The median price for island homes continues its descent, finding its way towards trough stability and hopefully inelasticity in the wake of government-injected life into the housing market.

The month of December brought the median price for single-family homes to $550,000 and condominiums to $300,000. A low from previous months, respectively, however, relative when considering the island-wide sales data. The Ewa Plain-Kapolei area had the most sales this month and year-to-date. It also had the lowest median sales price for the month of December and the second lowest year-to-date, behind the Makaha-Nanakuli area.

Though general indicators of market direction, the median sales price holds little insight into the individual Oahu areas. A few months back Hawaii Kai’s median sales price spiked from previous months. This was not necessarily an indicator of increased activity or rising property values, but rather a number skewed by a few high-end property sales. The importance lied in the examination of each pocket area and all data pertaining to individual properties, like listing prices, sales prices, days on the market, like-kind properties, property condition, etc.

Inventory continues to decline both in East Oahu and all of Oahu, and fewer new listings are entering the market. With respectively four months of inventory remaining in East Oahu, a buyer’s market exists, but changes in government initiatives and interest rates could bring further market changes.

According to Gabe Amey, Branch Manager of HomeLoan Financial and HawaiiVALoans.com, interest rates have been fluctuating between roughly four-and-one-half percent and five-and-one-half percent for borrowers looking to purchase or refinance an owner-occupied residence. Amey doesn’t predict that rates will remain as low as they have been for too much longer.

“Part of the reason rates have been so low for the last year is due to the Fed’s $1.25 trillion program to buy mortgage-backed securities to prop up the housing market. The funds for this program are expected to run out in March 2010. Without the Fed’s help to artificially increase the demand for mortgage-backed securities, it is likely that rates will have no place to go but up,” says Amey. “Who knows exactly when the rates will increase and by how much? But it is only logical to think that interest rates in the four percent to five percent range will not last long.”

Both real estate agents and lenders have noticed an increase in first-time homebuyers looking to take advantage of the $8,000 credit. With the credit deadline extended from late 2009 to June 2010, more buyers are “getting off the fence.”

Amey has noticed these changes in activity. “It was only a year ago when it was obvious that we were in a buyers’ market. Our borrowers had the pick of the litter when it came to getting an offer accepted and the buyer had many more opportunities to get seller credits to help pay for closing costs. In the third and fourth quarters of 2009, we started to see this all change. Our borrowers were having a harder time getting their offers accepted and seller credits were no longer easy to obtain. It was apparent that potential buyers that were sitting on the fence, were finally jumping into the real estate market to take advantage of the great initiatives such as low rates and tax credit, which ultimately contributes to the reduction in inventory.”

Overall, East Oahu continues to show signs of stability in price and desirability with minimal drastic fluctuations. It is arguable whether Hawaii has reached its market trough, but what is known is that the government-injected life into the housing market, has actually given the market some life.