University of Hawai'i economists are predicting that O'ahu is in store for a multiyear housing price decline of about 17 percent.

The projection was shared yesterday during a City Council Budget Committee meeting as part of an economic briefing by UH economics professor Byron Gangnes to help the council assess a proposal by Mayor Mufi Hannemann to raise property tax rates as part of his budget plan.

Gangnes said he and his colleagues at the university's Economic Research Organization expect the median price of O'ahu single-family homes sold this year to be down 8 percent to 9 percent, followed by 4 percent to 5 percent next year.

Adding last year's 3 percent median home price decline, UHERO expects close to a 17 percent drop over three years, which if accurate would be a bit milder than O'ahu's previous housing market bust in the late 1990s and significantly less dramatic than what's occurring in many Mainland markets.

Though there isn't a uniform definition of a housing market bust, a 2005 Federal Deposit Insurance Corp. study of historical housing market swings defined a bust as a price decline of at least 15 percent over five years.

For O'ahu's condominium market, UHERO's outlook isn't as bad as the drop in the 1990s here and the recent drops in many Mainland markets, but it is worse than the single-family home forecast.

Gangnes told City Council members that median condominium prices are expected to fall more dramatically than single-family homes.

The economist said O'ahu's median condo price, which was unchanged last year, is expected to fall more than 20 percent during this down cycle. This year's condo price decline is expected to be smaller than the expected single-family home price drop. Next year, however, the decline in condo prices is forecast to significantly outpace the expect- ed single-family home decline.

If UHERO's projection for an 8 percent to 9 percent single-family home price decline this year is on the mark, the move would rival the worst fall for home prices during Hawai'i's economic slump in the 1990s — an 8.4 percent drop in 1997.

During the 1990s bust, single-family home prices on O'ahu suffered a five-year decline of 21.2 percent from 1995 to 1999.

Median condo prices during the 1990s dropped 41.3 percent over six years from 1994 to 1999, with a peak downfall of 14.3 percent in 1997.

Gangnes did not present more specific figures for expected price declines in UHERO's report, which is scheduled to be released with more details tomorrow.

"It is significantly more pessimistic than what we were saying in our previous (forecast) that came out in September," he said.

In September, UHERO's report forecast the single-family home median price would be down 5.2 percent this year and 2.6 percent next year. The report forecast condo prices would be down 4.9 percent this year and 5.9 percent next year.

The recent revision is largely due to the devastation in global financial markets and the national economy that unfolded late last year and have hurt the local economy.

In a report last March, UHERO was pretty close to predicting home price changes last year with expectations for a 3.2 percent decline for single-family homes and a 1 percent decline for condos.

Now, however, continued volatility in global financial markets and a national economy awaiting possible benefits from a giant federal government spending stimulus initiative make the latest UHERO forecast more uncertain.

Other forecasts for O'ahu single-family home median prices include one by local real estate brokerage firm Prudential Locations anticipating a 6 percent to 10 percent decline at midyear, and one by Moody's www.Economy.com anticipating a 30.9 percent drop between the second quarter of 2008 and early 2011, which, if averaged, could be close to 14 percent this year and next year.