Here is our 11/10/2017 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 Oahu median sales price in October for single-family homes was $752,000 (1.3% higher than October, 2016) and for condos was $397,500 (0.4% higher than October, 2016). The supply of available homes remains extremely tight and Buyers are experiencing the frustration of competing against multiple offers on many available properties. There are only 2.3 months of remaining inventory for single-family homes and only 2.6 months of remaining inventory for condos. Six months of remaining inventory is considered a balanced market, where neither seller nor buyer has a distinctive negotiating advantage.
National news and politics rarely have a direct impact on Hawaii real estate. However, the proposed federal tax code change could have a significant impact on real estate nationwide. The recently released bill from the House of Representatives raises the standard deduction for every taxpayer, limits the mortgage interest deduction for new homeowners to $500,000, and eliminates the mortgage deduction for second homes. Investment real estate owners would currently be able to still deduct their mortgage interest on investment property using the Schedule E. The haggling in the U.S. House and the Senate has just begun. All owners who have a mortgage on real estate should look for any changes in the tax code if the President signs a bill addressing tax reform.
Castle and Cooke Hawaii broke ground on Koa Ridge, a $2 billion project that will include 3,500 new homes once completed. The project has been stalled for 20 years as the developer had to push through three state regulatory proceedings and two Hawaii Supreme Court challenges. Affordable housing advocates don’t have to look very hard to realize that government red tape is primarily responsible for Hawaii’s housing shortage.
The Honolulu City Council gave approval for the city to begin condemnation proceedings for an easement over a small lane off Portlock Road to restore public beach access. One of the property owners installed a new locked gate that effectively blocked access to the beach on the advice of police. The owner is objecting to the city’s efforts to condemn part of his property to restore access. The controversy highlights a risk associated with owning beachfront property, particularly when the public uses a portion of the land to access the beach.
The sound of church bells will ring on Saturday, November 11, 2017, marking the 100th Anniversary of Queen Lili’uokalani’s death. When she died in 1917, church bells across the islands rang out over the islands she once ruled. Queen Lili’uokalani was the last sovereign of the Kamehameha dynasty that ruled the Hawaiian Kingdom since 1810. By the time that she became queen, a new Hawaiian Constitution had reduced much of the monarchy’s powers. When she tried to restore those powers, a coup supported by the U.S. Marines deposed her in 1893, and a provisional government was established about a year and a half later. The queen signed a formal abdication of her rule in 1895 but asked President Grover Cleveland to help restore her powers. The United States annexed Hawaii in 1898. Queen Lili’uokalani helped raise money for the Soldiers Chapel at Schofield Barracks, one of the churches that will be ringing the bells on Saturday.
Hawaii’s unemployment rate dropped to 2.5% in September, one of the lowest rates since the state of Hawaii started tracking the data. The low unemployment rate has become a challenge for Hawaii employers looking to grow and take advantage of Hawaii’s buoyant tourist industry.
Southwest Airlines has confirmed that it will start flying to Hawaii next year and is also eyeing the interisland market. The announcement came just before Island Air filed for bankruptcy in order to prevent its three remaining leased planes from being repossessed. Island Air had been losing money for 17 straight quarters prior to filing for bankruptcy. Hawaiian Airlines and Mokulele Airlines are currently the only commercial interisland carriers as several competitors have failed to gain a foothold over the past decade. Southwest would quickly become a stiff competitor if it does decide to compete for interisland business.
Taking care of Hawaii’s aging population has recently been getting more attention and divisions are occurring on similar lines as other recent contentious issues like vacation rentals and affordable housing. A cottage industry has been growing up in response to the expense associated with and lack of availability to traditional assisted living communities and nursing homes. The Honolulu Star Advertiser recently ran a front-page article concerning unlicensed elder care facilities called “aging in place” (AIP) facilities. The AIP model involves having a resident sign a residential lease and a separate agreement with a home health care company specifying a set rate each month for necessary care and assistance with daily living activities. The model appeals to many people that need assistance because they would rather live in a home environment and have help versus being forced to live in a nursing home. Homeowners have had an aging in place option available to them for years. The AIP proponents argue that this relatively new arrangement is more affordable and with more options than traditional licensed assisted living and nursing home options. Opponents of the measure claim that the lack of state oversight leaves unprotected seniors at risk of harm. Attorneys that have helped set up AIP facilities state that the arrangement complies with Hawaii law while some state regulators claim that the facility operators are trying to skirt the spirit of the law. Ultimately, the legislature and courts may decide if seniors that want assistance will be able to continue choosing where they can rent and choosing the type of care that they want at home.
