Prices Dip Slightly Yet Demand Remains Robust in January
After more than 12 months of consecutive price gains, the median price of a single-family home on Oahu dipped in January — down a slight one-half percent, compared to this month a year ago.
While sales price trend statistics are a key gauge of overall market health, other stats strongly influencing the market include Days on the Market, the number of closed sales, pending sales, and inventory levels.
Inventory levels remained low as they have for many months. While the number of new listings in January was up 6.2% in single-family homes and up 13.3% in condos, Months of Inventory Remaining and total number of active listings are lower for both categories. In fact, the months of inventory remaining, which tracks the number of months it would take to sell the homes currently on the market at the current rate of sale, is 2.4 months — severely low — for both single-family and condominiums. When there is not enough inventory to meet demand, a competitive situation exists among buyers.
Pending sales is a forward-looking indicator tracking the number of homes in escrow but not yet closed — a predictor of sales volume one to two month into the future. When compared to January 2016, pending single-family home sales are up 26.1%, from 341 a year ago to 430 last month. Pending condo sales are up 31.4%, from 471 a year ago, to 619 just last month.
So while median prices were nearly flat in January, market indicators are consistent with a strong and continuing demand.
“Early indicators for the year show that the market is still booming,” says Kalama Kim, principal broker at Coldwell Banker Pacific Properties. “Pending sales were up which is a great sign for the near future. Even though new listings increase in January, the increase in closed sales and pending sales exceeded new listings — meaning that we need more homes for sale to keep up with buyer demand.”
Another indicator to keep an eye on is sales volume. Since the market ebbs and flows seasonally, tracking sales year-over-year allows a better understanding of the market’s seasonal dynamics. And while January typically records fewer sales than most months, when compared to January last year, the number of closings is up.
Single-family homes sales volume is up 6.5% — from 232 closings in January 2016 to 247 last month. The tally of closed condo sales was up a significantly, 11.8% — from 338 closings during the first month of 2016, versus 378 last month.
January and February have historically been the seasonal slow months for Oahu housing sales, so stats reported by the Honolulu Board of Realtors which reflected relatively flat price data last month is a typical start to the new year.
The median sales price of a single-family home was down 0.5% — from $733,500 in January 2016, to $730,000 last month. The lull this month, after many months of significant gains is likely tied, in part, to a slight increase in mortgage interest rates. As rates go up, buying power goes down. Rising rates can be a motivating factor for buyers who want to close on a sale while rates still remain historically low.
“Interest rates continue to have a positive impact on home sales because it allows home buyers beneficial purchasing power and the flexibility for ‘right-sizers’ to sell their current home and buy a replacement property at nearly the same interest rate they used when purchasing their current home,” says Kim.
Conversely, the median sales price of a condo was up slightly (1.5%) from $374,500 a year ago, to $380,000 last month. Condo prices remain more affordable than single-family homes, therefore the condo market buyer pool is generally larger.
“We continue to see first-time homebuyers flock to the more affordable price points in the market as mortgage interest rates remain low even with recent rate adjustments,” Kim adds.
This month’s best performing neighborhoods were those where buyers were motivated to pay 100% or more of the asking price. The fact that buyers are still bidding up prices to more than the asking price, illustrates the point that while prices were flat in January, demand was unmistakable.
Single-family home neighborhood best performers:
Ewa Plain: 100.1%
Kailua – Waimanalo: 102.5%
Kapahulu – Diamond Head: 100.8%
Makaha – Nanakuli: 100.6%
Moanalua – Salt Lake: 101.9%
Pearl City – Aiea: 100.7%
Condo neighborhood best performers:
Ewa Plain: 102.3%
Kailua – Waimanalo: 102.2%
Source: Honolulu Board of REALTORS®, compiled from MLS data. December 2016