Top 5 Hottest Single-family Neighborhoods (Data based on median price increase from the first 5 months in 2005 compared to the first 5 months in 2004) 1. North Shore: up 49.8 percent 2. Kaneohe: up 47.6 percent 3. Makakilo: up 34.1 percent 4. Ewa Plain: up 33.2 percent 5. Waipahu: up 28.8 percent Top 5 Hottest Condo Neighborhoods 1. Ala Moana/Kakaako: up 64.6 percent 2. Makaha/ Nanakuli: up 52.8 percent 3. Wahiawa: up 50.0 percent 4. Kalihi/Palama: up 36.3 percent 5. Kailua/Waimanalo: up 35.7 percent Data compiled by the Honolulu Board of Realtors.

Although prices for condominiums slipped a bit to a median of $230,000 that same month, they have still shown a rise of 21.1 percent in the past year. Sales volume continues at a scorching pace with condo's moving at twice the rate of single-family homes.

As interest rates creep upwards — making single-family homes with high price tags less affordable, condominiums become more reachable. According to HBR research economist Harvey Shapiro, "Rising prices have moved some purchasers from the single-family home market segment into the more affordable condominium category. We expect this trend of shifting sales patterns to continue, particularly since the cost of financing a purchase has risen over the past several months and the nationwide average rate for 30-year fixed mortgages is now above 6 percent."

At any rate the soaring market continues its record-setting momentum. So far in 2005, total home sales have surpassed $1.1 billion dollars as compared to a year ago when sales were $907 million — an increase of 29.4 percent. In short, people are buying and selling more homes, and they're doing it for higher prices.

How long can the pace continue? No one really knows. There is no doubt that low interest rates have had an extremely stimulating effect on the housing market but that's not the full story. Hawai'i's tourism is back in full swing and, with a weak dollar, Japanese visitors are back in strength. With the local economy booming, jobs tend to be created and incomes seem to increase. All of these factors have a trickle-down effect on the local real estate market. However, unless you have a crystal ball, there is no telling what the future holds. What you can watch are economic and demographic conditions.

Inventory levels — reflecting fundamental supply-and-demand economics — are certain to influence the market and April 2005 statistics show a shrinking inventory. According to Shapiro, "The single-family home inventory is down to 814 (in April 2005), just ahead of the record low number of active listings of 784 that was hit last April. Condominium listings hit a new low at just 940 units (in April 2005), the first time ever in the Board's recorded history that condominium availability has dropped below 1,000 units." And while inventory is down, market dynamics force prices higher.

And finally, there is the influence of the baby boomers. According to Coldwell Banker Real Estate Corporation CEO Jim Gillespie, these trendsetters are now "in their peak earning years and have built tremendous equity and appreciation in their homes." Experts agree that the boomer population — comprising approximately one-third of the population nationwide— have set their sights on real estate in the form of second homes, retirement homes and investment property.

"These factors are allowing the luxury home market to thrive and it should be robust for years to come," says Gillespie.

HOT PROPERTY

What's really sizzling hot in the rental real estate market? In a word: Condotels. A combination of two words actually ("condo" and "hotels"), condotels are hotel rooms — with sometimes 200 to 300 square feet, no kitchen and no parking — that are sold as individual condominiums.

In a flurry of activity, many of Waikiki's older hotels are cashing out by offering individual rooms for sale. Property management companies are stepping in to take over functions such as bookings, front desk operations and guest services, while buyers are flocking to get a crack at one of the hottest real estate concepts to hit the Island in years.

Industry followers credit the Diamond Head Beach Hotel conversion in 2001 with kicking off the recent hotel-to-condotel conversions that include the Ohana Ala Wai Towers, Aston Waikiki Beachside, Aston Waikiki Parkside, Bamboo Hotel, Kaua'i's Islander on the Beach, Royal Garden at Waikiki, Hawaiian Monarch Hotel and Kuhio Village. The Ala Moana Hotel is next — a project that's expected to put another 1,150 rooms on the condotel market.

So far, buyers have been scrambling to get a piece of the action. Scenes of motivated buyers standing in line around-the-block eager to put their money down are not uncommon. However the question remains whether the condotel explosion will pan out for investors in the long run. Recent Waikiki hotel occupancy rates have been very high and condotel owners have been enjoying the surge in tourism. And while the costs-versus-income calculations have put many condotel owners bottom lines in the black, a rise in interest rates may make it tougher for future buyers to turn a profit.

Of course, not all condotel owners are returning their units to the resort rental pool. Some have opted to lease long-term and manage the property themselves.

Others simply want a vacation getaway for friends and family.

It's a trend that's hitting certain areas on the Mainland too. But for now, condotels in Hawai'i are selling like shave ice on a hot summer's day.

LIVING THE GOOD LIFE

"Retirement living is hot." OK, so maybe Paris Hilton has never said that, but some baby boomers may. Although some of those born between the years of 1946 and 1964 are still likely to be wearing tie-dye shirts and granny glasses, a growing number of the peace-and-love generation are approaching their sixties and are today focusing more on retirement issues.

Aging boomers (who make up nearly 80 million Americans) are armed with billions of dollars in disposable income and on the verge of transforming retirement living — perhaps fueling the real estate market for years to come.

What is really hot for the boomers is the evolution of "old folks" homes to "assisted care"

facilities to the new retirement communities that boast amenities typically found at top resorts and spas. The number of seniors will increase by 87 percent over the next 15 years, according to the Senior Advantage Real Estate Council, and most see fitness as vital to their well-being. Their decision to purchase in a resort-style community is driven by desire rather than need. These are not assisted-living facilities or nursing-care facilities, although plenty of communities offering these services have similarly enticing amenities.

At Kahala Nui, O'ahu's recent entrant into "life care," there are a full list of amenities including gourmet dining, wellness programs, concierge services, a fully equipped fitness center, aerobics classes, personal trainers, swimming pool and Jacuzzi, all surrounded by beautiful grounds and water features. Residents purchase one-, two- or three-bedroom units and are able to adjust the amount of assistance required as they grow older.

According to some real estate experts, many boomers are selling their single-family homes and opting for a condo in places like the new luxury highrise now under construction called Ko'olani. World-class amenities here include a 20,000-square-foot spa with services that dwarf even some resort facilities.

But downsizing isn't what some baby boomers have in mind at all. According to Coldwell Banker's Baby Boomer Survey, sampling the opinions of Realtors serving this demographic, 65 percent of these almost-retirees are moving into bigger residences, while 15 percent are buying second homes.

Turns out the 'me generation' is turning to real estate because it's less risky than the stock market.