Here is our 7/10/2019 e-mail update. The newsletter is sent after the statistics for the preceding month have been posted on the Board of Realtors website. Please check out our most recent quarterly newsletter under Quarterly Newsletters.
The June median sales price for single-family homes rose modestly to $800,000 (2.3% higher than June 2018) and for condos to $432,000 (3.0% higher than June 2018). Demand continues to fall with the number of single-family sales dropping 10.4%, condos sales dropping 13.5%, and pending sales (property under contract to sell) for single-family homes dropping 7.3% and for condos dropping 13.0%. There is currently 3.6 months of inventory of single-family homes and 3.9 months of inventory of condos and inventory continues to slowly climb as demand falls. Economists consider 6.0 months of inventory a balanced real estate market. However, the clock may be ticking for people on the selling fence if the trends in 2019 continue considering that mortgage interest rates have recently dipped.
Hawaii’s bankruptcy filings rose to the highest levels in May for the past six years and it was the fourth increase in the past five months. The rising number of filings reflects a slowing economy, less overtime, and more people struggling with Hawaii’s high cost of living. Stott Property Management, LLC periodically assesses monthly rents and will consider raising rents when leases expire to help offset the rising expenses involved with maintaining a rental property. Several tenants pushed back against the rent increases claiming that they would have to move if forced to pay a higher rent because they are already living paycheck to paycheck.
Honolulu Star Advertiser’s front page article in the Sunday paper (7/7/19) highlights the struggle of both Oahu renters and current landlords looking to raise rents to make ends meet or to pay for the rising costs associated with maintaining a property. Hawaii has the largest financial gap between the average hourly wage and the hourly rate a tenant needs to make to pay for a two-bedroom residence and a one-bedroom residence. A renter must make $36.82 per hour ($76,577 per year) to afford a two-bedroom rental and $28.04 per hour ($58,316 per year) to afford a one-bedroom rental while the average wage is $16.68 per hour. This is a major reason why rents have softened over the past couple of years and Oahu’s population has shrunk. Landlords struggling to make ends meet should seriously consider selling while inventory remains relatively low.
The Thirty Meter Telescope (TMT) project has received a notice to proceed with construction from the Department of Land and Natural Resources after a four-year delay. State and county officials recently removed unauthorized stone structures erected by protestors in 2015 and are now planning to provide safe access for construction crews to the site while allowing peaceful protest activity. Construction will begin with site preparation and installation of perimeter fencing.
The state legislature approved about $13 million in funding to repair the concrete groins at the Royal Hawaiian hotel and install a groin at Kuhio beach where erosion periodically exposes the old foundation from the Waikiki Tavern that was demolished in 1962. The concrete groins help keep Waikiki’s beach from getting swept away. Waikiki Beach was recently estimated to bring about $2.2 billion to the local economy every year.
A new Arleigh Burke-class destroyer was named the USS Daniel Inouye in honor of the Hawaii war hero and U.S. Senator who represented Hawaii in the U.S. Senate for 50 years until his death in 2012.
Former Honolulu Police Department Chief, Louis Kealoha, and his wife, Katherine Kealoha, a former Deputy Prosecutor, were convicted of conspiracy and three counts of obstruction of justice after just one day of jury deliberation. The trial lasted for more than one month, 70 witnesses testified over sixteen days, closing arguments took three days, and the judge took more than an hour to deliver jury instructions. The Kealohas tried to frame Katherine’s uncle, Gerard Puana, with the theft of the Kealoha’s mailbox in 2013 and then tried to cover it up. Gerard Puana’s public defender, Alexander Silvert first contacted the FBI about the security case when the judge declared a mistrial on the first day of Puana’s trial for the stolen mailbox when Louis Kealoha told the jury of Gerard Puana’s 2011 conviction for unlawfully entering a neighbor’s home. Katherine tried to frame her uncle when she discovered that Gerard had bank statements from a joint account with her grandmother showing that she spent $135,000 of the money from a reverse mortgage on a Mercedes, Masarati, and other expenses to support the Kealoha’s lavish lifestyle. Katherine’s scheme included making up a fake notary, Alison Lee Wong, in order to forge trust documents related to her grandmother’s finances.
Katherine Kealoha was taken into custody on Friday, June 28th, and will remain in jail prior to her sentencing on October 7th and for her upcoming trials for her alleged theft of a $167,000 inheritance of two children for whom Katherine served as financial guardian and a second trial for allegedly helping her brother traffic opioids and use her position to hide the crimes. The U.S. District Judge revoked her bail because he was convinced that Kealoha would continue to obstruct justice if she remained free. Federal prosecutors are expected to intensify their investigation of city Prosecutor Keith Kaneshiro, Katherine Kealoha’s former supervisor, relating to these cases. The first trial is just the beginning of holding people accountable for possibly the largest corruption scandals in Hawaii’s history.
