O'ahu's housing market slowdown intensified last month with a sharp drop in single-family home resales, but the median sale price continued to maintain relative stability with only a slight decline.

Sales of previously owned single-family homes in February fell 40 percent from the same month last year — to 163 from 272 — representing the market's biggest drop since sales began to recede in 2005. It was the lowest sales total for any February since 1999.

The drawback, however, didn't cause much of a drag on the median price, which declined 2.5 percent to $599,000 last month, from $614,500 a year earlier.

"It's really amazing that prices have held up with the fewer sales that we're having," said Harvey Shapiro, research economist with the Honolulu Board of Realtors, which released its industry sales report yesterday.

Condominium resales were down 20 percent last month, but the median price rose to match a record set last year, the report said.

Kay Osman, principal broker of Honolulu-based Del Osman Realty Inc., said news reports of the weakening national economy and many Mainland housing markets are alarming prospective buyers.

"The buyers are kind of hesitant," she said. "They seem to be waiting for the bottom to fall."

Osman believes O'ahu home prices won't suffer a major price decline because the state economy is still growing, unemployment is low, home inventory is modest and new housing development is constrained by limited land and development rules.

TOO EARLY TO JUDGE

Other observers, including local economists, generally predict that O'ahu home prices will stay more or less flat over the next couple of years and not drop significantly unless there's a shock to the state economy that reverses job and income growth, creates a population exodus or boosts interest rates sharply.

Leroy Laney, a professor of economics and finance at Hawai'i Pacific University, said it's too early to judge which direction the median price will go this year by looking at the past few months of data.

Since October, the median price was unchanged in two months — January and November — and was down 0.6 percent in December, compared with the same months a year earlier.

"It's pretty much what we have been expecting," Laney said.

The median price was down twice and flat once in the first three months of last year, and ended the year up 2.1 percent.

Last month the median price dipped below $600,000 for the first time since July 2005, but Laney said that's not very significant considering that the median price has been hovering around year-ago levels for more than a year. Also, February's median was $1,000 less than $600,000 in January.

"It's just simply a continuation of a trend," he said. "The boom is over. It's been over for a couple of years."

Laney added that with fewer sales, the median price — a point where half the sales were for more and half for less — can more easily be swayed by the mix of homes sold.

The biggest declines in homes sold last month occurred largely in the more modest-priced communities of Pearl City-'Aiea, Waipahu, Wahiawa and the 'Ewa Plain. A big drop also occurred in the Kailua-Waimanalo region as defined by the Honolulu Board of Realtors.

Of 17 regions on O'ahu, the only area that didn't have fewer sales last month was 'Aina Haina-Kuli'ou'ou where sales were up by two homes.

INVENTORY STILL MODEST

Despite the sharp sales decrease, inventory remained at a fairly modest level. There were 1,924 homes on the market last month, up from 1,717 a year earlier but below levels closer to or just over 2,000 homes in late 2006 and late 2007.

Dana Chandler, broker-in-charge at Hawaiian Island Homes Ltd. and president of the Honolulu Board of Realtors, said the modest inventory increase was due in part to fewer homes being listed on the market.

Still, she said it's a positive sign that inventory hasn't ballooned as in previous post-boom periods.

Homes sold in February spent a median 59 days on the market before selling, down from 61 days in January and 70 days in February 2007.

In the condo market, there were 321 sales, a 20 percent decline from 402 sales a year earlier. The median price was $335,000, up 4.7 percent from $320,000 a year earlier and equal to a record set in July 2007 and repeated in September.

Condo inventory last month was 2,476 units, up from 2,294 a year earlier but still below levels around 2,700 in late 2006.

Condos sold in February spent a median 50 days on the market before selling, up from 42 days in January but down from 59 days in February 2007.

Honolulu Board of Realtor statistics exclude sales of new homes, and reflect sales completed last month. Completing a sale typically takes one to three months once a contract is signed.

The recent flurry of rate cuts by the Federal Reserve Bank is good news for homeowners and homebuyers.

With interest rates inching above and below the 6-percent point, many borrowers have decided to ditch their higher interest mortgages for new loans taking advantage of the monthly savings that refinancing brings.

Joy Cabildo, senior vice president and division manager of the residential real estate division at First Hawaiian Bank, says that because of low rates, refinancing nearly doubled in January — some were refinancing the same piece of property for the third time since rates began falling in 2002/2003.

"On January 22, First Hawaiian Bank's 30-year rates hit 4.95 percent," says Cabildo. "Since we've been tracking mortgages rates, our all-time low was 4.75 in June of 2003. These quoted rates were with 2 points."

At the end of January, the U.S. central bank cut the rate at which it lends money by half a percentage point to 3 percent — the lowest level since September 2005. That move came just eight days after the Fed slashed rates by three-quarters of a point in an emergency move to spur economic growth. The cumulative 1.25 percentage point rate drop is what makes refinancing an attractive option once again.

This month, First Hawaiian Bank is sweetening the pot even more.

For a limited time, qualified borrowers can refinance their home loan on a 30-year fixed rate term of 6.03 percent, with no points.

In the past, the rule of thumb was to refinance if you could get an interest rate at least two percentage points lower than what you are currently paying. Normally, this was because there were so many hidden costs associated with refinancing that it wouldn't pay off unless the rate was significantly lower.

But with no points and no loan origination fees, it's possible you can break even and start saving money sooner, making it worthwhile to refinance even if the current rate is only slightly less than what you already have.

"With no points, plan on the cost being approximately 1 percent of your loan amount," says Cabildo, as a rule of thumb.

For example, on a $300,000 loan, it would cost approximately $3,000 to refinance.

Then, figure how much money you will save each month. Cabildo figured a one percent lower interest rate would yield the following:

"The savings is 65 cents per $1,000 per month," she says. "At $300,000, that totals $195 per month."

By saving $195 per month, it would take a little more than 15 months to break even — or to pay off the $3,000 it cost you to refinance the loan — before you started saving money. For anyone playing at home, that adds up to a $2,340 savings per year for the remaining 28.5 years, and more than $65,000 over the life of the loan.

Cabildo says we have been braced for rates to rise for months now, and instead of going up, they've come down again. If you thought you missed the boat on the low rates, now you have a second chance.