Oahu real estate update

Oahu’s real estate market showed strength in the month of February, posting an increase in the number of condominiums sales as well as an uptick in the median price of a condo. There were just less than three hundred condominium purchases in February 2011, marking a substantial twenty-one percent increase over the 244 reported at the same time last year.

The average price of a condo rose as well, moving from $299,000 in February 2010 to $320,000 in February 2011.

This suggests that consumers’ demand for condominiums is sufficient to resist the downwards pressure of increasing prices, although that trend has not held true for single-family homes on the island.

There were 181 single family houses purchased last month, representing a marginal increase over the 177 sold in February 2010. Conversely, the median sales price of these properties declined by approximately one percent from $575,000 to $570,000.

This particular discrepancy between condos and single family homes suggests two things. First, that investors may be returning in force to the Oahu housing market, as represented by the uptick in condo sales volume, and second, that residents’ demand for residential properties may be cooling off.

There is reason to be optimistic, however, since the decline in median price actually represented a moderation of the previous month’s decline, which was a drop of more than four percent. In other words, the real estate sector of the housing market seems poised to stage a moderate recovery as the year moves along.

In terms of the amount of time that properties spent on the market, homes sold in February 2011 took 58 days to be purchased, compared to 38 days the year prior. Similarly, condominiums spent an extra week on the market relative to last year, with time on market rising from 51 days to 58 days. This can be understood partially as a result of the federal housing tax credit which was in effect last year. Essentially, the credit may have cannibalized future demand by accelerating the pace of short-term sales. Therefore, this apparent slowdown should not necessarily be interpreted as showing weakness in the market.

There were also fewer homes and condominiums in the market in February 2011 – just under 1400 single family houses and slightly over 1900 condominiums. These numbers represented a decline of roughly ten percent and four percent for homes and condominiums, respectively.

Interestingly, February is traditionally the part of the year with the fewest number of sales in Hawaii. The fact that condominiums sales rose substantially while home sales remained relatively static seems to indicate an encouraging strength in the Oahu real estate market. There have been a number of instances throughout the island in which properties have been bid on by multiple individuals, even when the price is at or near the market mean.

There were slightly fewer foreclosures in the Oahu real estate market in February, although that dip may have been the product of national foreclosure backlog. Throughout the entire state, there were 953 foreclosures in February, representing a two percent decrease from the 972 recorded last year at the same time. Although this past tracking period was the third straight in which the number of foreclosures declined, the decline is not likely an indication of a decrease in distressed properties but rather the result of several major lenders freezing foreclosure actions.

Hawaii’s foreclosure rate is relatively severe overall, consistently ranking in the top ten or fifteen worst markets for foreclosure nationwide for several months. The news was more encouraging for Honolulu and Oahu in particular, however, since the City and County of Honolulu saw the lowest foreclosure filing rate of the entire state. In February 2011, Oahu had one foreclosure for every 825 homes, compared to one out of 270 for the Big Island, one out of 362 for Maui, and one for every 502 on Kauai.

Despite the lowest proportion, Oahu saw the largest quantity of foreclosures, with just over 400 in February. Most of these foreclosures were either auction notices or lender repossessions, although there were only 84 default filings (which mark the start of a foreclosure). It is possible that Oahu’s median home price will be depressed once banks start to clear out their backlog of foreclosures, since foreclosures are generally sent for less than the market median.