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Business :: Real Estate :: Understanding the Hawaii Real Estate Market :: What the Future Holds for...

What the Future Holds for The Oahu Real Estate Market

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I find it amazing that we have fallen in values sold by -10% when comparing last year August figures with this year’s. I would have thought that at this point we be seeing a decline of no more than -5% to -8%. This is not say that every neighborhood is doing this poorly but this is what the average market conditions are for Oahu in August of 2009.

As we head into the Fall and leave the year’s typical best selling season of April through October each year, we can only expect a further general decline in all categories that we keep track of such as Sold Price, Asking Price, Units Sold and particularly right now a further reduction in inventory levels. I expect that the only things that are going to rise will be Expired and Withdrawn Listings which will indicate those sellers who have given up selling or withdrew their listings in order to come back onto the market at a lower price.

Other categories we track such as Days On Market (D.O.M.) and perhaps Median For Sale Price I expect will rise in the months ahead. Why should the Median For Sale Price rise? It will in most cases do just that but primarily in the more expensive neighborhoods such as Kailua, Kahala, Diamond Head and Hawaii Kai.


I have always said that it is the Condo Market that is leading the way in this current down turn and it continues to do just that. When we compare August ’08 with August ’09 we can see that the decline in the Median Sold Price is even larger than the Single Family Home (S.F.H.) Market.

The market is nose diving right now and not “bottoming out “as you will frequently hear from Real Estate ‘experts’ on the Mainland. One might say ‘well, it is bottoming out on the Mainland.’ Well, I would have to disagree on that point as well. The reason why we do hear ‘some’ good news concerning real estate sales on the Mainland may be bottoming out is that sales have gone upwards in many areas where there existed a plentiful for sale inventory of Foreclosures and Short Sales and it is these that buyers in the Mainland are snapping up.

In Hawaii as of September ’09 there is approximately 13% of the entire inventory for sale on Oahu that are Foreclosures and Short Sales for both Single Family Homes and Condos. Our Foreclosure & Short Sale % figure is much less than what we see occurring in the Mainland in hard hit, high inventory, economically depressed markets such as in California and more specifically in Las Vegas. The Foreclosure and Short Sale inventory on Oahu is pretty much evenly split between S.F.H.’s and Condos. The most inventory available in Foreclosures & Short Sales is located in the West Side of Oahu such as in Ewa, Kapolei and Makakilo. There are approximately 525 homes for sale that are Foreclosures and Short Sales on Oahu and the inventory has not increased since May ’09 but is now spreading to Mililani and Mililani Mauka. I would hard pressed to say that these areas as mentioned above are the only neighborhoods impacted by these type of distressed properties as you will find distressed properties pretty much all over, even in Kailua, Hawaii Kai, Waikiki, Honolulu, Kaneohe, the North Shore area and many more areas on Oahu.



Although it has been ‘assumed’ that appraisers who are valuing property for lenders of homes in escrow are not including the Foreclosures and Short Sales into their calculations when valuing a property, there are cases out there where this is happening. It might even be said that ‘why should you not include Foreclosures and Short Sales into the value calculations?’ I do not disagree. If  an area as for example, Ewa is being particularly hard hit with Foreclosures and Short Sales you might wonder why should you not include these distressed property sales, as if you do not, you may not be reflecting and reporting an accurate ‘picture’ back to the lenders of the neighborhood or area. If the appraisal is inaccurate then the lenders are at risk as well as the buyers who are purchasing these properties, as their homes in escow may be valued inaccurately high and the lender and the buyer are paying too much.

Days On Market (D.O.M.) is performing well due the fact that the inventory is very low and buyers are snapping up bargains particularly in the lowest price ranges in every neighborhood all across Oahu. Not all neighborhoods are the same regarding the Days On Market situation. Some have higher D.O.M., some are lower. As of August ’09 Makakilo SFH D.O.M. is at 125, Hawaii Kai 92, Kailua 81, Mililani Area 93 and Mililani Mauka 65.

In many areas of Oahu I would expect a period of 2 to 3 months to be expected in order to get an Accepted Offer on a home for sale. Patience is a requirement for Sellers today in this market as well as a keen sense of reality of the existing market conditions.

Again, we find that the Condo Market overall has a higher rate in the Days On Market vs. the Single Family Homes.

Since the end of last year in 2008 we have seen a steady climb in the Median For Sale Price. One might be wondering ‘why?’ The reason for this climb and modest increase is the amount of higher priced homes coming onto the market in areas such as Kailua, Hawaii Kai, Kahala, Diamond Head, North Shore Area and parts of Makakilo, Mililani and other areas on Oahu that have an inventory for sale of homes well into the $1,000,000+ price range.

