O'ahu's housing market ended 2008 on a surprise up note — albeit an anomalous one — with a rise in the median sale price for previously owned single-family homes.

The median rose 2.7 percent to $626,500 from a year earlier, according to the Honolulu Board of Realtors.

Though the gain was attributed to more sales in a few higher-priced neighborhoods boosting the islandwide median price, it was the first year-over-year growth for any month since October 2007.

Still, the full year recorded a 3 percent decline in the single-family home median price, and there is agreement between local economists and some top real estate brokers that buyers and sellers should anticipate prices will fall this year by a greater, but still moderate, amount.

"You can expect a relatively modest adjustment (down)," said Byron Gangnes, a University of Hawai'i economics professor. "It's certainly a much weaker housing market than we had two years ago."

The University of Hawai'i Economic Research Organization projects the median single-family home price will decline 5.2 percent this year, and 2.6 percent next year.

Local brokerage firm Prudential Locations anticipates the median price could fall 6 to 10 percent by midyear. It notes that price movements, which vary by neighborhood, could be down more than 15 percent in some areas.

Chason Ishii, president of Coldwell Banker Pacific Properties, expects a slightly better year with the median price down 5 to 8 percent, with perhaps a turnaround next year.

"I don't see the dramatic declines that you see in other areas (on the Mainland)," he said. "The trend I see is that our market is holding relatively strong."

Last year ended with the single-family home median price at $624,000, or down 3 percent from $643,500 in 2007. The drop erased the 2.1 percent gain in 2007 to put last year's median price a bit below the 2006 mark of $630,000 but still above the 2005 median of $590,000.

Median prices had consistently been weak since October 2007 with the median each month ranging from no change to a 9.2 percent drop compared with the same month a year earlier. But last month, the median price rose 2.7 percent to $626,500 from $610,000 in December 2007.

Ishii said it was clear that the rise was due to more sales in three high-priced areas — Kahala, Kapahulu-Diamond Head and metro Honolulu — and fewer sales in most other areas that resulted in more high-end homes represented in the total number of sales.

"This is what happens when a large portion of high-priced inventory sells," added Mike Gallagher, broker-in-charge at RE/MAX Honolulu, in a note to clients. "This causes an inordinate rise in median and average sold prices."

The median price is a point at which half the sales were for more and half for less.

December's median price rise was exacerbated because the total number of sales decreased to 194 last month from 240 a year earlier. The decrease occurred mostly in lower and midpriced regions.

For the full year, sales were down 24.4 percent to 2,741 from 3,627 a year before. It was the fourth consecutive year of fewer sales, and put the tally for single-family home transactions at its lowest level since 1998 when 2,495 homes sold.

In the condominium market, there were 3,933 sales last year, down 28.5 percent from 5,499 sales a year earlier. It was the third straight year for fewer condo sales, and put the tally at its lowest since 2000 when there were 3,926 sales.

The median condo price last year was $325,000, unchanged from the year before. The flatness in the median price is expected to disappear this year with further anticipated weakening of the broader market. UHERO forecasts a 4.9 percent condo price decline this year followed by a 5.9 percent drop next year.

Last month, the median condo price was down 4.7 percent to $305,000 from $320,000 in December 2007. There were 243 sales, down 31.2 percent from 353 sales in the same comparable period.

Combined, prices and sales volume for single-family homes and condos translated to $3.68 billion of residential real estate commerce on O'ahu last year, a 26.1 percent or $1.3 billion drop from $4.98 billion a year earlier.

Leroy Laney, a Hawai'i Pacific University finance and economics professor, said the local housing market won't likely improve until key parts of the local economy gain strength such as employment and personal income.

"Everything is weak," he said, adding that his expectation is for the local economy to begin rebounding at the end of this year or sometime next year.

Gangnes at UH said a big uncertainty is how Hawai'i's housing market may be affected by a national housing market that continues to worsen.

"So far we have gotten off lightly," he said. "We're still doing a lot better than most Mainland markets."

Nationally, the median single-family home price was on pace to drop 9.3 percent last year after slipping 1.4 percent in 2007, according to the National Association of Realtors.

"The Honolulu housing market shows remarkable price resiliency, even with the number of reduced sales," Sandra "Sam" Bangerter, Honolulu Board of Realtors president, said in a statement.

Bangerter said some Mainland markets have had median price declines of 18 to 30 percent.

One positive trend for housing is interest rates that are falling and acting as a counterweight to poor consumer confidence that has deterred many people from buying property.

Prudential Locations in a recent report said reduced interest rates and other moves by the federal government to stimulate the national housing market could lead more people to buy homes, which increases demand that helps support prices.

"Such loan products would have a tremendous impact on the Hawai'i market, making forecasted price reductions less drastic," Prudential said in its report.

Prudential also cited efforts to reduce foreclosures, which depress property prices, as another positive prospect for the local housing market this year.

Harvey Shapiro, economist for the Honolulu Board of Realtors, said if federal efforts succeed in shoring up the nation's financial lending market, then O'ahu home sales could pick up as early as the next few months.

Ishii, however, said he can't envision sales picking up this year, though he expects the decline in sales will level off.

Ishii said it will take a reduction in the inventory of homes on the market before any rebound in prices occurs.

There were 2,033 single-family homes on the market last month, up from 1,874 a year earlier. During the recent boom in prices, inventory often was under 1,000 homes.

Condo inventory last month was 2,634, up from 2,346 a year earlier. During the boom, inventory was at or below 1,000 units.