Maui, Hawaii, home prices still high, but falling

— -- While many would consider Hawaii a worry-free zone, that's not been the case for the Maui real estate market. Its steady decline in the past few years shows no sign of stopping anytime soon, experts say.

The popular vacation- and retirement-home destination benefited greatly from the technology bubble in the 1990s as wealth spread rapidly, University of Hawaii economist Byron Gangnes says.

Prices were low; the scenery exotic.

"These areas are much more attractive because they're not in big urban centers like Honolulu," he says. "It's the landscape, quality of life that is somewhat slower that people like."

Such appeal sent Maui's housing market booming for about a decade until things began to unravel a few years ago, Gangnes says.

Regardless, home construction continued through last year, but the recession has left Maui with many foreclosures and half-built and empty homes, says Terry Tolman, chief staff executive of the Realtors Association of Maui.

Although the Maui market is heavily dependent on the national and global economy, because most of its home buyers are not native islanders, Gangnes says the recent economic downturn added to but did not cause the waning demand.

"A good part of the decline would have happened regardless," he says. "This is not a process that happened overnight. The expectation is that there will be a weak housing market coming off such a big boom. The recession is just another source of weakness in the already deteriorating condition."

And although Maui's median home price is still nearly $350,000 more than the national median price, Tolman and Gangnes expect prices to drop further.

"I do not think this is the bottom," Gangnes says. "It's hard sometimes to tell where the market's moving because of how few transactions there are, but it's just an indication of how weak demand is."