REAL ESTATE DATA BANK.

The Hawaii Business Real Estate Composite Index was up 4.3 percent in September from its year ago level. The gain in the index was broad based with all components making a positive contribution. The index continues to be led by strong sales activity with the Oahu total single family and condominium

resales component being up 24.5 percent on a year-over-year basis. Also supporting the gain in the index was the Oahu average sold market time. It declined in September to a reading of 88 days, which was 12.1 percent below a year ago and one of the lowest market times since the early 1990's. Finally, the Oahu average single family monthly rent continued to rise, with the September reading of $1,365 being 6.5 percent above a year ago.

Neighbor island condominium sales were particularly strong in September. Compared to a year ago, condominium resales were up 66.7 percent in Kihel, 46.7 percent in Kaanapali, and 166.7 percent in Poipu. The strong sales activity of the past several years is finally leading to noticeable price increases in most of the neighbor island resort condominium markets. In a number of instances, prices are up 25 to 50 percent above their levels of the mid-1990's. While these prices are still well below their 1990-91 peaks, they still represent significant gains for buyers who purchased in the past few years.

Interest rates moved up further in September and, in the process, approached levels not seen since 1997. Being concerned about the potential for inflationary pressures building in the economy, the Federal Reserve has pushed up short-term rates twice already this year. The Fed's goal is to reduce the growth rate of the economy to a more moderate and non-inflationary rate. We expect them to succeed in this effort, which will set the stage for a meaningful decline in interest rates beginning early next year. In the meantime, many homebuyers have opted for adjustable-rate mortgages, which are currently running more than one percent below traditional fixed-rate loans.

                                            Latest Previous   Year
                                            month   month   previous
HAWAII BUSINESS REAL ESTATE INDEX
Index (1972 = 100)                           200.4    207.1    192.2
Components:
 Oahu resales/number                           548      560      440
 Oahu avg. resaLe price/$                  243,275  250,561  241,520
 Oahu avg. time on market/days                  88       88      100
 Oahu new residential permits/number            NA      235      244
 Oahu avg. single-family rents/$month        1,365    1,342    1,282
HAWAII BUSINESS SPECULATION INDEX
Index (1972 = 100)                           111.4    119.1    126.0
Components:
 Waikiki condo resales                          45       52       45
 Kihei condo resales                            50       45       30
 Kaanapali condo resales                        22       29       15
 Kona condo resales                             19       28       35
 Poipu condo resales                             8        8        3
 Total Hawaii condo resales                    477      502      375
SALES INDICATORS
Oahu single-family and condo resales           548      560      440
Maui single-family and condo resales           216      203      137
Big Island single-family and condo resales      99      150      154
Kauai single-family and condo resales           39       56       35
                                               Percent
                                           change from
                                           a year ago
HAWAII BUSINESS REAL ESTATE INDEX
Index (1972 = 100)                                 4.3
Components:
 Oahu resales/number                              24.5
 Oahu avg. resaLe price/$                          0.7
 Oahu avg. time on market/days                   -12.1
 Oahu new residential permits/number                NA
 Oahu avg. single-family rents/$month              6.5
HAWAII BUSINESS SPECULATION INDEX
Index (1972 = 100)                               -11.6
Components:
 Waikiki condo resales                               0
 Kihei condo resales                              66.7
 Kaanapali condo resales                          46.7
 Kona condo resales                              -45.7
 Poipu condo resales                             166.7
 Total Hawaii condo resales                       27.2
SALES INDICATORS
Oahu single-family and condo resales              24.5
Maui single-family and condo resales              57.7
Big Island single-family and condo resales       -35.7
Kauai single-family and condo resales             11.4