Here is our 02/10/2017 e-mail update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors website. You can find previous newsletters by visiting www.stott.com/news.
The median sales prices for both single family homes and condos were essentially flat in comparison to last year. The median price for single family homes in January was $730,000 (0.5% lower than January 2016) and for condos was $380,000 (1.5% higher than January 2016). The pause in the steady rise of home prices over the last few years could signal that a buyer’s ability to pay will have a greater impact on future home prices since demand continues to be stronger in the midst of a shrinking supply of homes. There are currently 2.4 months of inventory for single family homes (7.7% lower than last January 2016) and 2.4 months of inventory for condos (17.2% lower than January 2016). The pause could also be temporary and just a result of the mix of homes sold during any given month. Only time will tell.
A study by local housing analyst, Ricky Cassiday, concluded that online booking site Airbnb has had no material impact on Hawaii’s housing market in contrast to claims made by some local politicians. Homes booked through the website represented only 1.53 percent of the statewide housing stock and 88 percent of those homes were booked less than half the year. Cassiday concluded that Airbnb listings represent a miniscule amount of the housing stock in Hawaii and it is clear that owners are using these homes most of the time. Cassiday stresses that the supplemental income provided by renting out rooms is equivalent to a 12 percent raise for the median local household and serves as a vital economic lifeline to many hosts. He notes that housing availability and affordability are not impacted by the number of short-term rentals, but are impacted by complex housing regulations and zoning laws, limited supply, and a lack of infrastructure.
In related news, The University of Hawaii Economic Research Organization (UHERO) posted two excellent articles regarding tourism in Hawaii and transient rentals in Hawaii neighborhoods. The blog posts are titled “How Many Tourists is Too Many” and “Regulating Home-Share Rentals in Hawaii.” A link to these articles is provided below.
Foreclosure activity in Hawaii grew 29% in 2016 compared to 2015 while foreclosures at the national level dropped 14%. About 55% of the foreclosures in Hawaii are from loans that were originated between 2004 and 2008. The Hawaii legislature passed bills that Governor Neil Abercrombie signed back in 2011 that essentially eliminated non-judicial foreclosures in the state with the advertised goal of improving consumer protection. All that the changes in the law have really done is delay the inevitable. Lenders are finally working through the legal mess that the legislature created and the courts are working through the backlog of cases.
Hawaii was named the state with the healthiest residents physically and mentally for the second year in a row and for the sixth time since Gallup and wellness provider Healthways, Inc. started ranking the states in 2008. The report breaks up and measures well-being into five elements: purpose, social, financial, community, and physical. Two interesting outcomes from the report were:
- Hawaii has the highest financial rank despite having one of the highest costs of living year in and year out.
- Improved health care access does not lead to improvements in healthy behaviors like eating healthy and exercising nor does it lead to better health results as measured by higher obesity rates, rates of depression, and diabetes rates.
To no one’s surprise, Hawaii was ranked the fifth-worst place to retire according to a recent WalletHub study. Hawaii placed 51st for adjusted cost of living, 50th for property crime-rate, 46th for nurses per capita, 44th for annual cost of in-home services, and 38th for health-care facilities per capita.
Hawaii’s attorney general is challenging a Hilo judge’s ruling that the state Board of Land and Natural Resources should have held a contested hearing for a sublease agreement between the University of Hawaii (UH) and the Thirty Meter Telescope (TMT). The judge’s ruling could further delay a project where the clock is now ticking. TMT has chosen an alternative site in La Palma, on one of Spain’s Canary Islands. TMT officials have started preliminary environmental impact statements and land permits in Spain.
House Finance Chairwoman Silvia Luke has demanded that financial and computer experts investigate the $59 million project to replace the computer systems at the state Tax Department. Luke said she had difficulty registering on the new tax system and that a security code that was supposed to be sent to her phone never arrived. Even when she finally did successfully register, she struggled to make the new system work. Stott Property Management has been working since August to register their clients into the new system. One glitch is that the new system does not currently allow you to specify the period being filed. That issue has already resulted in one letter from the tax office claiming that the payment was late. State officials agreed to look into the issues and see what progress the Tax Department is making.
