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Data Shows Housing Market Returning To Normal

By Lisa Scontras

While many are still reeling from pay cuts and job losses, local industry experts analyzed big-picture – as well as small-picture – statistics at the third annual State of Real Estate forum at the Hawaii Convention Center last month. Their findings relay what many have hoped for 2011 – an optimistic outlook for our local real estate market.

“Each year billions of dollars are spent buying and selling real estate in Hawaii,” says Bill Chee, president and CEO at Prudential Locations, the event sponsor. “And when the stakes are that high, every detail about every segment of the market counts.”

Chee has successfully built his company on analyzing market data and sharing the findings with their clients – to help them make smarter real estate decisions. By reviewing inventory levels, days on the market, the number of buyers as well as visitor arrivals and unemployment figures, and the influence of factors such as subprime lending and mortgage interest rates, definite cyclic trends emerge. Chee’s analysis of Hawaii’s real estate facts and figures may be as close to a crystal ball as you can get.

This year’s analysis – as told by Chee; Paul Brewbaker, principal economics consultant at TZ Economics; Dr.

Michael Sklarz, president and CEO of the Honolulu-based real estate consulting firm Collateral Analytics; and a prominent Hawaii developer, Stanford Carr – shows a return to normalcy in the local housing market.

Looking back 40 years, statistics show that Hawaii’s market has lived through three clearly defined real estate cycles, each lasting about 10 years, and each ending with median prices doubling from the previous cycle. And in each cycle, after the spike in prices, there is typically a recovery period of sideways movement, which is the part of the cycle we are in today.

So while no one actually has a crystal ball, the data confirms that property values have not crashed and more importantly, homes are being bought and sold in Hawaii every day. It’s a normal market.

However, the experts pointed out that recurring home sales cycles don’t tell the whole story, as the economic influences that propelled them were different each time. The panelists discussed the market conditions that promise to be the most influential moving into 2011 and beyond.

Interest Rates

Continued low mortgage interest rates translate to “Hawaii being on sale.” Since interest rates have a much more profound impact on affordability than does price, sharp buyers will act soon before their buying power diminishes. Prudential Locations’ agents are encouraging buyers to sit down with a loan officer to crunch affordability numbers to see for themselves exactly what an opportunity these low rates offer.

Lack of Inventory

Unlike the last economic slump and the one before that, there is not a backlog of new-construction inventory waiting to be sold, according to Carr. New building codes and stricter lending policies have made it difficult for developers to get new projects launched. Coupled with the reduced number of resales listed in MLS, the lack of excess inventory puts sellers in an advantageous position.


Fortunately, Hawaii’s visitor numbers are returning to normal.

“The visitor count has almost returned to where it was before Aloha Airlines and ATA shut down,” says Brewbaker. “It is a pretty impressive comeback. The neighbor islands took a bigger hit than Oahu and the next round (of recovery) has to happen there.”

Rising oil prices will be an important factor to keep an eye on, as its impact on airline ticket prices may become significant on visitor numbers.

Editor’s note: Comments on Hawaii’s tourism were made prior to the tragic events in Japan. Thus, it remains unclear what the full impact on the local industry will be.


Unemployment in Hawaii (6.4 percent) is still quite a bit better than the national figure of 9 percent.

“For Hawaii, the unemployment rate has begun to work its way down,” said Brewbaker. “The resistance in new hiring is a typical attribute of a slow moving recovery such as the one we have here in Hawaii.”

Subprime Loans

Dr. Sklarz charted the number of subprime loans that were securitized since 2000 in 11 cities around the country, including Honolulu. The chart clearly shows Oahu’s subprime lending to be relatively low.

“In Honolulu, we didn’t really have a huge subprime boom here like we did in some of these other markets where they are still recovering,” says Sklarz.

Hawaii’s relatively small percentage of these loans was key in the stability of the local market.

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