O'ahu's housing market ended 2007 with a slight rise in median prices, but this year the market could be in store for its first single-family home price decline since 1999 if some projections are accurate.

In a year that saw many Mainland housing markets hit with with devastating value losses, the median sale price of existing single-family homes in Hawai'i's largest market rose 2.1 percent to $643,500 over $630,000 in 2006, according to the Honolulu Board of Realtors.

The increase was the smallest since 1.7 percent gains in 2000 and 2001. Last year's gain also was smaller than the 6.8 percent rise in 2006 that followed the recent spike of 28.3 percent in 2005.

Whether the market will sustain its positive price momentum this year is a question that divides many local residents and even some O'ahu real estate brokers.

The University of Hawai'i Economic Research Organization in September predicted O'ahu's single-family home median price will fall 0.63 percent this year.

The forecast, a collaboration of UH economics professors Carl Bonham and Byron Gangnes with Bank of Hawaii chief economist Paul Brewbaker, slightly underestimated this year's median price gain by forecasting a 0.97 percent rise, which was revised from a 3 percent decline forecast issued in May.

Harvey Shapiro, chief economist for the local Realtor trade association, predicts there won't be a change — up or down — of more than 5 percent in the single-family home median price this year.

"We don't see anything disastrous happening," he said.

Mike Gallagher, broker-in-charge at RE/Max Honolulu, said he expects O'ahu's median single-family home sale price this year to decline 10 percent to $580,000, mostly from a reduction of what he views as "inflated" prices on many high-end homes, to bring down the broader median measure (at which half of all homes sell for more and half for less).

Jim Wright, president and CEO of Century 21 All Islands, expects the median price this year can eke out a 1 percent to 2 percent gain.

"The demand is still pretty much out there," he said.

For December only, the median single-family home sale price was $610,000, unchanged from November and down 0.6 percent from $613,500 in December 2006.

Generally, local economists and some other industry observers believe O'ahu home prices will stay more or less flat over the next couple of years and not drop significantly unless there's a shock to the state economy that reverses job and income growth, creates a population exodus or boosts interest rates dramatically.

Helping sustain home prices is a state economy that continues to grow, albeit at a slower pace, as well as low unemployment, rising personal income, limited new-home construction and vibrant demand from out-of-state retirees and investors.

Prices last year held up despite a third consecutive year of fewer sales. There were 3,627 single-family homes sold, a 10.2 percent decrease from 4,041 sales in 2006. However, the drop in 2006 was larger, at 12.5 percent, which followed a 1.8 percent decline in 2005.

Annual sales peaked in 2004 at 4,702. The Board of Realtors noted that 2007 single-family home sales were well above the top of the market during the late-1980s' speculative bubble in which sales topped out at 3,179 in 1987.

Wright said he expects sales to start bouncing back in the second half of this year and achieve an increase for the full year over 2007. Shapiro, however, predicts sales will again be lower this year though probably by less than last year's 10 percent decline.

In the last few months of 2007, sales volume took some big hits, falling around 30 percent last month and in September. December's 30.6 percent drop to 240 homes sold was the biggest decline for any month during the last three years of generally softening sales.

Shapiro said he doesn't believe the recent sharp declines are a trend that will continue, and could have to do more with consumers holding off on purchases amid media reports about the national subprime mortgage crisis that has affected Mainland markets much harder than Hawai'i's.

In O'ahu's condominium market, the sales decline and median price gain were both greater than those for single-family homes.

Last year, condo sales were down 13.8 percent to 5,499. A year earlier, sales fell 20.2 percent in their first drop since 1996.

The median sale price for condos last year was $325,000, up 4.8 percent from $310,000 in 2006.

Shapiro projects a price change of no more than 5 percent up or down for condos this year. Gallagher of RE/Max Honolulu forecasts a 1.5 percent rise this year to $330,000. UHERO predicts a 0.73 percent decline.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.

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