Here is our 02/09/2018 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 January median sales price for single-family homes was $772,000 (5.8% higher than January 2017) and for condos was a record high of $430,000 (13.2% higher than January 2017). The supply of available properties continues to be extremely tight. There is only 1.9 months of remaining inventory for single-family homes and only 2.4 months of remaining inventory for condos. Generally, six months of remaining inventory is considered a balanced real estate market.
Zumper reported that Honolulu’s median rent for a two-bedroom apartment in January is 7.1% lower than last year and the median rent for a one-bedroom apartment fell 2.9%. The lower rents resulted in Honolulu falling out of the top 10 in the most expensive cities to live. Honolulu fell one spot to #11 while San Diego, CA moved up to #10. California has five of the top 10 highest rent cities in the nation according to Zumper. Zumper compiles their rental data from more than 1 million active listings on their website.
Carl Bonham, executive director of the University of Economic Research Organization (UHERO) briefed the House and Senate money committees, he outlined the benefits of accelerating the development of 33,000 additional new homes over the next seven years and cautioned that building so many more homes would require changes in the way that the state and the counties regulated development. Bonham estimates that the residential building would add an extra 0.5% to the state growth domestic product (GDP), and increase employment about 1%, and attract about 5,000 people to a state that has been experiencing a decline in population. Unfortunately, state legislators did not take the brief to heart. House Finance Chairwoman Silvia Luke focused on her favorite punching bag, Mayor Kirk Caldwell, by implying that nothing was happening at the city level yet she failed to mention the regulatory hurdles created by the Department of Land and Natural Resources (DLNR). Senate Ways and Means Chairman, Donavan Dela Cruz, summarized the presentation as “another plea” to cope with the housing crisis. While Bonham framed the issue as an opportunity if lawmakers reduced regulation, the “housing crisis” will likely continue by the lack of action at the county and state levels.
On Saturday, January 13, 2018, many people in Hawaii received the following emergency alert on their cell phones: “BALLISTIC MISSILE THREAT INBOUND TO HAWAII. SEEK IMMEDIATE SHELTER. THIS IS NOT A DRILL.” Fortunately, Tim’s general cynicism concerning the competency of large bureaucracies (government and non-government), and more specifically Hawaii’s government bureaucracies, turned out to be true. Tim told Tracey, the state of Hawaii government just screwed up an emergency drill. It took the state 43 minutes to broadcast that the emergency alert had been sent out in error.
Both the state and the FCC conducted an investigation into the incident. The findings from the state’s internal investigation revealed that the employee who sent out the emergency alert confused an exercise recording that started a drill, with a real threat. Five other employees executed the drill correctly. According to the report, the employee had been a source of concern for more than ten years due to poor performance and had previously confused drills for real events. The investigator documented in the report, “I find a preponderance of evidence exists that insufficient management controls, poor computer software design, and human factors contributed to the false alarm and its delayed retraction.” The FCC weighed in by stating that The Hawaii Emergency Management Agency (HI-EMA) did not establish proper protocol or resources resulting in the false alert and delayed retraction. The HI-EMA administrator and another executive resigned and a third supervisor is facing suspension without pay in addition to the fired employee.
On January 17th, Hawaii observed the 125-year anniversary of Queen Liliuokalani’s overthrow by businessmen with the aid of the U.S. military. While some speakers tried to focus on the progress that Hawaii has made as the 50th state, and others tried to highlight that the overthrow places the state’s legitimacy in question, many others focused on the cultural uniqueness of Hawaii and what the spirit of aloha has to offer a world in turmoil.
Aloha United Way commissioned a report to assess financial hardship on the island. The report focuses on working people that are unable to afford the basic necessities on the island in their current employment. The group is identified as Asset Limited, Income Constrained, Employed and goes by the acronym ALICE. The report calculates the “household survival budget,” the budget that covers basic housing, food, transportation, child-care and health care costs, at $28,128 annually for a single adult and $72,336 for a family of four. The study reported that 48% of the households in Hawaii fall short of the threshold.
Medical insurance rates went up across the board and both companies and individuals continue to struggle with insurance costs that exceed inflation. Kaiser Permanente reported small-group premiums rose about 5.9%, large-group premiums rose 6.4%, and ObamaCare premiums rose 19.8%. The Hawaii Medical Service Association (HMSA) reported small-group premiums rose 11.2%, large-group premiums rose 9.3%, and ObamaCare premiums rose 19.8%. Hawaii’s insurance commissioner was quoted, “these rate increases illustrate the need to bend the health care cost curve.” Unfortunately, his proposed solutions involve doubling down on the same failed strategy that has driven ObamaCare’s unsustainable rate increases combined with a lack of health care options, or a single-payer system run by government like the scandal ridden program run by the Veterans Administration.
While healthcare premiums continue to sky-rocket, the state is struggling to address a three-year delay in inspections of new dialysis clinics that remain closed as the number of residents experiencing kidney failure climbs. The state Department of Health has failed to hire and train enough inspectors to complete inspections and certifications of dialysis clinics and must rely on hiring consultants outside the state. The backlog is expected to increase.
