How Much is Your Home Worth Now?

After a decade of skyrocketing prices, Hawaii’s real estate market has finally slowed down. What can we expect next?


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Location is everything. This three-bedroom house in Manoa is currently on the market for $1.3 million.

Photo: Rae Huo


What a difference five years makes. When HONOLULU Magazine last did a feature examining home prices in Hawaii in 2004, the real estate market was on fire, with soaring prices filling hopeful home buyers with urgency. You couldn’t buy a house fast enough. Today, it’s a much different picture. The global recession has bruised Hawaii home prices and squelched demand. The median sale price for a single-family home on Oahu has dropped more than 8 percent compared with this time last year, with certain neighborhoods seeing a decline of as much as 37 percent. (See our chart of which neighborhoods have seen the most dramatic price shifts on page 32). The number of homes being sold has dropped off sharply, as well—down almost 35 percent compared with the same time in 2008.


What does this mean if you’re trying to buy or sell a home right now? We spoke with local real estate experts to get a sense of what’s really happening in the market, and get some tips for the best way to respond to the situation.

What does this mean if you’re trying to buy or sell a home right now? We spoke with local real estate experts to get a sense of what’s really happening in the market, and get some tips for the best way to respond to the situation.

The Life of an Oahu Home

Staking out a piece of Lanikai paradise costs nearly $1.5 million these days. But if you had been lucky enough to have been shopping for the same property in 1948, you could have picked it up for just $3,000. Oh, for a time machine. To give some perspective on today’s housing market, we took a look at five single-family houses up for sale in neighborhoods around the island and researched what they sold for over the years. All of the properties are now fee simple (fs); for the one that started off as leasehold (lh), we’ve noted when the property converted to fee simple, and what it cost to purchase the fee. For space reasons, we haven’t listed every change in ownership, but what is listed gives a fairly representative sale history.
 
 

 
Photo: Rae Huo

MANOA

4 bedrooms / 3 bathrooms
3,806 sq.-ft. interior / 7,995  sq.-ft. lot
Sale Price History
Price adjusted to 2009 Dollars
1943:     $18,750 (fs)  
1950:     $26,250 (fs)
1956:     $32,500 (fs) 
1979:     $230,000 (fs)
1981:    $310,000 (fs)
2004:     $1,075,000 (fs)
$230,537
$231,685
$254,156
$673,871
$725,410
$1,210,493
2009: Offered for $1,495,000
 

 


Photo: rae Huo

LANIKAI

3 bedrooms / 2 bathrooms / 1 half-bathroom 1,992 sq.-ft. interior / 10,353 sq.-ft. lot
Sale Price History
Price adjusted to 2009 Dollars
1948:     $3,000 (fs)
1958:     $6,600 (fs)
1963:     $11,550 (fs)
1965:     $13,200 (fs)
1970:     $45,000 (fs)
2000:     $350,000 (fs)
2003:     $1 million (fs)
$26,478
$48,577  
$80,287   
$89,135   
$246,699
$432,335
$1,156,027
2009:     Offered for $1,495,000 (fs)

First of all, it’s easy to look at numbers like this and recall the bursting of the Japanese investment bubble in 1990, which sent the local housing market into an almost decade-long spiral of pain.

But real estate pundits say the current situation is far from the end of the world. Despite increasingly gloomy economic forecasts, there are a few reasons Hawaii won’t crater the way some Mainland markets have.

“It’s pretty clear that the housing market is going to stay weak until the economy turns around,” says Harvey Shapiro, research economist at the Honolulu Board of Realtors. “But this is not a collapse in the market; this is part of the normal business cycle, accelerated by the financial woes that we’re having.”

The larger economy may be in crisis, but it’s important to note that the dropping home prices we’re seeing aren’t a bubble popping as much as an inevitable correction to a decade’s worth of dramatic increases, during which the median price of a home skyrocketed from below $300,000 in 2000 to almost $700,000 in 2007.

Chason Ishii, president of local real estate firm Coldwell Banker Pacific Properties, says, “The escalation was really based on long-overdue, pent-up demand. When new inventory became available, the market continuously moved forward, as the economy and the overall business was doing quite well.”

Now that we’ve moved over the crest, Hawaii is left with a relatively modest number of available homes. Oahu’s inventory this April totaled 1,822 single-family homes and 2,514 condominiums, less than the same time last year. This scarcity will create a natural safety net for prices, especially compared with states such as Florida and Nevada, where rampant overdevelopment has led to a glut of empty, unwanted homes.

And finally, even in the go-go atmosphere of the past decade, Hawaii has remained more conservative than other Mainland cities, both in terms of who’s buying property and how they’re financing it. Ricky Cassiday, of real estate consultancy Data@Work, says, “A lot of people want to come here to live. But it’s a much bigger step to buy here. The people who own houses in Hawaii are generally different from those on the Mainland; they didn’t get into this for the home equity. It’s more of a longterm commitment.”
   

Selling When No One is Buying

Real estate analysts might minimize the severity of the downturn, but it’s small comfort for anyone trying to sell a home. Buyers have adopted a wait-and-see attitude.

“Demand is low because of the mystery and the fear,” says Cassiday. “Home shopping is a collaborative process. Everyone’s looking over their shoulder, saying, ‘She just got it for 50 cents, I want it for 45 cents. Maybe if I wait five months or a year …’”

He recommends that sellers be realistic about pricing, which in this time of slow decline means not only matching the prices of similar listings in your neighborhood, but beating them. It’s also important to make sure your property is in good, livable shape. With bargains available everywhere, buyers have become less tolerant of fixer-uppers.

Houses (Hottest & Coldest Neighborhoods)

Hottest 5
2008 YTD Median Price
2009 YTD Median Price
% Change
Wahiawa
Mililani
Ewa Plain
Aina Haina-Kuliouou
Kapahulu-Diamond Head
$415,000
$579,000
$475,000
$895,000
$781,000
$436,000
$585,000
$461,500
$863,000
$737,500
5.1%
1.0%
-2.8%
-3.6%
-5.6%
Coolest 5                    
2008 YTD Median Price
2009 YTD Median Price
% Change
Waialae/ Kahala
Pearl City-Aiea
Moanalua-Kalihi
Windward Coast
North Shore
$1,500,000
$704,500
$667,500
$560,000
$897,500
 $1,217,500
$560,000
$525,000
$435,000
$567,600
 -18.8%
-20.5%
-21.3%
-22.3%
-36.8%
Overall Oahu
$620,000
$570,000
-8.1%

 

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