The US Federal Reserve knocked a quarter-point, or 25 basis points, off the federal funds rate, taking the rate down to 2.0 percent. This latest decrease lowered this rate by a total of 3.25 percent since September. The 40-year low for this rate occurred in 2003 at 1.0 percent, then increased to near 5.0 pecent in 2006-7 before the recent declines.

The impact of this rate cut should have a positive effect on the housing market, albeit a small one. With the weakening economy, I’m not sure that a 25-basis point move was adequate to stem inflation, but it needed to be balanced against the negative effect of a weaker dollar.

Let’s hope this rate cut helps do the trick.  Do you think the Fed made a wise move?

The Board of Governors of the US Federal Reserve will meet tomorrow and Wednesday and the betting is that they will further reduce interest rates, but only by 25 basis points (.25%).

Fed watchers say they are more interested in the Fed discussions than what happens with rates. They want to know how the Fed sees the US economy and get a clue to future rate changes, but it’s pretty clear that current thinking is that we’re nearing the end of the Fed rate cutting program.

There needs to be a discussion of the US dollar in light of the beating its been taking.  Except for some minor fluctuations last week, the dollar has been consistently losing ground to all major currencies over the past few years. This translates into more expensive imports, including oil, and higher cost international travel.  On the other hand, the weakness in the dollar could add demand for exports from the US and, hopefully, will promote more investment from overseas.

Because of the weakening dollar, it’s important to realize that Honolulu properties are inexpensive when compared to real estate in parts of the Mainland and in foreign countries, especially in Europe and Japan. This contrasts with the sticker shock that visitors had when comparing O`ahu housing prices to those back home as recently as the mid-90’s. Honolulu prices were the highest in the US and were $100k higher than the second place city, San Francisco. Now, we’re fourth or fifth from the top.

What do you think the future holds for interest rates and the economy?

The Kalihi-Palama neighborhood is a well-established living area near downtown Honolulu. This neighborhood is geographically defined by the Honolulu Board of REALTORS® as Tax Map Key, Zone 1, Sections 2 through 9.

Condominium sales have fared quite well in this community as evidenced by their strong 2007 showing. During 2007, not only were median prices higher, but this was one of only two condo neighborhoods on O`ahu to see an increase in sales, the other being Ala Moana-Kaka`ako.  Last year’s sales totaled 145, compared to 129 in 2006, an increase of 12.4%. This year, sales have pulled back somewhat, declining to 22 in the first three  months of 2008, down from 30 sales in the same time period a year ago.

The median price paid for a condominium in Kalaihi-Palama was $330,000 in 2007, an increase of 3.8% over the 2006 median price of $318,000. The highest price for a condominium was $678,000.  Sales speed was 38 days last year, compared against the 2006 indicator of 24 days, a slowdown of two weeks.  This statistic has increased further this quarter, to 45 days.

In March, there were only 38 condo units being actively marketed for sale in Kalaihi-Palama. This was a decrease of 3 units from the 41 that were on the market last year at the same time. Asking prices have pulled back, declining to $327,000 from $380,000 last year, a 13.9% decrease. Note that his is one of just a few areas to have all fee simple condominiums available and no leasehold properties.

For further information about recent activity in your specific neighborhood, check the information available on the Honolulu Board of REALTORS® website HiCentral.com and/or contact a REALTOR® in your area.

The Makakilo neighborhood is just north of where H-1 and H-2 merge and has sustained rapid growth in recent years. This neighborhood is geographically defined by Honolulu Board of REALTORS® as Tax Map Key Zone 9, Sections 2 and 3.

The sale of single family homes in this neighborhood has faltered, with a decline of 20.1% last year, almost double the islandwide loss of sales of 10.2%.  In 2007, there were sales of 143 dwellings, which was down from 179 in 2006. In the first quarter of 2008, there was a further deline, where only 20 homes have changed hands, compared to 40 in the year earlier quarter.

Median prices, however, appear to have stabilized, In the first quarter of this year, the median price paid for a single family home in Makakilo was $567,500, just 0.2% or $1,000 ahead of the same quarter in 2007. Comparing full years, though, we see a loss in price of 3.8%, going down to $577,000, from the same quarter a year earlier of $600,000. The highest price paid for a home in this area during 2007 was $1,500,000 and, in the 2008 first quarter, was $1,125,000.

The sales speed slowed in 2007 by almost 2 weeks, increasing to a market time of 68 days from 56. This year, the median time a property sat on the market expanded to 89 days.

The inventory of available homes in March of this year shrank by 10.5%, compared to March of last year, which is counter to the overall O`ahu trend of a 12.0% increase in 2008. The median list price for this inventory has decreased only slightly, by 1.4%, to $647,000, and this is less than the decline of 3.3% for single family homes islandwide.

For further information about recent activity in your specific neighborhood, check the information available on the Honolulu Board of REALTORS® website www.HiCentral.com and/or contact a REALTOR® in your area.

This Saturday is Earth Day and will be celebrated with litter cleanups everywhere. If you’d like to participate, there are many groups holding events that would welcome you.

I’m partial to Hanauma Bay in Hawaii Kai and will be coordinating the Earth Day cleanup. If you’d like to come to Hanauma Bay, no reservation is necessary - just show up at 8:30 a.m. and we’ll put you to work. We provide gloves and bags and we’ll have cold drinks for you when you’re done.

You’ll be charged $1 to park, but we’ll get you a refund. Remember to bring proof of your Hawaii residency to avoid the beach access fee.

Hope to see you on Saturday!