Michael Choi thought he had a $1.8 million Hawai'i Kai house ready for a quick and easy sale last November, but following nearly a year with no offers, he has cut his price to under $1.1 million.

There's been a dramatic turn in O'ahu's residential real estate market in the last year.

It's as though value is evaporating into the salty air — $50,000 here, $150,000 there, $720,000 in Choi's case.

This turn hasn't been reflected in regularly reported median sale prices, which continue to be up in year-to-year comparisons. The median price for a single-family home on O'ahu in August was $635,000, up 1.6 percent from a year ago.

But that headline number masks the fact that list prices are falling. Not only are more sellers dropping their asking prices, but more properties are selling for below list price.

The jury's still out on whether these changes might precipitate the market's first year-over-year drop in the median sales price, but the trend is clearly benefitting buyers and frustrating sellers.

According to O'ahu home sale data available at Kaufman's Web site, OahuRE.com, there were 1,798 cases of sellers dropping their asking price last month, compared with only 633 a year earlier.

The number of price drops for homes on the market, which includes more than one drop for the same property, has been steadily rising from 1,081 in January to 1,604 last week. The average drop for single-family homes was 7.6 percent.

"I think the buyer in a lot of aspects has the upper hand," said Melanie Long, an agent with Pacific International Realty. "It's a good time for buyers."

For investors who bought at the top of the market late last year with the intent to resell for more, selling now may leave them with no profit or a loss.

Most sellers, however, likely stand to cash in on substantial equity built up during the last several years or decades, depending on how long they've owned their home.

Still, lowering an asking price can give sellers the depressing feeling that a good part of their home's value has evaporated rather substantially.

FORCED TO SELL

Dolores Martinez, a retired Census taker, has lived in her Punalu'u home for 18 years. About 18 months ago, a disability forced her to retire and refinance her home, but higher mortgage payments became unaffordable.

Martinez said she had to sell, and in April with a broker's assistance listed the three-bedroom house "steps from the ocean" for $775,000.

There was little buyer interest. "One person looked, and that was in the door and out the door," Martinez said.

In July, Martinez dropped her price to $675,000, and then to $550,000 last week — a collective 29 percent reduction.

If her home sells for $550,000, Martinez, who plans to move to the Mainland, said she can live with it. "It wouldn't be good, but I'd be all right. I hope it sells soon."

Martinez's home has already spent about 180 days on the market, which is more than most, though property in general is taking longer to sell than it did a year ago.

In August 2005, single-family homes spent a median 21 days on the market, meaning half sold under that time and half over. Last month, homes took a median 49 days to sell.

According to Kaufman of OahuRE.com, about 70 percent of single-family homes this year sold for below their list price, compared with about 50 percent a year earlier. The percentage of homes that sold for above asking price was about 11 percent this year, compared with about 24 percent a year earlier.

LIST PRICES FALLING

The median list price on O'ahu hit a peak in May 2005 at $850,000 and now stands at $770,000. Median list prices for single-family homes have been below their year-ago levels in each month this year except January.

Weaker listing prices, however, have not translated to a year-over-year drop in actual sale prices and that is what experts key on in declaring whether home prices have fallen. In fact, median sale price records were set in March at $650,000 and in May at $668,300.

Local economists so far have been correctly predicting that O'ahu's median home price will rise 5 percent to 10 percent this year.

The economists say job growth and rising incomes in a strong economy with a stable population outweigh negative price factors such as higher interest rates, fewer home sales and rising inventory.

PRICE DROP PREDICTED

Earlier this year, Carl Bonham, executive director of the University of Hawai'i Economic Research Organization, forecast 8 percent median home price growth this year and a 5 percent rise next year.

Bonham plans to update his forecast in a report expected to be released next week, though some industry observers are already predicting that home sale prices will drop.

Jim Wright, president and chief executive of Century 21 All Islands, expects there could be a 10 percent drop in home values in the next 24 to 36 months.

Wright said the tug-of-war between buyers and sellers is still even in his view.

"We're probably in what I call a negotiable market where it's pretty fair to both sides," he said.

MANY HOLDING ON

Many sellers, however, have been slow to accept that the top of the market has passed.

"It's taken them a while to agree that the heat has gone out of the market," Wright said.

"People are starting to realize it's slowing down," added Rob Burns, a broker with East Oahu Realty. "Prices are going down to where they ought to be."

Choi, the Hawai'i Kai home seller, was one who got caught expecting buyers would keep bidding up values.

The house Choi is trying to sell was owned for more than 10 years by his mother, who died and left the property to a family trust. Choi at the time had been a real estate agent for about two years and felt buyers would snap up the 1,668-square-foot house with three bedrooms, two-and-a-half bathrooms and a pool. List price on Nov. 8, 2005: $1.8 million.

"It was pretty bad timing," he said. "The real-estate cycle was so good up to that time. Now I can say that that was the top of the market, but I couldn't see that at that time."

Choi in January reduced the price to $1.58 million. By May it was $1.38 million, and then $1.23 million in July. Still, no offers.