In 2008, the term "short sale" entered the vocabulary of the Maui real estate business, something that Bob Lightbourn, president of the Realtors Association of Maui, said he hasn't seen in years.

In a short sale, the seller owes more on his mortgage than he expects to get from a buyer, which means the lender has to be prepared to release the lien without an expectation of getting full repayment.

Until recently, it wasn't easy to go underwater on Maui real estate because the market was racing ahead so fast, as much as 25 percent in a year. Now a lot of that gain has been given back, although Lightbourn said "there are places like Kula where it hasn't gone down much at all."

On the other hand, condominiums in some large projects like Kihei Villages are showing big price drops and plenty of short or distressed sales, and Lightbourn said he's watching developers slashing asking prices on new projects.

That turmoil doesn't leap out of the year-end sales statistics from the association's Multiple Listing Service. The numbers show average prices for single-family houses down 10 percent and condo prices up an average of 13 percent, The Maui News reported today.

Unlike many places on the Mainland, real estate prices haven't crashed. But the market has sort of gone to sleep.

The number of sales is way down from 2007, 21 percent for single-family and 34 percent for condos.

The decline is startling when contrasted with the peak in 2005, especially for condos. There were 2,050 condo closings that year. In 2008, only 788. There were 1,187 condo closings in 2007.

For single-family sales, the peak in 2005 was 1,316. In 2008, only 907. There were 1,142 sales in 2007.

The dollar total of residential real estate changing hands in 2008 was just under $1.5 billion, while in 2007 it was more than $2 billion.

The average and median prices don't tell that story, but Terry Tolman, the chief staff executive at the Realtors Association of Maui, cautions that Maui is a small market and averages can be moved by a few high or low sales. That appears to have happened in 2008.

The average single-family price dropped 10 percent last year, to $831,424. Just half of all single-family sales, 448, occurred in Central Maui, where the average price also dropped 10 percent, to $483,792.

However, a large fraction of those 448 sales, 103, closed at subsidized prices at Spencer Homes' Waikapu Gardens, which accounted for 178 closings, or almost one in five during the year.

Those 103 closings were far below island averages. The affordable homes were priced from $225,000, but with upgrades some were sold for as much as $300,000.

Developer Jesse Spencer has said, "I left $100 million on the table" by doing Waikapu Gardens as a fast-track affordable project - and by locking himself into 2004 prices while market levels rocketed upward before he delivered the first houses in late 2006.

More than half of the 412-unit project sold in 2007, when average prices in Central Maui were even higher, $538,048. Spencer was getting more than twice as much for his market price houses as for the subsidized homes.

Spencer's affordable project was big enough to drag down island averages somewhat.

In Kihei, a much smaller market with only 140 sales last year, average prices fell only 1 percent, to $797,131.

In Kula and in Lahaina, single-family prices jumped 9 percent, to $1.1 million in Kula-Ulupalakua-Kanaio and to $1.8 million in Lahaina.

While the number of single-family closings in Maui County was 235 fewer, the number of condo closings was 399 fewer.

This also is an area where a few outlying transactions move the averages. The average condo price was up more than $100,000 to $921,063, but the median price, $549,500, did not move at all. At the median, half sold for more, half for less.

That means that the prices of the more expensive condos moved higher in 2008 - or that contracts inked in 2006 were closed in 2008, at a time when market prices were actually falling.

A number of lawsuits by buyers trying to overturn sales agreements signed before construction was completed - and before values slumped - suggest that the latter was at least part of the story.

The biggest area for condos is Kihei, with 307 transactions. In Kihei, the average price was almost unchanged at $475,416, and the median dropped 7 percent to $395,000.

In his commentary on the sales data, Tolman noted that days-on-markets statistics suggest that "properties priced right will sell in a reasonable timeframe."

He suggested that "sellers who don't really need to sell should stay off the market, and clear the marketplace for those who really want/need to sell."

Tolman's commentary and the sales data are online at www.RAMaui.com.

Foreclosure notices are piling up. Anyone who bought (and did not refinance upward) before the market zoomed in 2005 probably should be able to sell without loss even if he cannot keep making mortgage payments, but Tolman cautioned that buyers of foreclosed or distressed homes may end up with a smaller bargain than they thought. Such purchases require "more hurdles to leap and more time (often many months) to close. Be prepared."

It's a buyer's market.

"The correction is good," said Lightbourn, who works for Century 21 All Islands in Kahului.

During the last couple of years, "it was frustrating working with first-time buyers," Lightbourn said.

While some sellers got trapped - possibly by "using their house as a checkbook" and taking out equity loans - "there are a lot more houses in the 400s than a couple of years ago," he said, and interest rates are the lowest he's seen in 25 years in the business.

Tolman advises shoppers to get preapproved for financing so they don't suffer last-minute disappointments from loans that are turned down.

"It's a great time to buy and hold," he wrote in his commentary. "Prices have declined considerably in the past two to three years. . . . Buyers waiting for the 'bottom' may also miss unique properties/opportunities as market forces, qualification requirements and rates may fluctuate. (There is no bell that rings when the market hits the bottom.)"

* Harry Eagar can be reached at heagar@mauinews.com.