For nearly four years, sales of O'ahu single-family homes have been declining, yet the median home price stays stubbornly high.

Sales are on pace to set a 10-year low this year, but prices are hovering just a bit under last year's record.

The relative price stability is baffling many consumers and a few real estate agents who have been anticipating a moderate price decline, or worse.

But local economists and traditionally optimistic real estate agents say they aren't surprised by the resiliency in O'ahu home prices that contrast with many Mainland housing markets, where median prices are down 10 percent to 30 percent after big price run-ups in recent years.

"I think the other shoe has yet to drop ... but it's unlikely to be fairly severe," said Byron Gangnes, a University of Hawai'i economics professor.

Mike Sklarz, a local economist and housing market statistician, said O'ahu home prices are following a historical pattern of flattening after a steep increase. "It's more like a staircase pattern — up and then sideways," he said.

Sklarz and other economists said several factors — including population growth, low unemployment, stable personal income, attractive interest rates and relatively low foreclosures — have helped maintain home prices despite the relatively big sales slowdown.

Out of 1,413 previously owned single-family homes sold on O'ahu in the first six months of this year, the median price was $629,000, down 2.5 percent from $645,000 in the same period last year, according to Honolulu Board of Realtors data.

The slight settling follows a near-doubling of the median sale price from $299,900 in 2001 to $590,000 in 2005. Last year, the median was a record $643,500.

While prices are essentially flat, sales are down 26 percent this year through June. That pace, if carried through the full year, would result in about 2,700 sales, or the lowest level since 2,500 sales in 1998.

The sales drop also is on top of three years of declines between 2 percent and 13 percent since the 2004 peak of 4,702 sales.

FIGURES IMPRECISE

One reason the prices appear to be stuck could be the median price is an imprecise measure. It represents a point at which half the sales were for more and half for less. The calculation often can be swayed by differences in the mix of homes sold, such as a higher percentage of older and smaller homes that would tend to pull the median down, or a higher percentage of newer and larger homes that would tend to push the median up.

The sales mix effect is more pronounced in O'ahu's condominium market where many new luxury high-rises from downtown to Waikiki have been built and come on the resale market to boost median prices, especially in Kaka'ako. For the first six months of the year, O'ahu's median condo price is up 1.5 percent to $330,000.

New single-family homes are being built in smaller numbers and at mostly moderate prices in Leeward O'ahu, so the effect they have on median prices is less clear.

Mark Jolly, an agent with Realty Executives Oahu, believes that intrinsic single-family home values are down more than the median resale price suggests — perhaps 8 percent instead of 2.5 percent.

Jolly's theory is that the subprime mortgage industry that began unraveling last year has left the market largely devoid of marginal buyers. Those were the consumers who last year fueled much of the moderate-price home purchasing.

Now the market is left with consumers with strong credit who want to buy higher-priced homes and that boosts the median price, he said.

A better indicator of where prices are heading could be the repeat sales of the same home. County property records show a 1,050-square-foot Mililani Mauka house built in 1992 sold for $512,500 in February this year, or 9 percent less than the $565,000 the previous buyer paid in March 2006.

In the 'Ewa community Haleakea, developer Gentry Homes sold a 2,514-square-foot house in June 2006 for $824,779. The owner in April 2007 listed the property for $940,000 but by the end of the year had reduced the price three times before pulling the home off the market. The home was relisted in February for $725,000, and sold in April for $735,000 — 11 percent less than what it sold for new almost two years earlier.

On the flip side, other homes are still selling for more than they did previously, such as a 1,640-square-foot house in Hawai'i Kai bought in February for $755,000, or 6 percent more than it sold for a year earlier.

LARGE SUBMARKETS

Overall, O'ahu's median home price this year has been roughly balanced out by a few large submarkets — urban Honolulu, Pearl City-'Aiea and Wai'alae-Kahala — where median prices are up 5 percent to 8 percent, and the island's biggest housing submarket — the 'Ewa Plain — where the median price is down 9 percent.

By comparison, some Mainland housing markets are experiencing double-digit median price declines, including cities in California, Arizona, Nevada and Florida. According to the latest available data from the National Association of Realtors, the median home price average for about 150 major metropolitan areas was down 7.7 percent in the first quarter.

In many Mainland cities, median prices have tanked in part because so many borrowers obtained risky loans that have led to stunning rates of foreclosure. Developers also oversaturated markets with new homes that hurt median prices after sales fell sharply.

On O'ahu, lenders say borrowers were more conservative with the loans they took out. Developers also are constrained from wild overbuilding because of limited land and development regulations.

The constraints on new-home construction naturally helps keep supply relatively tight, which can lead to soaring prices when demand is extremely high and only mild price declines when demand is weak.

During O'ahu's previous housing market downturn, which stretched from 1991 to 1999, median prices declined 18 percent, or 1.8 percent per year on average.

During the nine-year slump, the biggest decline in sales was a 30 percent drop in 1991, and the median price declined 3.4 percent that year. In 1995, sales fell 25 percent and the median price declined 3.1 percent. The biggest single-year price drop was 8.4 percent in 1997 as sales were rebounding.

"Prices remained pretty stable throughout that period," Gangnes said. "We've typically not had big price declines on O'ahu."

DEMAND PENT UP

One of the prime contributors to the previous housing market slump, beside a recession in California and a financial crisis in Japan that hurt local tourism, was a population exodus largely from military downsizing.

"You don't see that outflux," said Roy Omoto, a real estate broker on O'ahu since 1964. "The demand (for homes) is still pent up. People need to live somewhere."

Sklarz said that unlike the stock market where prices can move down quickly when people panic, homeowners can't wake up one morning concerned about the real estate market and sell their house the next day. So, home prices tend to decrease gradually in bad markets.

The University of Hawai'i Economic Research Organization in March forecast a 3.2 percent decline this year in O'ahu's median single-family home price followed by a 2.3 percent decrease next year.

Sklarz said one key statistic he uses to gauge a market is how long it would take to sell every home up for sale at the present sales pace. Known as months of remaining inventory, the measure this year has averaged 8.5 during the first half of this year, up from 5.5 to 6 in the last two years and under 3 at the height of the recent boom.

Sklarz said six to 10 months of remaining inventory generally is a level at which prices remain more or less flat.

The number of homes on the market, around 2,000 every month this year, also remains relatively healthy. Though the level is double the inventory level of about 1,000 homes in 2004 and 2005 when the market was raging, it's also still below two prior peaks around 2,400 in 1991 and 1996.

Gangnes said a moderate number of sales combined with moderate inventory should keep median prices from falling dramatically.

"You still have levels of activity that are above the worst of the last downturn," he said. "We're expecting some downward drift, but it may take some time for that to play out."