Following a strong September performance, O'ahu's real estate market is almost certain to extend its extraordinary expansion cycle for a ninth year, dispelling earlier indicators that it might be poised to cool.

The median price of previously owned condominiums climbed to a record $287,000 in September, while single-family homes sold for $615,000, close to the record $625,000 set in August, according to Honolulu Board of Realtors data released yesterday. The number of sales rose about 9 percent from a year ago.

Real estate has been one of the surging components of Hawai'i's expanding economy, with demand fueling new-home construction and brisk business for mortgage lenders, appraisers, and title and escrow firms as well as roughly 5,000 O'ahu brokers earning commissions from sales.

But for those looking to buy a home, times are tough.

"I have been watching the housing prices skyrocket in Hawai'i," said former Hawai'i resident Mark Matsuno, who now lives in San Francisco. Matsuno hopes prices eventually will decline even though many in the real estate industry don't see that happening.

"Naturally, Realtors aren't gonna admit that the housing market bubble is about to burst or is at its high," Matsuno said in an e-mail from San Francisco.

The number of residential real estate sales on O'ahu has increased the past eight years, while prices have risen for six years for single-family homes and five years for condos.

Boom or bubble?

Home sales have been a growing source of consumer spending and government revenue in the form of rising property taxes, higher conveyance taxes and general excise taxes.

The recent dramatic rise in home prices has led to speculation as to whether the super-heated activity is a bubble about to burst — an issue sure to be further inflamed by September's strong results.

For many recent buyers, such as former San Francisco resident Scott Bowditch, purchasing a home earlier this year looks like it was a smart move.

Bowditch, who's studying for his doctorate in educational psychology at the University of Hawai'i, said he began following the local housing market after moving to O'ahu in July 2004 and was surprised at how fast homes were selling.

"We saw some dumps — a two-bedroom cinder-block place with square, prison-like rooms tucked into a hillside with no light for $190,000 last Christmas, and it was (purchased fast)," he said.

In February, Bowditch negotiated purchase of a leasehold two-bedroom condo in Makiki. By the time the sale closed in May for $185,000, similar units in the building were selling for $250,000.

"I watched the (upward price) spiral," he said. "I think we saved a bundle."

Others hear stories of frothy bidding on real estate and think the market is more likely headed for a crash, based on what they see as unsustainable price increases leading to a sell-off by speculators and people who can't afford mortgage payments if interest rates rise.

But to date, no economist who closely studies Hawai'i's housing market has publicly predicted there will be a price crash.

MORE OF SAME AHEAD

Bank of Hawaii chief economist Paul Brewbaker and former chairman of the state Council on Revenues Mike Sklarz forecast that it's more likely that prices will level off rather than drop drastically after prices peak, which could be a year or two away.

Typically, the first sign that prices are going to stop rising and possibly fall is a slowdown in sales and bloating of inventory.

Some market observers thought a near 12 percent fall in O'ahu home sales in July might be an indicator that such a slowdown might be starting. But sales rebounded in August and continued their advance last month.

For the first nine months of the year, O'ahu single-family home sales totaled 3,524, an increase of 1.6 percent from the same period in 2004. Condo sales are up 5.3 percent this year through September, to 6,207.

The dollar volume represented by year-to-date single-family home and condo sales totaled $4.5 billion, up from $3.4 billion in the same period a year ago.

Harvey Shapiro, research economist for the Board of Realtors, predicted that sales for the full year will break records for the number of transactions and median sales price, which is a point at which half the prices are higher and half are lower.

"We'll have a few more sales, and prices will be up 25 to 30 percent for the year," he said. "I think that will hold up."

Shapiro said that historically low inventory earlier this year rose significantly last month as part of a normal summer increase that could result in more home sales later this year.

September inventory rose about 20 percent to 1,205 single-family homes and 1,296 condos. That compares to historic lows of 814 single-family homes in April and 935 condos in May that real estate agents said held back sales in recent months.

"While we believe that this increase was most likely a seasonal adjustment, this is good news for buyers as there are more choices in the O'ahu housing market," Shapiro said.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.