A state audit questions the purpose of the Hawaii State Energy Office after the auditor found that the office could not show any contributions to the state’s progress towards its renewable energy goals. The organizations expenses exceeded its revenues by over $600,000 and the depletion rate of the special fund balance could be “substantially depleted” next year. 90% of the office’s expenses go towards employee salaries. In one instance, the Hawaii State Energy Office awarded a contract for a $250,000 “state-of-the-art” energy innovation center and then hired another consultant to assess whether the center was actually needed. The audit shows another waste of taxpayer dollars in a state where the population already embraces renewable energy and drives change.
A recent paper published by the University of Hawaii Research Organization by a grad student reported that 2019 is the best time to invest in a PV system with a battery backup. The working paper by a Ph.D. student analyzed the declining costs of battery systems, pending reduction in federal tax credits, and a range of electricity rates. The student concluded that homeowners who invested in a system in 2019 would improve their net savings by 17 – 32% on Oahu compared with buying the same system in 2017. Food for thought for homeowners on both Oahu and the outer islands.
One persistent rumor passed around Hawaii is that other states buy their homeless population one-way tickets to Hawaii. The House Bill in the state legislature actually proposes using a portion of the state’s hotel tax revenue to purchase one-way tickets back to family members of homeless individuals in the Continental U.S. In order to qualify, the homeless individual must have a family member in another state vouch for the individual and agree to pay half of the airfare.
WalletHub ranked Hawaii dead last for car ownership. The state’s dismal ranking was attributed to high cost of ownership and maintenance, poor roads and infrastructure, the nation’s highest gas prices, and poor access to vehicles and maintenance.
The Armed Forces Disciplinary Control Board put out an advisory in late December warning service members of violent crimes occurring in Waikiki. According to the notice, the board estimates that there have been more than 1,000 violent drug and alcohol-related arrests in the vicinity of the intersection of Kalakaua and Royal Hawaiian avenues and the intersection of Kalakaua and Kapahulu. Mayor Kirk Caldwell only became aware of the notice in mid-January. Police have responded by using new recruits to increase police presence in Waikiki during the late-night and early-morning hours.
30 families recently moved into the first phase of Kahauiki Village, a plantation-style affordable housing community, organized and developed by local businessman, Duane Kurisu. The pre-fabricated houses once provided shelter for victims of Japan’s 2011 tsunami. One-bedroom units are renting for $750 per month and two-bedroom units are renting for $900 per month. 153 families will eventually live in the village once the project has been completed.
Beachgoers and nonprofit groups collected an estimated 3,500 pounds of debris that washed ashore on Kailua Beach on January 1st and 2nd. The volunteers collected debris both in the water and on the sand over ten days and piled it above the high water mark at Kailua Beach Park. The parks department crews then hauled the debris off to the city landfill.
Hawaii has recently produced an outstanding group of high school quarterbacks that have excelled at the college level starting with NFL sensation Marcus Mariota. Tua Tagovailoa, a Saint Louis High School alum, recently guided the Alabama Crimson Tide to a national championship. Mililani High School graduate, McKenzie Milton, led the University of Central Florida to an undefeated season, the only major college football team to go undefeated this year. And Pearl City High School alum, Jordan Ta’amu was the starting quarterback for the University of Mississippi. In unrelated news, Nick Rolovich will have the University of Hawaii return to the run and shoot offense that ushered in an era of record setting seasons under then coach June Jones.
The Honolulu Star Advertiser commemorated the 50th anniversary of Duke Kahanamoku’s passing on January 22nd at the age of 77. Duke is arguably Hawaii’s greatest athlete and waterman. Kahanamoku collected three gold medals, one silver medal, and one bronze medal in a 20-year Olympic swimming career. He rescued eight men from a capsized boat on his surfboard, one by one, in heavy surf that closed the harbor channel off Corona del Mar, CA. His daring rescue changed the way lifeguards conducted ocean rescues. His surfing exploits on a 16-foot, 114-pound redwood longboard without a skeg, helped introduce the world to surfing. When his job as sheriff on Honolulu was abolished during statehood in 1959, Duke was appointed “Ambassador of Aloha.” What made Duke Kahanamoku such an iconic Hawaiian figure could be summed up by part of his written creed, “We greet friends, loved ones and strangers with Aloha, which means love. Aloha is the key word to the universal spirit of real hospitality.”
A recent article by Pacific Business News summarized the continued growth in both size and selection of Hawaii’s microbrewery industry. New breweries included Aloha Beer Co., and Waikiki Brewery Co. Existing breweries that have expanded their operations include Tropics Ale House in Kakaako, Maui Brewery Company in Waikiki and soon to open restaurant in Kailua, and Lanikai Brewing Companies Tap & Barrel pub. Industry-demand for locally brewed specialty beers has been fueled by both tourists and locals like Tim. One of Tim’s goals this year is to expand his collection of micro-brew T-shirts from Oahu establishments in addition to enjoying their offerings.