The chief financial officer for the Honolulu Authority for Rapid Transportation (HART), Diane Arakaki, resigned on December 15th according to the rail agency’s latest monthly status report. Arakaki is just the latest in a string of high level departures that is causing concern. Last week, a group from the American Public Transportation Association visited HART to review how the rail project is being managed. One of the findings cited from the visit is a loss of institutional knowledge from high staff turnover. The political fallout and resulting management chaos from the delayed and over-budgeted rail project will have real consequences to city and state taxpayers.
In what has become an annual event, state lawmakers “grilled” Mayor Kirk Caldwell over the finances related to HART’s rail project. State lawmakers are once again demanding a final price tag for the project before they vote on another extension to the 0.5% General Excise Tax surcharge for economic activity on Oahu. While some members grandstand, other members of the legislature recognize the inevitable and support the extension since it is needed to finance the project and hold onto $1.55 billion in federal funding. The alternative is to cut the rail line short and hamstring the usefulness of the system. There was some discussion about eliminating the state’s 10 percent fee for collecting the surcharge, but that is highly unlikely considering the legislature’s fondness for collecting taxes and funding their own pet projects.
The wheels of progress may finally be starting to grind now that the state agency that oversees Aloha Stadium has approved a plan to build a new 30,000 to 40,000-seat facility that would ultimately replace the rusting Aloha Stadium. It appears that the departure of the Pro Bowl and rejection by the U.S. Women’s Soccer Team may have finally woken up complacent state officials to one example of the state’s neglected infrastructure. The resolution comes at a time when both city and federal deed restrictions may be lifted which would allow more development of the 100 acres of land at the stadium. A HART rail transit station will be built on the site. Hopefully some of the new development will include adequate parking.
The City and County of Honolulu purchased 114 acres of North Shore property that includes the Kahuku Golf Course and almost a mile of shoreline and coastal sand dunes for $12.1 million. The Kahuku Golf Course, a municipal nine-hole golf course has been operated by the city under a lease agreement since 1937. The previous owner, Continental Pacific, had previously announced plans to close the golf course and create six luxury beachfront homes. The money for the lots comes from a fund approved by Honolulu voters that sets aside a half-percent of real property tax revenue for land conservation purposes. The city plans to keep the golf course open and improve public access to the shoreline.
The Hawaii Public Utilities Commission (PUC) struck down Hawaiian Electric Company’s (HECO) grid upgrade plan and ordered the state’s largest utility to submit a detailed strategy to modernize its grid across the state by June 30th. Apparently, HECO’s plan failed to adequately integrate customer-sited assets (rooftop PV) in the near and long term. The PUC wants the grid to empower consumers to make their own choices concerning the level and types of electric service they desire in the future and leverage customer-sited resources to assist in grid operations. The PUC envisions that the grid will at some point integrate 100,000 individual solar energy systems. Apparently HECO wanted to keep more electric generation under their management.
HECO announced that Hawaii’s largest solar energy farm became operational mid-January. The 27.6-megawatt solar farm in Waianae was developed by Eurus Energy America on 200 acres of land and state regulators approved a contract for Eurus to sell power to HECO for about 14.5 cents per kilo-watt hour. The project has the capacity to power about 11,000 homes per year.
As the PUC continues to wrestle with HECO, Kauai is charging ahead with their renewal energy plans. The Kauai Island Utility Cooperative (KIUC) has contracted with AES Corp. to install a 28-megawatt solar farm and a 20-megawatt energy storage system on the South Shore. The battery system will be one of the largest in the world, once built. The energy from the project will be priced at 11 cents per kilowatt hour and increase KIUC’s renewable-sourced generation to more than 50%. AES Corp. operates one of the largest fleets of battery-based energy storage in the world. KIUC anticipates that the system will reduce electrical rates to Kauai’s customers when completed.
The Howard Hughes Corp. received approval to build another Kakaako tower. Aalii, a 42-story, 751-unit mixed use condominium project will be located on the route of the Honolulu rail transit project. Residential units will include studio, one and two-bedroom units ranging from 300 square feet to 900 square feet. The Hawaii Community Development Authority approved a variance allowing the tower’s podium height to be 75 feet high versus the standard 45 feet to allow for additional parking and accommodate more retail spaces below. Amenities will include a pool, fitness centers, private rooms, and lounges. This is the sixth tower to start construction in Howard Hughes Corp.’s Ward Village.
