May 2010 E-mail Update

This is my May 7th e-mail update. I send an e-mail out after the statistical data for the preceding month has been posted on the Honolulu Board of Realtors website. Our staff routinely adds most new e-mail addresses we receive to our distribution list. To be removed, hit reply and send me an e-mail stating that. Please include your first and last name so that it is easier to find you in our database.

Analysts have a mixed opinion as to the long-term impact of the $8,000 Government housing subsidy that ended (contracts in escrow) the end of April. Our Hawaii Housing Market should not be used as a nationwide market example, as the effect of an $8,000 subsidy has far less of an impact here than in most areas of the Mainland in view of our higher home prices. Still, even in Hawaii, we saw an increase in sales of lesser-expensive homes over the past month or two with competing sales contracts becoming relatively common. The result has been an increase in sales prices that in my opinion is unlikely to be sustained. Many of the recent lower-end buyers overpaid for their homes; i.e., the $8,000 subsidies went largely to sellers via competing offers. The result of the subsidy-supported higher prices may cause a market slow-down as the program ends and those buyers that didn’t take advantage of the subsidy sit on the sidelines and wait to see what happens to prices. This may create another real estate bubble that extends our real estate woes and economic problems. Renowned economist & author Robert Shiller, one of the top economists in the world, speaking as a guest on the 4/23 Fox Business TV show gave another real estate bubble theory a 50-50 probability.

The following statistics reflect a soaring housing market; however, they should be taken with a large dose of salt until we see what happens over the next several months. Sales of Oahu houses jumped 62.9% in April with 286 sales compared to 187 sales in April 2009. Condo sales also soared, by 48.3% to 390 compared to 263 a year ago. The median sales price of a house fell 6.2% to $563,000 from $600,000 in April 2009. The median price of a condo was $308,000, down 2.2% from $314,950 a year earlier. Year to date (Jan-May) are similar for both houses and condos. There were 925 sales of houses in 2008 that dropped to 632 in 2009 and then increased to 898 in 2010. For condos there were 1.336 sales in 2008 that dropped to 826 in 2009 and then increased to 1,236 in 2010. Sales reflect closed transactions. The Government housing subsidy ends for properties that have not closed by June 30th; therefore, we’re likely to see similar sales increases in May and June with a decline in July.

Democrats Ed Case and Colleen Hanabusa and Republican Charles Djou are the front-runners in a special congressional election for the congressional seat left vacant by Neil Abercrombie who resigned from Congress in February to concentrate upon on a run for the governor against current Honolulu mayor Mufi Hannemann. The three Congressional front-runners are competing in a winner-take-all election that provides Republican Djou an unusual opportunity if the two leading Democrats end up splitting the Democratic vote. Case is a former Congressman who won a special election to fill the seat of Patsy Mink who had died of pneumonia. Case then chose not to run for another term in the House of Representatives so he could challenge Senator Daniel Akaka in the Democratic primary, which Case lost. Hanabusa is the first Asian American to be the Hawaii Senate President. Djou is the former Minority Floor Leader of the Hawaii House of Representative and now serves as a City Councilmember. Ballots for the mail-in election went out the end of April with results to be tallied May 22nd.

Private schools statewide are seeing enrollments decline and student financial needs increase as families struggle in the economic downturn, factors that recently contributed to decisions by two Honolulu schools to close when the year ends in June. Word of Life Academy in Kakaako with 250 students (K-12) and Holy Trinity School 70 students (K-8) on Queen St are both shutting down. Both schools have experienced a dwindling enrollment along with a steep increase in the number of students requiring financial aid. Ironically, Holy Trinity was one of 12 schools in the nation just recognized for excellence in fostering religious identity. In addition to students’ efforts to assist the homeless, they also participated in helping the late artist Peggy Chun create a painting of Father Damien De Veuster that was presented to Pope Benedict XVI as part of Father Damien’s canonization process last October.

Northwestern Mutual Life Insurance Co., the owner of Oahu’s Pearlridge Center with over 200 stores, is seeking a buyer for the 1.2 million-square-foot leasehold shopping center off Kam Hwy in Aiea. The shopping center sits on 55 acres of land, most of which is owned by Kam Schools with the anchor tenants being Macy’s and Sears . . . The Hawaii Supreme Court’s recent ruling requiring the owners of the Turtle Bay Resort, formerly known as the Kuilima Resort, to file a supplemental environmental impact statement before proceeding with a decades-old expansion plan could have far reaching effects on other projects. The high court reversed an appeals court ruling stating that circumstances like traffic had changed in the 25 years that have passed since the original environmental impact statement was done. The decision could affect any project in Hawaii that has been changed for one reason or another.

The Hawaii Pacific University (HPU) Cheer and Dance teams repeated as Division II National Champions at Daytona Beach, FL in early April. The HPU Large Coed Cheer Team won for the 8th consecutive year while the HPU Dance Team won for the 5th consecutive year. The Dance Team also placed first in the Hip Hop category, a competition category offered for the first time this year. A number of HPU students placed in the top three for individual or small group competition. 5,000 student athletes and 15,000 spectators convened in Daytona Beach making the competition the largest college cheer and dance championships in the world . . . Hawaii’s employment numbers are starting to show some gains. After 20 straight months of declines, employment in March grew for the second consecutive month . . . Getting a lot of negative publicity these days is shark finning. The practice involves cutting the fins off of sharks and then discarding the live animals in the ocean to drown. The shark fins are the key ingredient in shark fin soup, a Chinese delicacy. Currently about 175 countries have signed an environmental treaty to halt this practice. Hawaii has bills in both the House and the Senate that would make Hawaii a leader in the global fight to end shark finning by prohibiting the possession and sale of shark fins.

The April 23rd issue of the Wall Street Journal had a front-page article concerning the practice in Hawaii of politicians standing on street corners and waving campaign signs. Everyone does it including Senator Daniel Inouye who has represented Hawaii in the Senate for 45 years. The prevalent opinion is that the public would think something was wrong with politicians who didn’t do it themselves along with a group of their supporters . . . The locally produced ABC-TV show “Lost” spent $228.2 million in Hawaii from 2006 to 2009 employing an average of 973 full-time employees in each of those years. Much of that cost was offset by state credits; however, neither the state nor ABC will disclose how much in investment tax credits were used to help finance “Lost.” Estimates are in the $50 to $70 million range. The final episode will air May 23rd. I assume someone will initiate a Freedom of Information Act request after the show ends if accurate figures are not forthcoming.

As expected, a buyer was unable to be located for the Honolulu Star Bulletin. Offers were apparently received from three groups but they all fell short of the paper’s estimated liquidation value. As a result, the two daily newspapers will begin consolidating in the next couple of months into the Honolulu Star-Advertiser . . . Mahalo for the nice e-mail comments concerning property management in the last quarterly newsletter. For additional information, contact my son-in-law, Tim Kelley, locally at 808-254-1515, toll-free at 1-800-922-6811 or by e-mail at tim@stott.com