Will home prices go up or down in '07?

Interest rates, economic factors define this market.

 

HONOLULU ADVERTISER   February 11, 2007

BY LISA SCONTRAS

Custom Publishing Group

 

Which way will 2007 home prices go — up or down?

 

When Bill Chee, CEO at Prudential Locations LLC and 30- year veteran in the real estate field, was asked to characterize the outlook for the coming year, he had this to say.

“Although we expect the rate at which home prices increase to slow in 2007, we still anticipate moderate, single-digit price appreciation for the Hawaii market overall,” says Chee.

He adds that while nearly all Oahu neighborhoods appreciated in 2006 — the median single- family home rose 9 percent and median condo rose 16 percent for the year — 2007 prices in some areas will go up and in others will go down — depending on the community.

 

 

“Those neighborhoods that attract a more diverse set of buyers — both local and from out of state — and have a more universal appeal will continue to maintain their value and may even show an increase,” says Chee. “Other neighborhoods may begin to weaken this year, but not by a lot.”

Chee cites the strength of the overall economy, combined with the robust visitor industry, expanded military presence, Hawaii’s universal appeal to offshore buyers and the Island’s limited supply of developable land as being strong factors in sustaining Hawaii’s property values.

Experts will be keeping a close watch on interest rates this year, as a significant increase could possibly affect home prices causing them to fall for a short period of time, Chee explains.

“Currently, interest rates are still extraordinarily low,” he says. “Favorable interest rates, the fact that sellers may be more willing to negotiate and an increase in housing inventory levels present a window of opportunity for potential buyers.”

In general, it is likely that the number of sales will continue to slow in 2007 — down slightly from 2006 figures — returning to more normal levels and stabilizing from the frenzy that characterized the past five market years.

“It’s been so long since the market has been normal, we’ve forgotten what ‘normal’ is like,” says Chee.

Key trends to watch for this year will center around condos and investors.

“Because they’re a more affordable alternative, buyers will turn to the condo market,” says Chee. “This segment of the market will continue to outpace single-family homes in price appreciation.”

January statistics gathered by the Honolulu Board of Realtors and released this week support that trend. The median sales price for single-family homes last month was $600,000, down 2.4 percent from the same period last year. Median condo prices rose 8.5 percent from a year ago averaging $320,000.

With several new condo developments scheduled to be completed this year, Chee says the inventory in these areas may rise as investors look to sell.

On a positive note, Chee advises investors to take advantage of the leveling off in prices to strengthen their real estate portfolios.

“Real estate investors should consider taking advantage of 1031 Exchange rules to shift investments to neighborhoods where buyer demand is greater,” he says.

 

 

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