For a second consecutive month, there has been a rise in the number of previously owned O'ahu single-family homes sold in July, building on what could be an early sign of an expected lengthy market recovery.

There were 265 sales last month, up 5.6 percent from 251 sales in the same month last year, according to the Honolulu Board of Realtors.

The median price, however, still was lower — declining 4 percent to $595,000 from $620,000 in the same period a year ago.

Local economists predict that the median price, a point at which half the sales are at a higher price and half are at a lower price, will be modestly lower for the next couple of years even if increased buyer demand returns to the market.

The July single-family home sales volume followed a 9.5 percent gain in June, which marked the first year-over-year increase for any month in two years.

Though the median price only began a modest retreat last year, subsiding 3 percent, the number of sales began sliding four years ago.

Harvey Shapiro, research economist for the trade association of O'ahu real estate agents, said it's still hard to clearly predict whether the higher demand of the past two months will be sustained.

"Things are starting to look positive," he said.

Sandra "Sam" Bangerter, president of the Honolulu Board of Realtors and co-owner and principal broker of RE/MAX Kai Lani in Kailua, said the uptick in sales and a median price that was at its highest since March for single-family homes "may be indicating that we're already past the bottom."

However, looming over the economy is the prospect that several thousand state workers may be forced to accept wage cuts, furloughs and perhaps layoffs as government leaders grapple with balancing state finances.

Also, unemployment and home foreclosures continue to rise, factors which have negative impact on home prices and sales. And tight lending standards continue to inhibit home-buying.

NEW FORECAST DUE

Carl Bonham, executive director of the University of Hawai'i Economic Research Organization, said that state spending cuts and a negative jobs outlook make any change unlikely for the direction of projected median home prices.

"You can have rising sales and falling prices," he said. "The home prices tend to bottom out after a recession."

UHERO most recently issued a forecast in March predicting that O'ahu's median single-family home price will fall 9 percent this year, 4.9 percent next year and 0.6 percent in 2011. An updated forecast is expected in the next month or so.

This year through July, the median single-family home price is down 9.1 percent to $570,000 and the number of sales is down 17.5 percent.

Mark Denzer, a local homeowner who is self-employed as a sales and marketing representative for clothing manufacturers, expects to see a roughly 15 percent to 20 percent pullback in median home prices over the next two years.

"The trickle-down from the government furloughs, higher unemployment and loss of tourist industry income is just being felt or has not yet hit," he said.

In O'ahu's real estate market downturn during the 1990s, single-family home sales volume consistently increased for five years — from 1996 to 2000 — before the annual median price rose.

To be sure, circumstances in the economy and the real estate market aren't exactly the same today, so, as the saying goes, past performance isn't necessarily a good indicator of what lies ahead.

CONDO PRICES FALL

In O'ahu's condominium market, which often lags trends in the single-family home market, the number of sales and the median price both were lower last month.

The story is not as upbeat for the condo market.

There were 327 condo sales, down 10.4 percent from 365 in July 2008. The median price was down 5.4 percent to $312,000 from $329,900.

This year through July, the median condo price is down 7 percent, and sales are down 32.3 percent.

UHERO projects the median condo price will decline 8.5 percent this year, 10.4 percent next year and 7.2 percent in 2011.

Part of what is helping keep median prices from falling drastically like they have in many Mainland cities is relatively limited new-home development on O'ahu and a relatively tight inventory of homes for sale.

Last month, there were 1,653 single-family homes on the market. That was the lowest level for any July since 2005 near the peak of the market when inventory was at 958. Inventory in July 2008 was 2,087 homes, and ranged between 1,700 and 1,928 during the first six months of this year.

If no new homes were added to the market, it would take 6.5 months to sell the present inventory, which is down from 9 months a year earlier, 7.6 months in June and a high for any month this year of 15.8 months in February.

Condo inventory last month stood at 2,279 units, which was a low for any July since 2005, when there were 1,001 condos for sale. Inventory in July 2008 was 2,753, and has ranged between 2,381 and 2,582 earlier this year.

"We're clearly in a buyer's market, but the inventory hasn't expanded," Shapiro said.