These same higher priced homes in upscale neighborhoods will be joining the ranks very soon of the Withdrawn and Expired categories as the market moves further into the end of it’s prime selling season and sales rate annually drop off. Beginning in October through February is when sales drop significantly and it is not until the Spring of 2010 that they will pick up again and once again the higher priced inventory will return to the market

It might also be interesting to do a little conjecture from the above graph by concentrating upon the cycles within the graph. January ’07 we see after April the prime selling season took hold and ended in February of ’08 as this is when the higher priced listings came off of the market and the Median For Sale Prices dropped. 2008 was virtually a disaster for Oahu real estate sales and you can see here, that that there was virtually no prime selling season to speak of in 2008. In February 2009 we see Median For Sale Price rose steadily through August. My bet is we will see a steady drop in this figure throughout the year and into the Spring of 2010.

The Median For Sale Price of the Condo Market appears to have not had the upticks during the prime selling seasons as occurred in S.F.H.’s and has in fact dropped steadily since 2007. This is very indicative of buyers choosing to purchase in the lowest sales price ranges, especially in Condos. 

Sales for August are currently the lowest since this data was collected in 2004 for Single Family Homes and Condos and are almost at their lowest level of sales rate since 2004 when you look at the figures below the graph above showing sales rates from 2004 through 2009. I believe the market will continue to loose ground in sales throughout this year and next year. I do not believe are we are going to experience a ‘bottoming out’ of the real estate market nor do I believe that the National Economy is doing better.

If you look closely at the graph above you will see we are almost at levels of sales rates as previously reported in mid 90’s during the last down turn.

In terms of the Economy I believe that what we are experiencing right now has been a normal, seasonal, uptick in sales this Summer from the low sales rate Pre-Summer months when the National Economy was thought by many of us to be in it’s most dire straits earlier this year. An example of what many consumers thought of the economic conditions in the first part of this year was that Grocery Store Sales all across the nation, in the beginning part of 2009, were at the lowest recorded level in approximately 60 years, as concerned consumers made the decision to eat out of their own previously stocked pantries. Since then consumers have loosened up in spending while they have listened and read the reports that the economy is on the mend.

Here in Hawaii we are loosing tax revenue for the State and the City & County budgets and the only response from our esteemed legislators has been to hold up lay offs and furloughs in court and raise our taxes on every conceivable item that they can think of.

I for one do not support the current leadership in Washington D.C. nor Hawaii, as I see no end to the spending by our governments while we do not have the means to balance the budgets. In addition, there will be increases in our Hawaii taxes due to an ill conceived rail system, expansion by 100% of the City budget over the past 4 years, increases in property conveyance taxes, G.E. tax and property assessment taxes. There is no end in sight yet on new increased taxes that will be imposed upon us with our current leadership, both within the State and Nationally. 

The State of Hawaii currently has a $876 Million budget deficit.

September 3rd. 2009


The ‘bottom line’ is and always will be unemployment. Here in Hawaii we are experiencing 7.4% as of June ’09. Across the nation we are higher at an unemployment rate of 9.7% as of Sept. ’09 and ‘come on folks, you know as well as I do the unemployment figures are dramatically under-reported.’

According to the U.S. Department of Labor, Hawaii's unemployment rate is at a 31-year high while the national rate is at a 26-year high. The problem with taking the national 9.7% unemployment rate at face value: the Labor Department only counts people as unemployed if they meet a certain number of criteria, including whether they actively looked for work in the four previous weeks. Having given up looking for a job doesn't change the fact that you're unemployed, and certainly shouldn't exempt you from being calculated into the national unemployment rate.


The Labor Department does calculate a separate unemployment rate that includes those who should have a full-time job but do not.

Alternative measures of labor underutilization by state, third quarter of 2008 through second quarter of 2009 averages

In addition to the current unemployment rate being reported in Mainland news we can expect an additional job losses in 2010.

I believe we will see a continued rise in Foreclosures and Short Sales and increases in unemployment of the likes we have not yet experienced in the Mainland as well as Hawaii. There is right now approximately $750 Billion worth of Option A.R.M. loans coming due Nation wide and already 50% are in default. This is as reported by the New York Times, John Leland (8/26/09).

Employment or…Non Employment is the bottom line here in this State and the Nation and it is going to affect each and every one of us as well as the real estate markets.

Inventory levels continue to drop due to sales and mostly from the lack of New Listings.

The Median For Sale Prices of New Listings have not been this low before. Since 2005 they have come down. They will drop further as more buyers continue to purchase the low end price ranges.

Notice the upturn in SFH and the down turn in the Median For Sale Price.

To summarize I believe what we are seeing in these graphs is only an uptick in sales to reflect the current prime selling season that annually occurs between the months of April to October.

It is my belief we are only seeing a plateau right now that is generally performing in a downward direction and will begin to trend downwards at much greater rate in the months and year to come.

You may not agree. You are entitled to your opinion. My goal is supply you with the best information I can bring to you each month and for you to review and then conduct your own studies.

If you take away anything after reading this report, do not believe everything you read and hear concerning real estate sales and the economy. More often than you think what appears to be real estate news related articles are actually advertisements and separate agendas of real estate related companies that want to tell you want they want you to hear. I can also tell you that I will give you the straight info.

If you have any questions always feel free to call or email at your leisure.

I wish you all much Aloha and I Thank You for your readership.


Mike Gallagher, Broker in Charge, RE/MAX Honolulu
Ethics Complaints Review Committee Member, and


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