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A Case for Reaching the Bottom? Current Trends in the Hawaii Real Estate Market

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This article is about ‘reaching the bottom’ in the current real estate cycle for Oahu properties. The data currently available can either be interpreted as a change in the market place that will lead us to a bottoming of the market or…the current data may mean that this is nothing more than a regular, seasonal thing that the height of the market brings us every year. Time will only tell.

At the time of this writing the Honolulu Legislature has met in a special session and has voted for the most part to override the Governor’s Veto’s to raise significant taxes. Also at this time the first of the lay off notices have gone out to State Employees. In order to balance the budget I believe that this is the right thing to do. Personally, I think the furloughs would have been a much better measure but to now watch the Unions not taking responsibility in this fiasco is ridiculous. The Union Bosses have done a disservice to their membership in their quest to make the Governor the ‘Bad Guy.’

A balanced budget will be good for the State. It will be good for the City and County as well. This is no different than what we all do every day. We balance our check books. When there is no more money left…there is no more money.

Whomever we wish to blame for the ills in this State or this Country, one thing is apparent in the fact that we allowed ourselves to just spend and spend and spend with no end in site. We turned on the spigot and let it flow to everyone. In the housing market loans went to everyone who wanted to buy a home that had a heart beat, regardless whether or not they were credit worthy. There was a loan for anyone it seemed no matter what your credit score was.

Now we see two things:

1) The Nation is trying to spend its way out of this mess to the tune of Trillions of $’s for whatever you want to name it: Stimulus, National Health Care, Card Check, Cap and Trade.

2) The State of Hawaii and the City & County will balance their budgets but not by employee reductions or program adjustments but by raising your taxes.

This is no different than what we are seeing on the Federal Level. If you do not know what Cap & Trade is all about or you think it is about ‘saving the planet’, you better get onto the internet right now and find out what it is really about.

The initial bill as it went through the house would have:

1) Prevented you from replacing a window in your home in most cases without Federal Approval.
2) Would not allow you to sell your home until a Federal Energy Auditor came into your home and inspected it. Under the bill which still needs to go to the Senate, if this auditor found other ‘deficiencies’ for instance, poor insulation, no solar, no ‘Energy Star’ appliances, so forth and so forth, you would be given the list of deficiencies and be ‘forced’ to correct them, at your expense, before you could sell your home.

If it were not for the fast action of the National Association of Realtors this portion of the bill would have become reality. I urge you to think about this, long and hard.

If you want more information on this:

If you have checked out the above then do a little more and check out what is happening in our own Legislature:

Stay engaged. Stay informed.

Every year there is a cycle. As you might guess from the graph above, we can see the low in the months of December through February. Then in March the market rises and it peaks August and September before starting down again.

From January ’07 to December ’07 there was a -9% decline. The following year in ’08 there was a -15% decline. I am thinking that back in ’07 many buyers and sellers were still ‘non believers’ when it came to the reality of the market conditions and finally in ’08 we all knew ‘We are not in Kansas anymore Toto.’

Now the question is “Are we just in another typical Summer ‘Up Cycle’ or are we approaching bottom?” I cannot positively tell you the answer to this question, but I am hoping it is the later.

It is important to note that the combined figures of decline equal -24% less sales for the years of ’07 and ’08.

“Could the market decrease even more?” The answer is “Yes.” I would expect more decline to come from the balance of the months left in this year but I also would expect the rate of decline to be much more pronounced than last years decline rate.

The combined drops in the years ’07 & ’08 equaled -41%. From June ’08 to June ’09 we see a -17% drop. This graph concerns me. I would love to hypothesize that we going to be reaching bottom soon. Condos may have a little ways longer to drop. I think it will be less pronounced than in previous years, especially in ’08, but from the looks of this, Condos may drop even further for a while. I hope I am wrong.

After looking at this graph too on Condos but only in Ewa it looks very similar to the graph preceding this one for Oahu Condos. In other words, it too does not look very hopeful. There may well be more declines ahead of us.

I find it absolutely incredible that the Median Sold Prices for Single Family Homes increased over the past two years of ’07 & ’08. This is a total gain of +7% in Median Sold Price. June ’08 to June ’09 however shows a -10% loss.

All things considered whether or not we are just in a ‘Summer Market Cycle’ or not these graphs I think do not express much confidence in that we may be reaching the bottom yet.


The only ‘hopeful’ sign I see here is in the Ewa market for Single Family Homes. A total of -12% decline in Median Sold Price for ’07 & ’08 followed by a +3% for June ’08 to June ’09.

The first year of decline was not until ’08 that showed -6%. From June ’08 to June ’09 we see a matching decline of -6%. June ’09 may be the height of the market for this year which should mean more decline for the balance of the year is ahead of us.

Yes, I think we are in store for more decline yet to come. Where ever the bottom is, I do not think we are either there yet nor do I believe it is in our eminent future.

You are probably hearing all sorts of stories in the News Papers and on the Internet that housing is looking up. I am sure that some of these stories are true for some areas in the Mainland, I just cannot see it here in Hawaii from these figures. Maybe if these stories are true on the Mainland it will only be a matter of time before what is happening on the Mainland, happens here. I hope so.

Frankly, I am really getting tired of the negative news on all fronts. I can however tell you that there are buyers out there. They are mostly purchasing in the lower price ranges and this may indicate either First Time Buyers or Savvy Investors. Some of the high end is selling as well but not much.

We hear that Hawaii has a disproportionate share of Millionaires and that we are an International destination of great appeal World Wide and this brings us more real estate sales. I think we should count our blessings for this or this decline in all probability would have been worse.

I promise to stay on the data and bring to you each month new perspectives and updates to our real estate market and some of the economically political news.

I wish you all much Aloha and Mahalo for reading my articles!

Mike Gallagher, Broker in Charge, RE/MAX Honolulu
Ethics Complaints Review Committee Member, Honolulu Board of Realtors 808-384-9015

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