KAHULUI, Maui — It's only a housing bubble if it bursts, and Maui's record-breaking home prices show no real sign of weakness, thanks in large part to limited supply.

But the fact that more and more people are wondering whether the housing market is headed toward a downward correction similar to what Hawai'i experienced in the 1990s is cause for concern, said Leroy Laney, economics consultant to First Hawaiian Bank.

"As with any sharp run-up in prices in any market, there comes a time when we begin to question the sustainability of the rise. We are beginning to ask that question with the housing market now in Hawai'i," Laney said during the 31st annual Maui Business Outlook Forum sponsored by the bank and held at the Maui Beach Hotel last week.

Laney said housing prices are one of the few thorns in Maui's rosy economic picture. "One wonders about the future of an economy in which those who make it run can't afford to relocate or stay here," he said.

High housing prices can affect job growth because fewer workers can afford to live on Maui or move here, and other sectors such as healthcare, for example, if doctors decide they can get more for their money elsewhere.

In the first half of 2005, the median single-family home price on Maui averaged $672,100, up 25 percent from the same period last year. In August, the median price rose to $693,000 after two months of decline, proving the market still has legs.

"There's still an awful lot of money out there from baby boomers who are reaching the retirement stage. But the fact that more people are thinking about (the bubble bursting) makes one cautious," Laney said in comments before his speech.

When prices reach the point where most potential buyers have been squeezed out of the market, the current real-estate cycle will end, "hopefully with a soft landing."

The bursting of real-estate bubbles generally are not as dramatic as stock market busts, he said. That doesn't mean they don't hurt, especially for those who bought at the top of the housing boom. In fact, the bursting of the real-estate bubble in the 1990s plunged Hawai'i into its worst economic slump in recent decades.

But that bubble was inflated by speculators from Japan who bought property well over the asking prices, which is not the case this time.

The bubble that began in the late 1980s peaked in 1992 with a median single-family home price of $290,000 on Maui, Laney said, then prices dipped 20 percent, bottoming out in 1997 to a median of $232,000 before rebounding.

He said the only effective way to bring housing prices down is to increase supply. Some relief will come with planned residential development in Central and West Maui and the Kihei-Wailea area, but the trade-off will be increased traffic congestion and other negative impacts from growth.

Laney said that anyone who needs a new home for their family or a mortgage-interest tax deduction shouldn't be discouraged from buying now because of fears the market will slide. But he advised caution for buyers who are gambling that prices will continue to rise.

"It is amazing how many people I encounter who are in denial that anything is going to happen," he said.

Reach Christie Wilson at cwilson@honoluluadvertiser.com.