Oahu’s housing market has been constrained this year by low inventory as relatively few homeowners put their property up for sale even as the market gains strength. And something similar can be said, too, of the market for new homes.
Developers built and sold 405 new homes on Oahu during the first half of this year, down 12 percent from 461 homes in the same period last year, according to an analysis by local housing market researcher Ricky Cassiday.
What’s more is that a considerable number of new homes sold represented unsold inventory in condominium projects finished two or more years ago, meaning the number of homes being developed for sale is still depressed even as the local housing market rebounds moderately after not declining much during the past recession.
“At these levels, the (new homes) market is almost a third of what it was at the top of the last cycle,” Cassiday said in the report referencing the 2005 market peak.
There is considerable activity among condo developers rolling out plans to soon begin building new towers with close to 2,000 units in urban Honolulu. Five such projects are under way between Kakaako and Waikiki, and of those, two are in the sales phase. But unit delivery, which is when the sales count, won’t happen for a minimum of two years as that’s roughly how long it takes to build a high-rise.
A significant number of sales in the first half of this year were first-time sales of units in one condo tower, Allure Waikiki, that got caught in the past housing market downturn.
Allure was developed by Chicago-based firm Fifield Cos., which completed the 291-unit tower in 2010 on the former site of the Wave Waikiki nightclub at Kalakaua Avenue and Ena Road.
Fifield lost the project to a bank after slow sales. Then the bank failed, and a group of investment firms and the Federal Deposit Insurance Corp. acquired unsold units at Allure. Property records show that the new owner, ST Residential, sold about 45 units in the first half of this year, representing 11 percent of all Oahu new-home sales in the period.
Relatively little new high-rise condo inventory is a primary reason for the lower new-home sales this year through June. Cassiday’s report said there were 74 new high-rise condo sales in the period, down from 141 a year earlier. Other condo sales, primarily townhomes in the suburbs, added up to 99, which was down from 111 in the same comparable period.
There were 232 new single-family home sales this year through June, up from 209 a year earlier.
Until new home development and sales pick up significantly, a tight market is expected to continue fueling more competition and rising prices for homes on the resale market.
This situation is one reason the University of Hawaii Economic Research Organization forecasts that the median price for existing single-family homes will rise from about $625,000 presently to $800,100 in 2015. UHERO predicts the median condo resale price will rise from about $315,000 presently to $387,300 in 2015.
UHERO and local economist Paul Brewbaker of TZ Economics point out that residential building permits statewide this year are lower than they have been in more than three decades.
One influence holding back single-family home production as the housing market recovers is relatively little activity by one of Hawaii’s largest home developers, Castle & Cooke Inc.
After the company built its last homes in Mililani in 2008, the plan was to start on a new master-planned community below Mililani called Koa Ridge, but development there had been delayed for many years over state land-use approvals.
Castle & Cooke has instead been building some affordable housing on state land in Kapolei.
Other major Oahu developers, including Haseko Hawaii and the Schuler Division of D.R. Horton, say they are picking up their development and sales pace.
Haseko sold the most single-family homes on Oahu during the first half of the year — 65 homes at its Ka Makana at Hoakalei golf resort in Ewa Beach, according to Cassiday’s report.
Richard Dunn, an executive vice president with Haseko, said the company is encouraged by increased sales activity and looks forward to continued improvements in the housing market and economy.
Schuler is building homes in Waianae, Makakilo and Kapolei. Mary Flood, Schuler’s vice president of sales and marketing, said the company is responding to increased demand partly driven by low inventory of previously owned homes.
“This past year we had 15 percent more sales than we anticipated, so this coming year we are ramping up our production by about the same amount,” she said. “We are very optimistic.”
