O'ahu home prices following forecast
By Andrew Gomes
Advertiser Staff Writer
By Andrew Gomes
Get ready for more record-breaking months ahead for home prices.
O'ahu's median single-family home price hit a new peak of $668,300 in May, adding validation to local economists' predictions at the start of the year that median home prices would rise between 5 percent and 20 percent over last year.
Five months into 2006, that forecast — to the disbelief of many casual observers — is on the mark.
The median sale price of single-family homes bought from January through May is up 15 percent over the same five months a year earlier, according to the Honolulu Board of Realtors.
"The only question in my mind is whether O'ahu's median price will exceed $700,000 this year or next," said Paul Brewbaker, chief economist at Bank of Hawaii.
While prices continued to rise, sales were down 6 percent in the first five months of this year, and home inventory has more than doubled and interest rates are rising slowly.
"We've been expecting the sales to slow and the price growth to slow, and that's what we're seeing," said Carl Bonham, executive director of the University of Hawai'i Economic Research Organization.
Bonham said the main supporter of O'ahu's housing market is the local economy, which remains strong with a stable population, job market and rising incomes.
Higher interest rates, more home inventory and fewer sales aren't going to outweigh factors pushing up home prices, he said.
Bonham's forecast for median home price growth in 2006 is 8 percent, followed by a 5 percent rise next year.
At 8 percent growth, the median price for O'ahu single-family homes would set records of $675,000 in August and about $692,000 in November.
The median is a point at which half the prices are higher and half are lower.
Harvey Shapiro, research economist for the Honolulu Board of Realtors, forecasts a 5 percent to 10 percent gain in the median home price this year.
"The statistics for May are right in line with our predictions of more normal market conditions," he said in a statement. "The frenzied period of market expansion that lasted eight years is clearly over, and the O'ahu housing market is returning to steady-state, historical conditions."
If median home price growth this year stays in line with predictions by Shapiro and Bonham, 2006 would be the slowest growth since 2001 when the median rose 2 percent.
Prices this year have risen 15 percent over the same period a year ago, a growth rate that is about half of what it was for all of 2005 compared with 2004. From 1985 to 2005, annualized growth has been 7 percent.
The slowdown in price appreciation is restoring some balance between buyers and sellers as the market moves away from the extreme sellers' market it was.
Jim and Remle Winand in April bought a single-family home in Hawai'i Kai. But the nearby townhome they moved out of and are trying to sell is still on the market seven weeks later.
"We had plenty of people walk through, but no real good offers — not aggressive like before," Jim Winand said.
The Winands started asking $615,000 for their three-bedroom, 2 1/2-bath townhome, and backed off to $609,000 and then $605,000. But with market prices still rising, the Winands are hoping they will get a good offer.
"We can wait," Remle Winand said. "We think we're going to get a good price."
Buyers appear to be holding out or taking their time in making purchase decisions, as exhibited by the growing time homes are sitting on the market.
The median number of days single-family homes spent on the market in May was 52, a dramatic increase from 17 days a year earlier. Condominiums took a median of 38 days to sell, up from 15 a year earlier.
Despite more time sellers have their property on the market, there were more buyers of single-family homes last month — 374 sales, up 2 percent from 366 a year earlier.
However, condominium sales were down 13 percent to 605 last month from 692 a year earlier.
The median condo sale price was $306,000 in May, up from $296,500 in April but below the record set in February at $315,000. The May condo median price was 16 percent higher than $265,000 a year earlier.
May's single-family home median price of $668,300 compared with $615,000 in April and $610,000 a year earlier. The previous record was $650,000 in March.
Inventory in May rose to 1,722 for single-family homes, up from 854 a year earlier and 1,644 in April. Condo inventory rose to 2,413, up from 935 a year earlier and 2,278 in April.
Reach Andrew Gomes at email@example.com.