Home sales on Oahu surge 30%

Oahu’s housing market received a sales jolt in January as low interest rates, attractive prices and demand from many first-time buyers helped push the number of single-family home purchases up 30 percent.

A Honolulu Board of Realtors report released Thursday showed sales of previously owned single-family homes on the island jumped to 227 last month from 175 a year earlier.

The increase was the eighth consecutive year-over-year gain and the largest for any month since May 2010 when a federal stimulus program to spur home sales was ending.

Real estate professionals are benefiting from the rising pace of sales, but the surge in buyers last month actually worked to pull down a broad gauge of prices.

The median sale price for Oahu single-family homes dipped 3.9 percent to $595,000 in January from $618,900 in the same month last year.

That decrease followed a 0.8 percent slip in December after a year of mostly moderate increases that put the median price for all of 2012 at $620,000 and up 7.8 percent.

However, analysts don’t expect the recent softness in price to play out as a longer-term trend.

Kevin Miyama, an agent with Prudential Locations and president of the Hono­lulu Board of Realtors, said January’s median sale price was dragged down by a higher proportion of midpriced and lower-priced home sales.

The median price is a point at which half the sales are for a higher price and half for a lower price, so the measure can be swayed by more transactions at the high or low end.

Miyama said many first-time homebuyers, who typically buy lower-priced homes, had a negative effect on the overall median price.

Kenneth Faria, a 36-year-old paramedic, is one of those first-time buyers helping drive sales. He is due to close on the purchase of a new home in Ewa Beach next week, and said low interest rates and attractive prices led him to take the plunge into homeownership with his wife after thinking about it for roughly a year.

"I’m excited and nervous," he said.

Faria is buying a new single-family home for about $480,000 — well below the median price for previously owned homes.

Though Faria’s purchase wasn’t part of the resale data reported for January, it illustrates how a preponderance of entry-level home purchases can affect median prices.

Based on typical volume and price breakdowns, Miyama said he expects Oahu single-family home prices this year will rise between 5 and 8 percent.

The University of Hawaii Economic Research Organization made a projection in November that Oahu’s single-family median home price will rise 6.8 percent this year before picking up steam with gains of 7.7 percent next year and 10.8 percent in 2015.

UHERO also expects median price growth in Oahu’s condominium market — a 5.9 percent gain this year followed by 7 percent next year and 8.6 percent in 2015.

In January the median condo price rose 3.3 percent to $315,000 from $305,000 in the same month last year. The gain was the seventh straight year-over-year increase. Last year the median condo price rose 5.8 percent to $317,500.

The number of condo sales in January was up 6 percent to 286 from 270 a year earlier.

A big reason for the expectation that median home prices on Oahu will rise is a supply-and-demand imbalance. Supply has been falling as demand has been rising.

At the end of last month, there were 943 single-family homes listed for sale, and 1,329 condos. That was down from 1,004 and 1,478 respectively in December. In January 2012, inventory was 1,262 single-family homes and 1,816 condos.

If the pace of sales in January continued with no new added inventory, the supply would run out in 2.3 months for single-family homes and 2.7 months for condos. Generally, anything under five months puts pressure on prices to rise, analysts say.

Meanwhile, average 30-year mortgage interest rates are at about 3.5 percent. That’s up from recent lows of 3.3 percent but still below where they were most of last year, according to surveys by Freddie Mac.

"There is a lot of activity in the market, and we’re optimistic low interest rates and reasonable prices will continue to fuel the positive trend we’ve been seeing these past few months," Miyama said.

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