Condo prices jump, but not so for homes

Oahu’s housing market ended 2012 with a bang and a dud in December.

The bang was a 17.5 percent increase in the condominium median sale price to $335,000 last month from $285,000 a year earlier. The gain was the biggest for any month last year, and the median price was just shy of the $337,300 record for any month set in May 2008.

The dud was a 0.8 percent decrease in the single-family home sale price to $600,000 last month from $605,000 a year earlier. The slippage ended a string of 12 consecutive months of gains and matched April’s median price as the lowest this year.

December’s home price figures, released Monday by the Honolulu Board of Realtors, exhibited divergent swings at the end of a year that overall was one of moderate median price growth that reversed small declines in 2011.

For all of last year, the single-family home median price rose 7.8 percent to $620,000 from $575,000 the year before.

Last year’s median condo price rose 5.8 percent to $317,500 from $300,000 the year before.

Mike James, president of Coldwell Banker Pacific Properties, said the performance last year was fantastic. "It’s a market we haven’t seen for a number of years," he said. "The train has turned."

The recovery has been driven largely by low interest rates, tight inventory of homes available for sale and an improving economy where personal income is growing again and unemployment is falling — trends that local economists expect will continue this year to produce more growth for Oahu’s housing market.

"We are delighted to see how well Oahu’s real estate market has recovered in 2012, and look forward to what we hope is continued strengthening in home sales in the new year," Bill Chee, CEO of Prudential Locations, said in a year-end report.

At the beginning of last year, Prudential expected median home sale prices would rise 3 percent in 2012. But a number of market conditions combined to produce results that were stronger than expected.

Interest rates were one of those conditions. Average interest rates on 30-year fixed-rate mortgages came down from about 3.9 percent at the start of last year to around 3.3 percent or 3.4 percent in the past few months, according to Freddie Mac.

At the same time, inventory of homes has fallen to historic lows. At the end of last month, there were 1,004 single-family homes and 1,478 condos on the market. That compares with 1,230 single-family homes and 1,709 condos a year earlier, and closer to 2,500 and 3,000, respectively, in 2006 and 2008.

Despite the extremely short inventory, relatively strong demand produced more sales last year.

The number of single-family home sales last year rose 6.5 percent to 3,166 from 2,974 the year before. Last year’s total was the highest since 2007. In December there were 291 sales, up 8.6 percent from 268 sales a year earlier.

There were 4,361 condo sales last year, up 8.2 percent from 4,029 the year before. In December there were 401 condo sales, up 20.4 percent from 333 sales a year earlier.

To some degree, low inventory helped constrain sales, but it also helped produce competition that drove prices higher. Prudential said about 1 in 5 single-family homes, or 21 percent, sold last year for more than their asking price. The rate was a little less for condos — about 1 in 8, or 13 percent.

Another factor attributed to price appreciation is a decline in distressed sales. Prudential said short sales and homes sold by lenders represented 8.5 percent of all sales last year, down from 15.5 percent in 2011.

A short sale is a sale by a homeowner facing foreclosure where the lender is willing to accept a price that often is less than what is owed on a mortgage.

Such factors are expected to produce more appreciation for Oahu home prices this year, according to local economist projections.

The University of Hawaii Economic Research Organization in November forecast that the median price for existing single-family homes will rise 6.8 percent to $670,600 this year, 7.7 percent to $722,400 in 2014 and 10.8 percent to $800,100 in 2015.

The median price peak for single-family homes was $643,500 in 2007.

UHERO forecasts the median condo price will rise 5.9 percent to $333,300 this year, 7 percent to $356,500 in 2014 and 8.6 percent to $387,300 in 2015.

Condo median prices peaked at $325,000 in 2007 and 2008.