By Lisa Scontras

A strong finish to the 2010 Oahu housing market has analysts optimistic about a recovery continuing into 2011.

Year-end numbers on Oahu show an increase in sales volume overall as well as an increase in the median home price.

The strength in Oahu’s single-family home market comes after two straight years of drops in the median price of a home – down 3 percent in 2008 and down another 7 percent in 2009. In 2010, the median price bumped up to $600,000, an increase of 3.4 percent, and more importantly, reversed the downward trend. Condominiums, with a median sale price of $305,000, remained unchanged in 2010 after dropping 6 percent in 2009.

“Sales volume was up 12.6 percent (2,976 sales for the year) for single-family homes, and up 9.0 percent (3,843 sales) for condos, which beats 2009 and 2008 – the highest since 2007 levels,” says John Jacobson, lead analyst in the Research Division at Prudential Locations. “We saw the bottom of the cycle in 2009. 2010 was an improvement by almost every measure.”

The real estate market across the country was given a boost in the first half of 2010 with two government intervention programs, which were the market’s biggest influences. The Fed’s program to buy mortgage backed securities to keep mortgage interest rates low ended on March 30 and the home-buyer tax credit expired at the end of June.

“In the last three to four months of 2010, Oahu indicators settled back into a typical end-of-year pattern,” says Jacobson.

“In fact, that was the biggest surprise of 2010 – that the market didn’t recoil when the homebuyer tax credit ended, it simply returned to regular patterns, and interest rates remained low,” says Jacobson. “We were waiting for rates to shoot up, but they didn’t.”

Other market indicators remained positive as well. The number of days a home spent on the market before it sold was also down in 2010, to 34 days for single-family homes and 36 days for condos – the lowest levels since 2005.

Statistics show year-end available inventory up slightly for the year as compared to end-of-2009 numbers, but still lower than the previous four years. The end-of-2009 drop may be attributed to the surge in sales created by the tax credit, which atypically depleted the inventory, as well as the economic uncertainty at that time, which discouraged some from making real estate transactions.

Jacobson found that in 2010, nearly 70 percent of Oahu neighborhoods had an increase in median price as compared to 2009 when more than 70 percent of the neighborhoods saw a decrease in price.

The high-end market on Oahu – $1.2 million and up – is also trending upward, recovering even faster than the rest of the market.

“While this may not translate into higher prices yet, the luxury home market is often a leading indicator, and so this is another sign of a strengthening Oahu real

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Inch by inch, consumer confidence is increasing along with the fact that tourism is rebounding and the economy, locally and nationally, is showing gradual improvement.

“The thing that strikes me is that so many indicators are positive,” says Jacobson. “Inventory is low, sales volume is up, prices are up, and days on the market are down. Also, interest rates are still very low, the visitor industry is doing much better than expected and we continue to hear optimistic news about Hawaii and the U.S.”

“These strong market indicators are going to mean something in 2011, he says. “Several of our local economists are predicting price increases in 2011.”

Historically, home prices on Oahu have appreciated at a rate of 100 percent every 10 years. The one exception was during the 8-year period from 1997 to 2004, where there was some lower appreciation and even depreciation.

“But in the 30 years before that and the six years since, Oahu home prices have doubled in every 10-year period,” says Jacobson.

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