High mortgage rates and limited inventory caused Oahu’s housing market to cool in 2023 — and the number of homeowners locked into mortgages under 6% could continue to discourage listings even if rates go down, some experts say.

Sales volume in Oahu’s housing market in December fell again, marking 23 consecutive months of dropping sales for single-family homes and 19 straight months for condos, according to a report released Saturday by the Honolulu Board of Realtors.

Single-family home resales in December fell 9.9% to 182 from 202 in December 2022. Condominium resales dropped 24.4% to 272 from 360 in December 2022.

The median price for a single-family home on Oahu in December dipped below $1 million, finishing the month at $996,500, a 5.1% decline from December 2022 when the median price was $1,049,500. However, the median sales price for a condominium in December 2023 on Oahu rose to $510,000, a 1.5% increase compared with December 2022.

December’s results contributed to an annual drop in single-family home and condominium resales and prices. For 2023, single-family home resales fell 26% to 2,560, while condominium resales declined 28% to 4,573.

While the median price paid for a single-family home in 2023 dropped 5%, the median sales price stayed above the benchmark $1 million coming in at $1,050,000.

Meanwhile the median price paid for a condominium in 2023 decreased a scant 0.3% to $508,500.

Fran Gendrano, president of the Honolulu Board of Realtor, said in a statement, “In 2023, Oahu’s housing market felt the acute impact of rising mortgage rates and limited inventory. The cooling market activity we first experienced in 2022 carried over in 2023, as sales volume continued to mellow out compared to the frenzy we saw during the COVID-19 pandemic.”

Pending housing market sales dropped in 2023 on Oahu due to higher borrowing costs, which dampened buying activity. Single-family home contract signings dropped 18.7% to 2,796, while condo contract signings declined 22% to 4,721.

However, Gendrano noted that additional market activity after mortgage rates peaked early in the fourth quarter of 2023, then dipped in November and December.

“Though the rates are still higher than this time last year, we saw slight increases in contract signings for both markets, which tells us that buyers are still optimistic and active in their pursuit of a new home,” she said.

Mortgage rates have dropped since peaking at 8% in 2023; however, they’ve been fluctuating. The average rate on a 30-year mortgage inched up to 6.62% last week from 6.61% the week prior, mortgage buyer Freddie Mac said. A year ago, the rate averaged 6.48%.

The National Association of Realtors’ latest forecast calls for the rate on a 30-year home loan this spring to average between 6% and 7%.

Even a modest decline in rates will help lower the cost of a home loan, improving affordability. Some economists, however, have noted that projected declines are unlikely to encourage homeowners who locked in rock- bottom rates to sell.

Over nine of every 10 U.S. homeowners with mortgages have an interest rate below 6%, according to Seattle-based Redfin’s analysis of Federal Housing Finance Agency data. Some economists say that sets the stage for the housing market to remain constrained by a low supply of homes.

First American Financial chief economist Mark Fleming wrote in his housing outlook that the “disincentive to sell is likely to persist as long as mortgage rates remain elevated.”

New listings on Oahu in 2023 fell by double digits in both the single-family home and condominium markets. Single-family home listings fell by 20% to 3,324 in 2023, while condo market new listings decreased by 18% to 6,123.

Danielle Hale, chief economist at Realtor.com, said, “The costs are going to remain high and we’re going to see a lot of people just choose to sit out.”

Listings on Oahu of single- family homes and condominiums spent longer on the market in 2023, and fewer sales closed above asking price.

The Associated Press contributed to this report.