Federal regulators should take heed before continuing their assault on for-profit schools. Graduates of the University of Phoenix-Hawaii graduates have the highest average salary compared to graduates from other public and private colleges in Hawaii. University of Phoenix-Hawaii graduates earn an average of $8,000 per year more than second-place University of Hawaii at Manoa and over $17,000 more than the national average.
A carefully selected group of six scientists moved into their new home on Mauna Loa for the next six months as NASA continues to study the psychological difficulties associated with living in confined, isolated conditions for extended periods of time. The crew will have no physical contact with people in the outside world and will work with a 20-minute delay in communications with the support staff to simulate the communications delay experienced by a manned mission to Mars. NASA hopes to determine how to select individual astronauts, man a crew, and support the crew on long-duration space missions. NASA has a goal to send humans to an asteroid in the 2020s and to Mars by the 2030s. Scientists previously manned the dome on Mauna Loa for extended periods to study food needs and crew cohesion.
Mark Zuckerberg, Facebook’s CEO, has recently become somewhat of a villain on the island of Kauai as he struggles to come up to speed with the state of Hawaii’s laws and traditions. One tradition held near and dear to most Hawaiians, is the right to gain access to the islands beaches and traditional fishing spots. Zuckerberg has been the focus of withering criticism in the media and on social media for suing to purchase small tracts of land landlocked by his 700-acre estate and for putting up no trespassing signs along a suspected Ala Loa trail (an ancient trail that circles each island). Mark Zuckerberg subsequently dropped the lawsuit on January 27th. The state has authority to claim ownership of ancient trails that date back to 1892 when Queen Lili’uokalani and the Legislature passed the Highways Act of 1892, a law that is still on the books. Many local activists complain that much of the problem lies with the state of Hawaii and that the Department of Land and Natural Resources (DLNR) fails in its duty to open and maintain recognized and recorded public trails. According to the activists, if DLNR would do its job, prospective landowners would already know that they don’t have the right to restrict beach access when they are considering the purchase of large estates and/or beachfront property.
Aloha Beer Company opened a Honolulu tap room January 19th on Queen Street in Kakaako. The tap room offers a variety of beers brewed in-house and crafted cocktails and the menu includes smoked meats, pickles, salads, and sandwiches. The tap room is just another member of a vibrant microbrewery industry in Hawaii.
Maui Brewery Company quickly followed suit and opened their first brewpub on Oahu in a space at the Holiday Inn Resort Waikiki Beachcomber in Waikiki on January 31st. Tim is eagerly awaiting their second brewpub that is scheduled to open in downtown Kailua in early 2018.
“It’s freezing,” is a common complaint heard in Hawaii when the temperature drops below 70 degrees. I don’t imagine that the temperature sensitive will visit if Ice Bar Igloo Waikiki LLC opens an ice bar in Oahu’s thriving tourism hub. Ice bars have been opening around the country where everything inside the establishments are made of ice and new ice sculptures are consistently created.
Island residents and visitors that use Uber will have to shell out more for each ride. Uber has raised its average fair price by 20% after reviewing feedback from a recent driver survey. Hawaii’s high cost of living was a major factor in raising fairs for Honolulu.
Hawaii Dairy Farms on Kauai has submitted its final environmental impact statement to the Hawaii State Department of Health after two years of evaluation and technical work. The environmental impact statement concludes that the committed 699-cow farm will pose no significant impact to resort, commercial, residential, or recreation areas and could support up to 2,000 cows. The dairy farm came under criticism by resort owners and managers when first announced in 2015. The farm would produce enough milk for roughly 60,000 people and could become operational next year.
Stott Real Estate, Inc. will soon have to change the description of their location. Employees often say that we share the parking lot with Pinky’s. Pinky’s closed in early January and Nico’s Kailua is scheduled to open at the location in March and will include a fish market, restaurant, and bar.
Stott Real Estate Fun Fact: In apparent anticipation of the Chinese New Year, a rooster has taken up residence on the grounds outside of Stott Real Estate’s office. We receive a daily reminder that it is the year of the rooster according to the Chinese calendar.