to 1,695 at the end of the year. Single-family home inventory sank this year to 1,162 in May, and had increased slightly to 1,181 in December.

Inventory levels for condos and single-family homes at the end of the year are still below December 2001 levels of 1,741 and 1,455, respectively, and far below peak levels of 4,700 and 2,500, respectively, in 1991.

Shapiro said some of the recent new listings are from people who because of increases in property values are finally seeing appreciation in their homes and can now afford to trade up.

Other buyers include first-time homeowners who have long delayed purchases and investors putting money into real estate instead of the languishing stock market.

The Honolulu Board of Realtors tracks only sales of existing homes on O'ahu. Home sales on the Neighbor Islands are not included in the board's report. Sales of new homes, which also increased last year, also are not included in the report.

Advertiser staff writer Andrew Gomes contributed to this report.

Reach David Butts at dbutts@honoluluadvertiser.com or 535-2453.