Hawaiian Airlines paid tens of millions of dollars to fix the new maintenance and cargo hanger at the Daniel K Inouye International Airport in Honolulu and the CEO has consequently asked for an investigation to determine how the delayed project got so far off track. The state will reimburse the airlines in the form of rent credits. Hawaiian Airlines identified 3,688 deficiencies after the airline took control of the unfinished facility last November and about two-thirds of the problems involved incomplete work that the contract marked as finished and the state had already paid for. The remaining one-third of the problems was substandard work that had to be fixed. The state originally signed a contract in 2010 for over $70 million to build the hangar and the project stalled in 2015 after subcontractors abandoned the job. The State Department of Transportation finally stopped all construction in 2015 when it discovered that 30 subcontractors were owed $4.2 million. The state claims that it was paying the general contractor but the general contractor was not paying the subcontractors. Some of the defects included a concrete parking area that was cracking before any vehicles passed over it, a vehicle ramp that was so steep that a heavily loaded truck would not be able to negotiate it, a 12-foot door built with an obstruction that only allowed 9-foot high objects to pass, and walls that had to be ripped out because the necessary electrical wiring was never installed. Hawaiian Airlines expects to move equipment and employees into the new hanger over the next six weeks.
The Hawaii Public Utilities Commission has approved two new solar credit programs that allow some compensation to new customers that connect rooftop PV systems to Hawaiian Electric Company’s (HECO) grid. Both programs, one involving systems with energy storage (batteries) and the other without, will provide financial credits at wholesale to customers when they export electricity to the grid. HECO will be able to limit the amount of electricity exported during daylight, which could reduce the program’s attractiveness. The PUC also announced that net energy metering customers would be able to add to their existing systems depending on certain technical requirements.
Maintenance crews cleared out three Kakaako parks after police forced 100 homeless people to move one week and the state closed the parks for three weeks to address safety issues. While outreach workers were able to move some people into shelters, others simply moved their belongings to various sidewalks in the neighborhood. State officials have also closed a portion of the Moanalua Stream under the H-1 viaduct in order to clear out the homeless encampments. Theft of copper and electrical wires has left street lamps dark along a stretch of the H-1 freeway. The state is hoping that building a fence and hiring private security will prevent homeless from returning. A legislative task force is trying to find “safe zones” where homeless can camp until they find permanent housing in the hopes that the homeless just don’t keep moving to other neighborhoods and causing more safety problems.
A recent string of violence in Waikiki has prompted concerns of the police, state lawmakers, and Waikiki stakeholders. A 16-year old was recently charged with second-degree murder for stabbing a 23-year old Marine, a 14-year old was charged with stabbing and beating of a 21-year old Army soldier, and an 18-year old was charged last month for second-degree murder for allegedly firing a rifle into a crowd outside a Waikiki bar. Officials are looking to see if there is any connection between the rise of homeless teens and the rise in violence committed by teenagers, particularly in tourist centric Waikiki.
Former HPD police Chief Louis Kealoha and his wife, Deputy Prosecutor Katherine Kealoha were arrested on Friday, 10/20/17, and appeared in federal court to face charges of conspiracy, obstruction of justice, making false statements and bank fraud. The former HPD police chief put himself on paid leave in mid-December when he was informed in writing that he was a target of a criminal investigation by federal authorities. Louis Kealoha retired in February and Katherine Kealoha was placed on unpaid leave on Friday, 10/20/17. Many consider the legal developments to be the most significant case of public abuse of power in state history.
Two Honolulu women were rescued from their disabled 50-foot sailboat 900 miles southeast of Japan after drifting for five months. The pair left Ala Wai harbor on May 3rd destined for Tahiti. The two survived by packing a year’s worth of food on the boat and brought along a water purifier. Authorities have questioned many of the pair’s claims regarding the events that occurred during their five months at sea.
The Howard Hughes Corp. completed its second mixed-use condominium tower in Ward Village in Kakaako. Anaha, a 317-unit ultra-luxury building has sold 95% of the units priced between $2.8 and $14 million as of June 30, 2017. Local developer, Stanford Carr, completed Keauhou Place, a 423-unit mixed use building that will become home to one of the 20 stations for the Honolulu Authority for Rapid Transit’s (HART) elevated rail project.
Hawaii craft brewing continues to enjoy growth with two local breweries expanding to meet growing demand. Lanikai Brewing Company recently opened a new pub, Tap & Barrel, to provide locals and visitors an opportunity to enjoy their offering near their brewing facility in Kailua. Kauai Beer Company has started renovating a building in Lihue into a beer garden and restaurant next to their brewery. Tim and Tracey have visited Lanikai Brewing Company’s tasting room and often enjoy their beers and also visited Kauai Beer Company during a Kauai trip last year.
Bikeshare Hawaii reported that operating costs exceeded fare revenue in its first three months of operation. The executive director forecast that the non-profit would have to continue relying on private donations and grant money to remain viable.
Kaneohe’s Bryan Clay, winner of the gold medal in the decathlon at the 2008 Beijing Olympic Games was recently inducted in to the National Track and Field Hall of Fame.
“The Eddie,” Waimea Bay’s big wave surfing competition will not happen this winter even if the waves are big enough. The competition, officially named the Quicksilver Big Wave Invitational in Memory of Eddie Aikau, is named after famed waterman who drowned when he tried to paddle for help after the Hokule’a capsized south of Molokai in 1978. Quicksilver and the Aikau family were unable to come to terms on a new contract and the current contract expired.