Housing market remaining strong

By Andrew Gomes
Advertiser Staff Writer

Prices and sales of Hawai'i homes are expected to come down a bit, but because of the market's strength over the last few years, 2002 still should be one of the best historically, even with a slight downturn, industry experts say.

Herb Conley, co-managing partner at the state's largest residential real estate brokerage, Coldwell Banker Pacific Properties, said that last year was the industry's best since 1990, based on prices and sales of existing homes.

"This is actually the best part of the entire real estate cycle because we have units going up and we have prices going up, and there's only a small window in the cycle where we get both of those," he said.

Sales have been up for about five years, and prices only began to rise more recently — two years ago for single-family homes and one year for multi-family units, according to industry data.

Last year, total resales on O'ahu grew 2.7 percent to $2 billion as single-family home sales rose 7.1 percent from the year before, and condominium sales rose 8.5 percent.

This year, industry experts predict home prices and sales will remain flat or dip slightly if there are no more unexpected economic shocks like the one following the Sept. 11 terrorist attacks.

Developers of new homes also expect a minor slowdown this year, but one they can live with following a 15 percent rise in sales and a 6 percent rise in prices through November.

"Developers are happy," said Ricky Cassiday, a research consultant who tracks sales of new homes for Prudential Locations.

Cassiday said he believes developers will slow their building slightly to avoid creating an inventory oversupply that would pressure prices. Even so, he predicts prices will come down by $5,000 to $7,500, or around 2 percent, on the $284,000 average list price for a new home as of November.

"I think we'll all be pleasantly surprised by the strength of the market," said Bob Brant, president and chief executive officer of Gentry Homes.

Brant said he expects fewer sales to people who face job uncertainty in the tourism industry, but that could change if analysts are correct in their prediction that the state's tourism market will improve by the middle of the year.

Homebuilders also are closely watching interest rates, hoping that they don't rise too much above 7 percent after climbing from 6.2 percent in October.

"The affordability of housing in Hawai'i is key," Brant said. "Right now, we feel pretty good as long as the interest rates stay low."

Conley said affordability at the end of the year was at a five-year high as the typical monthly mortgage payment for an existing home in Hawai'i was $375 less than it was in 1996.

On the Neighbor Islands, Cassiday said, he expects sales of existing homes to remain in good shape, with flat but strong sales and a halt in rising prices. For new homes, he predicts sales will be flat or slightly down while prices dip a little more than on O'ahu.

In other market segments:

• This year should be strong for elderly and affordable projects, of which there are several under construction or coming on the market in the coming months.
• Developers of market-priced single- and multi-family homes are busy around O'ahu. In Hawai'i Kai, Stanford Carr Development and Schuler Homes are in the early stages of building as many as 1,000 homes. In Central O'ahu, builders such as Gentry, Castle & Cooke and Haseko (Hawaii) are filling demand for the island's most active market. Other projects are continuing at Ko Olina in west O'ahu.
• In the high-rise market, new projects breaking ground are questionable this year. Nauru Phosphate Royalties (Honolulu) Development Inc. delayed plans to build another luxury high-rise similar to its Hawaiki Tower last fall. The company's sales broker was not available to say when the project might go forward.

A&T Properties Inc., which bought a Waikiki parcel in November, is studying the market and fine-tuning the type of residential high-rise it wants to build. Mike Wright, A&T vice president of acquisitions and investments, said project planners would like to break ground late this year or early next year.

"The sooner the better," he said. "I think the market is good right now."

Other high-rise condos in the planning stages include at least one on Victoria Ward Ltd. property in Kaka'ako and two others nearby at the intersection of Ward Avenue and Kapi'olani Boulevard.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.