In what may be an early signal that Hawai'i's red-hot real estate market is starting to cool, the number of existing homes sold on O'ahu slowed significantly in July.

July sales were down about 11 percent from a year ago, the Honolulu Board of Realtors said yesterday. It was the biggest decline in nearly four years, and surprising because it occurred during what is typically the strongest sales month of the year.

If the slowing sales trend is not reversed in coming months, nearly a decade of growth in single-family home sales will end this year. A sustained slowdown in sales may eventually lead to a drop in prices, although that hasn't happened yet.

"While it appears that our sales growth trend, which started eight years ago in July 1997, may be coming to an end, this is certainly not the case for median prices," said Harvey Shapiro, board research economist.

The median price for single-family homes in July was $599,000, up 25 percent from $480,000 a year ago and just shy of the record $610,000 set in May.

"There's a peaking that's going to occur (in median prices), but we won't see that in 2005," said Jim Wright, president and chief executiveof Century 21 All Islands.

For condos, the median price reached a new high of $270,000 last month, up 24 percent from $217,000 a year ago. The previous record was $265,000 set in May. The median price is a point where half the sales were for more money and half for less.

Many home buyers, including Hao Ma, a 42-year-old researcher at the University of Hawai'i, have given up on waiting for prices to decline.

Ma paid $265,000 for a condo in May after a couple of years fruitlessly trying to find an attractive single-family home at a price he could afford.

"The price gets higher and higher. ... There was no chance," Ma said. "We didn't have enough money."

Ma settled for a 3-bedroom condo in a Nu'uanu high-rise. "It's hard," he said. "Now rent is so high, but (purchase) prices are so high."

July sales volume for condos was down 12 percent to 684, compared with 776 in July 2004. The number of single-family home sales was down 11 percent to 418, compared with 467 a year earlier.

The declines were the biggest since late 2001 following the Sept. 11 terrorist attacks that shocked Hawai'i's tourism-dependent economy.

For the first seven months of the year, the number of single-family homes sold is down 1 percent to 2,618, compared with 2,650 sales from January to July last year. The decline last month combined with smaller drops in January, February and May.

Condo volume year to date was still positive, up 3 percent to 4,605, compared with 4,468 in the year-ago period.

For July, the sales volume drop for single-family homes and condos may be more significant because that tends to be the strongest sales month of the year. This year, July volume for single-family homes was even with April and below June. For condos, July volume was below volume in April, May and June.

Shapiro said at least one day of sales data likely was excluded from the July figures because of a computer shutdown, though it was unclear how many July sales were affected by the missing data, which will be incorporated into August sales.

Many brokers say the biggest constraint on sales is low inventory rather than any reduction in demand.

"Sales continue to be stifled by the lack of available inventory," said Judith Kalbrener, a principal with Re/Max 808 Realty and president of the Honolulu Board of Realtors.

The number of previously owned single-family homes available for sale last month was 958, which compared with 854 in May and 814 in April. The lowest single-family home inventory level was 784 in April 2004, according to board records dating to 1986.

Shapiro said anything below 1,000 is considered extremely low for O'ahu's single-family homes market, which fell below the 1,000-home mark in July 2003.

Condo inventory totaled 1,001 in July, which compared with a historic low of 935 in May.

The tight inventory has put pressure on prices as buyers competing for fewer homes find themselves bidding up prices. But prices also have been a limiting factor on purchases.

"I think the buyers are a little bit tentative," said Wright of Century 21. "They may be balking. I think they'd like to see prices stop rising."

But Wright said limited inventory is the bigger factor constraining sales. He also said developers of new homes — particularly new condos rising in Kaka'ako and Hawai'i Kai, and single-family homes built on the 'Ewa plain — may be drawing more buyers away from the resale market.

As long as interest rates, which are averaging around 5.5 percent for a 30-year mortgage, stay below 7 percent, Wright said he doesn't expect Hawai'i's housing-market expansion cycle to end. "I think it's way too premature," he said.