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Oahu home sales relapse

Drops in sales and prices spark concerns about a second dip in the housing market

By Andrew Gomes

LAST UPDATED: 1:40 a.m. HST, Jul 8, 2011

Halfway into 2011, Oahu's housing market is on pace to give back 2010 gains that previously were viewed as the start of a rebound.

Sales volume and median prices for previously owned single-family homes and condominiums are down between 0.2 percent and 7 percent this year through June, according to the latest report from the Honolulu Board of Realtors.

The weakness is raising some concerns that Hawaii's main housing market could suffer a bit of a double dip — a second decline.

"I'm a little more worried about the (remainder of the year)," said local housing market analyst Ricky Cassiday. "I don't think prices will turn up."

If prices continue to fall over the next six months, they would upend previous economic forecasts that anticipated a modest rise this year.

Market observers did note last year that sales and prices, to some degree, were artificially stimulated in 2010 by a federal tax credit that encouraged people to buy homes and kept positive pressure on prices. The absence of tax credits this year has been cited more regularly in recent months as a factor in softer sales and, in turn, weakness in prices.

But analysts also said a lack of strengthening consumer confidence in Hawaii is keeping buyers and sellers out of the market.

The number of single-family home sales this year through June was down 7 percent to 1,375 from 1,478 in the same period last year. The median price was down 2.6 percent to $570,000 from $585,000.

In the condo market, sales this year through June were down 2.6 percent to 2,009 from 2,062 in the same period last year. The median price was down 0.2 percent to $304,500 from $305,000.

The declines, though mostly small, come on the heels of 2010's recovery, which included a 13.4 percent gain in single-family home sales, a 10.3 percent gain in condo sales, a 3.1 percent gain in the single-family home median price and no change in the condo median.

The declines through June also contrast with analysts' projections about six months ago expecting sales and prices would rise modestly this year.

The University of Hawaii Economic Research Organization forecast in December that the median single-family home price would rise 4.3 percent this year. In February, UHERO revised the gain to 2.1 percent. UHERO's initial forecast for condo prices was a positive 3.6 percent, which was lowered in February to 1.3 percent. An update was not available Thursday.

<t-2>Truckee, Calif.-based real estate data provider Clear Capital projected in January that residential real estate prices on Oahu — single-family homes and condos combined — would rise 3.4 percent this year. On Thursday the company issued a revised report projecting that prices would decline 0.5 percent in the second half of this year after what Clear Capital calculated was a 6.1 percent decline in the first half of the year.

The firm's projection suggests the second half of the year will be stronger than the first half, though prices will remain slightly negative.

Clear Capital's price calculation is based on an analysis of prices for repeated sales of the same homes over time, which some contend is a better measure of prices compared with the median for all sales, which can be affected by the mix of homes sold.

Chason Ishii, president of Coldwell Banker Pacific Properties, said he expects the second half of the year will be more favorable largely because the second half of last year wasn't robust. For the full year he anticipates median prices will be close to what they were last year.

"We're seeing a relatively stable market," he said.

Ishii said one drag on Oahu's housing market is inventory that is shrinking because people aren't confident about selling and buying property. "The inventory levels are so low — they're the lowest since 2005 — that you don't have the capacity for the market to grow," he said. "That's the big challenge right now."

However, low inventory tends to put upward pressure on prices, so the weakness in prices this year is surprising to some.

There were 1,533 single-family homes on the market at the end of June, down 10.2 percent from 1,708 at the same point last year. If June's sales pace were continued with no more homes put on the market, the inventory would be exhausted in 6.1 months. That compared with 6.7 months a year earlier.

Typically, a figure between five and six months of remaining inventory puts upward pressure on prices.

Condo inventory stood at 1,953 units at the end of June, down 8.2 percent from 2,127 a year earlier. There was 5.8 months of remaining inventory of condos last month, compared with 6 months a year earlier.

For June alone, single-family home sales fell 16 percent to 248 from 295 in the same month last year. The median price was down 3.4 percent to $562,500 from $582,500 in the period.

June condo sales fell 20 percent last month to 354 from 442 a year earlier. The median price was up by just $1,000, or 0.3 percent, to $301,000.

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