Posted on: Saturday, September 4, 2004

Home prices, sales drop

By Sean Hao and Catherine E. Toth
Advertiser Staff Writers

Existing home sales and prices dropped last month in Honolulu in what could be the first sign the sector is cooling off.

After setting and resetting records for much of the year, the median price for a single-family home fell 6.3 percent to $450,000 in August, compared with $480,000 in July, the Honolulu Board of Realtors said yesterday. The number of homes sold dropped 12 percent to 410.

Median prices for condominiums also dropped last month by 4.2 percent to $207,800, versus $217,000 in July. Condo sales dropped 6 percent to 728 units.

Real-estate experts said the cooling off of the hot market could be a good thing.

"I'm pleased by it; it was just growing too fast," said C. Scott Bradley, managing director of Coldwell Banker Pacific Properties, the state's largest residential real-estate firm. "The pace was getting so fast, appreciation was increasing rapidly, inventory was getting low. The market is just taking a little time to digest all of that. This is a blip in the trend rather than a reversal."

Comparing Hawai'i's market — median family income, interest rates, median home prices — to similar markets, Bradley believes home and condo prices will continue to trend upward.

"Prices still have room to appreciate," he said. "I suspect to see more appreciation through at least the end of the year."

Year-to-date, the total sales volume of existing homes and condos is up 36.1 percent to $3.01 billion, compared with $2.21 billion in the year-ago period.

As shocking as the recent increases in Hawai'i home prices have been, the rise has not been out of line when adjusted for inflation, according to local economists. Still, some drop off was anticipated given recent record prices and generally rising interest rates.

"It's still a terrific pace," said Bill Chee, president of residential real-estate firm Prudential Locations. "Last year was an unprecedented year, so you would expect some slowing."

He attributes the cooling to rising home prices that are driving buyers to look at less-expensive condos, thus shifting the market. And inventory hasn't kept up with demand, which also slows down home sales.

The number of single-family units sold last month fell to 410 from 425 in August 2003. Condos sold, on the other hand, rose to 728 last month from 646 the same period last year.

Residential sales are historically strong during the summer, with a slow-down in the market starting in August, Chee said: "The market is seasonal."

Local real-estate agents, however, said the O'ahu market generally remains strong. At $450,000, August's median home price remained 14 percent above the August 2003 level.

Margaret Murchie, broker and vice president with Coldwell Banker Pacific Properties, said the market's still hot, especially for upper-end homes.

"I've got buyers ... but I can't find anything to show ... Everything's gone into escrow," Murchie said. "It's nutty out here."

Last month, she sold a four-bedroom home in 'Aina Haina for $1.395 million. A property on Kalaniana'ole Highway near Niu Beach, which has been on the market for about a year, got two offers this week, starting at $2.49 million.

"We may have hit a slump for a week or so," Murchie said, "but new buyers are coming into the market ... It's really exciting."

Reach Sean Hao at 525-8093 or shao@honoluluadvertiser.com. Reach Catherine E. Toth at 535-8103 or ctoth@honoluluadvertiser.com.

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