The Housing Bubble

The Star Bulletin has this report on Oahu’s housing bubble. “Oahu’s residential real estate market is still posting strong year-over-year gains, but from month to month the market is falling, leaving buyers and sellers to interpret the mixed signals.”

“While the median price paid for a single-family home on Oahu was $613,500 in February, 16.7 percent above the year-earlier $525,500, that was down 0.2 percent from January’s $615,000 median, according to statistics released yesterday by the Honolulu Board of Realtors. The record for Oahu’s single-family median price, $640,500, was reached in November.”

“The number of houses sold on Oahu fell 6.8 percent in February from a year earlier as more buyers balked at prices and turned to condominiums.”

“‘Frankly, the market is just not that good,’ said (realtor) John Riggins. ‘The consumer needs time to rethink and adjust to the higher prices and higher interest rates.’”

“Residential real estate professionals on Oahu have said that the market’s once frenetic pace, with buyers making multiple offers on tear-downs and paying premiums on properties site unseen, has slowed. ‘We’re in the zone,’ Paul Brewbaker, Bank of Hawaii’s chief economist said, forecasting that median home prices on Oahu, Maui and Kauai will soon start to echo those in California’s now cooling markets.”

“Three out of five of California’s top markets, including Silicon Valley, San Francisco and Orange County, have gone flat, he said. ‘I always say that Hawaii is the western edge of Orange County,’ Brewbaker said.”

“Even wealthy baby boomers, who have boosted Oahu’s home prices for much of this housing cycle, are expected to start showing some pause as the gap between Hawaii and California prices continues to close. ‘They aren’t all looking for a piece of the rock. It’s also about investment,’ Brewbaker said. ‘When their 30 percent rate of return goes to zero, from a portfolio prospective, real estate starts to fade a little bit.’”

“As prices have risen and sales have decreased, inventory has begun to build on Oahu, and the market advantage has begun to swing toward buyers who are beginning to negotiate concessions for the first time in a long while, Riggins said. The last time Oahu had this much inventory was in March 2003, Riggins said. There is a 5.3-month supply of single-family homes and a 4.4-month supply of condominiums remaining for sale.”

“The buildup in inventory and slowdown in the market is ‘absolutely incredible news’ for a buyer, Riggins said. ‘But sellers are going to have to adjust their mental outlook, and real estate agents will have to adjust their thinking,’ he said.”