What goes up must come down.
At least that was true in 2018 for Oahu's home market, which ended the year with record annual median prices for single- family homes and condominiums but saw slowing sales in December and for the full year.
The annual median price paid for a single-family home rose nearly 5% to a high of $790,000, and the annual median price paid for a condominium increased nearly 4% to a record $420,000. The median price is the point at which half the homes traded above and half the homes traded below.
The 2018 records beat the prior median price records set in 2017 of $755,000 for a single- family home and $405,000 for a condominium. But the highest monthly median prices were in March when condominiums rose to a record $435,000 and in September when the median price paid for a single-family home rose to $812,500. The December median prices were $788,000 for a single-family home and $398,500 for a condominium.
Rising prices combined with rising interest rates have put downward pressure on resales. In December single-family home sales dropped to 259, down just over 28% from December 2017, according to a report released Sunday by the Honolulu Board of Realtors. Condominium sales in December fell to 440 sales, an almost 5% drop from December 2017. The December sales declines contributed to a nearly 8% drop in annual single-family home resales to 3,609 and a nearly 3% drop in annual condominium resales, which fell to 5,679.
The results contrasted with the last three consecutive years when sales volume growth ranged from about 5% to 6.5% each year for single-family homes and 4.5% to 8.5% for condominiums.
Darryl Macha, 2018 president of the Honolulu Board of Realtors, said the last time annual sales of both single-family homes and condominium dropped was in 2009 when they fell about 6% for single-family homes and about 12% for condominiums.
"We've had a short six-year run-up, which started in 2012," Macha said.
While typical cycles run about seven years in Honolulu, Macha said, "the jury's still out" on whether this cycle has peaked.
He said December home prices remained stable despite sales slowing and active listings increasing in the last few months of 2018. In 2018, inventory of single-family homes increased by more than 10%, and condominiums increased by nearly 13% over the previous year.
These indicators are signs that the market is changing.
"We began to see a shift in the market during the last quarter of the year, and as 2019 begins it appears that trends point toward a more balanced market for buyers and sellers," Macha said.
Shannon Severance, the top producer for RE/MAX Honolulu, said, "Home prices went up so quickly. Now homes are sitting on the market a little longer, in some cases 90 days or more, but anything below six months is still a seller's market."
Severance said the market has hit a point where few sellers are likely to get multiple offers that are over asking price on the first day of an open house. But, she said, Oahu's residential real estate market is still great for sellers who price their properties competitively and ensure that they will show well.
Buyers and sellers are reacting to the slowing market in different ways.
"It's a great market, just a different market. There's not as much of a feeding frenzy as there once was," Severance said. "Once sellers could say 'as is' and buyers would take it, now they might have to fix that broken washing machine."
She's also seeing more departing military owners listing early to guarantee that they won't have to carry a Hawaii mortgage once they get to their next duty station, which could come with lower basic housing allowances than Oahu.
"In some cases they are putting their properties on the market six months before they move and going into a rental. Some have a fear of what's happening in the market and want to get out of their mortgage before they move," Severance said.
On the plus side, Macha said a more balanced market means that the new year could bring more options for buyers to consider. But given rising interest rates, they should still move fast, he said.
"With the increased inventory in both single-family homes and condominiums, well-qualified buyers may have more options to consider. Personally, I feel that we are headed back to the beginning of a cycle, so it's an opportune time to buy," Macha said. "While current mortgage rates are still relatively low, they are anticipated to rise this year, so those 'on the fence' may want to consider purchasing sooner rather than later."
Jim Shook, a Realtor associate for Remax Honolulu, said the market is "calming down as people take a little bit of a breath."
"We'll have to wait and see what happens," said Shook as he posted signs Sunday advertising an open house in Dowsett Point.
Though the market is moderating, Shook said he anticipated strong traffic at the open house for his 217 Prospect St. one-bedroom, one-bath listing.
"It's competitively priced at $439,000, and it allows pets of any size," he said. "Hopefully, today's going to be a busy day."
