Has O'ahu's housing market turned?

The median sale price for single-family homes stumbled 4.8 percent in November from the same month a year ago, breaking a five-year, three-month string of rising prices.

It was a long and ultimately unsustainable run for higher prices, but industry analysts said it's too early to say whether a substantial decline in residential real estate values is coming, or if prices will merely flatten as local economists have been predicting.

The median price for previously owned single-family homes last month was $610,000. That was down from $640,500 in November 2005. The median is a point at which half the sales were for more and half for less.

Observers pointed out that the November 2005 price was the high for all of last year and was going to be tough to beat this year. But last month's median also was the low for this year in which monthly medians had previously ranged between $613,500 in February and $668,300 in May, a record.

SOFTER MARKET

Doris Sullivan, a Kailua resident who put her Coconut Grove home on the market in February, has seen the softening market unfold.

Sullivan said real-estate agents initially suggested she list her house for $769,000 to $789,000 based on what comparable homes were selling for. After hosting a lot of lookers but no takers, Sullivan started lowering her price.

"We had people who came through three or four times," she said. "When we reduced our price the last time, we had two offers in the same day, both (from people) who had been through the house several times. I think they realized that was as low as it was going to go."

The house sold in September for $650,000. "I think the market had a big effect on the sale," Sullivan said. "It's just frustrating. Great for buyers because with the glut of homes on the market, they can pick and choose."

Market analysts caution casual observers about reading too much into a one-month decline in the median sale price, which can be swayed by the quality mix of homes sold.

"We need a few more months to see if it's a trend," said Harvey Shapiro, research economist for the Honolulu Board of Realtors, which released the November sales data yesterday.

Shapiro said he didn't expect the price decline, but said a 5 percent drop isn't big.

"It was surprising, but it's not really that major," he said.

Generally, local economists predict that O'ahu home prices will flatten over the next couple of years and not drop significantly unless there is a shock to the local economy that reverses job and income growth, creates a population exodus or boosts interest rates dramatically.

The University of Hawai'i Economic Research Organization in October forecast a 1.5 percent median price decline for O'ahu single-family homes next year to $625,700 from about $635,500 this year. On Friday, a UHERO update called housing prices "essentially flat" and said there likely will be a low single-digit percentage point decline next year.

Paul Brewbaker, Bank of Hawaii's chief economist, said it's probably more likely that 2007 median home prices will fall by about $25,000 than rise by $25,000.

"Home prices are kind of flat, with an ever-so-slight downward drift," he said.

Shapiro has forecast that 2007 median prices won't move up or down by more than $20,000 or $30,000 over this year's levels.

The last time the single-family home median sale price declined in one month compared with the same month a year earlier was August 2001, when the price eased 0.6 percent to $307,000 from $309,000 a year earlier.

That was shortly before O'ahu's real estate market went on a tear, with single-family home median prices rising 12 percent in 2002, 13 percent the next year, 21 percent in 2004 and then 28 percent last year.

COOLING TREND

For the first 11 months this year, the median price is up 7 percent. But the market has been cooling for some time, with fewer sales that have taken much of the steam out of rising prices.

Year to date, the number of single-family home sales are down 14 percent. In November, there were 293 sales, down 20 percent from 366 in the same month last year.

The condominium market also is slowing with fewer sales, but median prices are still rising.

There were 421 condo sales last month, down 33 percent from 614 a year earlier. November's median price was $310,000, up 2 percent from $305,000 a year earlier. Last month's median was unchanged from October. The record was set in July at $329,000.

Year-to-date condo prices are 17 percent higher than the first 11 months of last year, while sales are down 21 percent.

The Board of Realtors characterized the overall market as one that continues to adjust to a more normal balance between supply and demand.

Last month, fewer sellers put their property on the market, which slowed what had been for most of the year a steady and substantial rise in inventory.

There were 474 new single-family home listings and 672 new condo listings, compared with 628 and 1,003 in November 2005.

INVENTORY UP

After factoring in sold property and listings that expired or were withdrawn, total inventory rose by 26 for single-family homes to 2,052, and fell by 10 for condos to 2,679.

Inventory for most of the year had ballooned to about double what it was last year, but the expansion has slowed in the last two months. "This could be a turning point for inventory," Shapiro said.

While the growth of inventory may be turning, the time it takes to sell homes is still growing.

Single-family homes spent a median of 62 days on the market before selling, up from 49 days in October and 30 in November 2005. The last time it was higher was March 2001 at 64 days.

For condos, the median was 50 days, up from 49 in October and 19 in November 2005. The last time it was higher was January 2002 at 58 days.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.