Mayor Kirk Caldwell, flanked by hotel industry and union representatives, signed a new vacation rental policy bill that prohibits rentals of less than 30 days unless the properties are located inside the resort zones. The new law will allow about 1,700 new permits for hosted bed-and-breakfasts in addition to the current 770 licensed bed-and breakfasts, but do not allow whole-home vacation rentals. Supporters of the bill argue that the new measure will help maintain the character of Oahu’s neighborhoods while opponents of the bill point out that vacation rentals allow a homeowner to generate additional income to help pay for Hawaii’s high cost of living. Advertising an unpermitted vacation rental on Oahu will be unlawful starting August 1st while new permits will not be available until October 1, 2020 at the earliest. The law requires that vacation rental advertisements include the permit number and any people caught violating the law will receive a minimum fine of $1,000 and a maximum of $10,000. The city can now scan hosting platform sites and the existence of an ad can serve as evidence that a vacation unit is being operated. The burden of proof will be placed on the owner to show that the property is not being used as a vacation rental. It also requires hosting platforms like Airbnb to file monthly reports with the Department of Planning and Permitting. Vacation rental hosting platforms and groups of Oahu operators plan on challenging the new law in court. Check out the link below for more information from the City Department of Planning and Permitting. Click here to link to the FAQ.
The repairs to the Pali Highway will continue through November, three months longer than originally projected. The Pali Highway has been closed since February rains caused mudslides that destabilized the Old Pali Road above the highway. Record rainfall on June 25th dislodged some of the matting used to prevent erosion and work has started on installing a mesh to prevent future mudslides. Construction on the eighty-foot tunnel extension should commence soon now that the mesh net has been installed below the Old Pali Road to protect construction crews from falling debris.
Protestors stopped traffic and turned away tourists when the state opened Kuhio Highway after the devastating flooding in 2018 despite a new Ha’ena State Park Master Plan that limits visitation to Kauai’s Napali Coast to 900 people per day. Protestors formed a human chain forcing tourists to turn around while construction workers and residents were allowed to pass. Shortly after, Kauai police arrived and forced the protestors to open the road to everyone. The Department of Land and Natural Resources estimates that for every car that had a permit to visit the park, five others were forced to leave for failing to have a permit. Officials also plan on aggressively enforcing no parking zones along Kuhio Highway leading to the park.
A sailing cargo ship, Kwai, hauled in about 40 tons of marine debris collected in the Pacific Ocean over three weeks including discarded fishing nets, rope, plastic floats and bottles after satellite trackers were deployed a year in advance. The data collected from the trip will be analyzed by University of Hawaii’s International Pacific Research center and the trash was incinerated at Oahu’s HPOWER waste to energy plant.
A Kauai farmer has four new water buffaloes shipped in from Arkansas after receiving permission from state Board of Agriculture. The four females are pregnant and will eventually be used to help plow the taro fields, produce milk for cheese, and also help control invasive weeds. Apparently water buffaloes previously existed on Hawaii for about 50 years in the early 1900’s and were imported from China to work on rice fields.
Kauai Island Utility Cooperative (KIUC) continues to lead the way in renewable energy ranking 8th nationally in solar capacity nationally. A large contribution to their success is the investment in battery storage that currently supports 40% of evening peak demand (375-megawatt hours). A new battery project will add an additional 70-megawatt hours and a pumped hydro storage project will provide 56.25-megawatt hours to the evening total. KIUC predicts that they will be able to provide 80 to 85% of the electrical demand with renewables once these two projects are completed.
The Big Island may have a major supplier of renewable energy back on line as the Puna Geothermal venture plant is on track to open at the end of 2019, about 18 months after two production wells, one re-injection well, and a substation were covered by lava. Hawaiian Electric Light Company replaced the recently installed utility poles that were smoldering with steel poles to restore power to the plant and about 30 residents. The geothermal plant supplied 31% of the islands electricity in 2017.
Eight firefighters battled darkness, altitude sickness, and freezing temperatures for 7 ½ hours to rescue a 68-year old man from Arizona. He wandered past warning signs at Mauna Kea’s summit to get the perfect photo and got lost. The man stepped on unstable terrain that gave way and he fractured his femur. The fire fighters found him at about 12,000 feet above sea level, splinted his leg, and carried him on a stretcher for 3 ½ hours up a 700-foot slope with 40 lb. backpacks. Six of the eight firefighters would carry the stretcher about 10 feet and then two would rotate out in order to prevent further injuries from fatigue.
State conservation officers cited an injured Honolulu man and five other hikers for trespassing at Sacred Falls State Park following another rock fall. The state park has been closed since eight people died on Mother’s Day in 1999 from a major rock fall. The state is wrestling with the problem of social media encouraging hikers throughout the state to ignore warning signs and closure signs in order to experience a “great hike.”
Eleven people died when a skydiving plane crashed shortly after takeoff at Dillingham Airfield on Oahu’s North Shore. The Federal Aviation Administration (FAA) and the National Transportation Safety Board (NTSB) are investigating the crash. The crash occurred just after a tourism helicopter crashed in Kailua two months ago. It was the deadliest civilian aircraft crash in the United States since 2011. The NSTB recommended that the FAA implement stricter maintenance practices and inspections since operators of parachuting services operate under some of the laxest requirements. Additionally, pilots do not need the same level of training that other operators must follow.
Tim and Tracey flew to Santa Clara to celebrate the graduation of their son, Mark, from Santa Clara University. Mark worked four summers at Stott Real Estate, Inc. and received his real estate license during his first college summer, joining Tracey as the two members of the family licensed at the age of 18. Tim, Tracey, Mark, and Ashley then went white water rafting on the south fork of the American River as part of the celebration. Mark’s grandparents also joined in.
Check out the video below regarding parital 1031 exchanges. Please give us a call if you have any questions, 808-254-1515.
Partial 1031 Exchange
If you need assistance buying, selling, or managing your Oahu property, we want to apply for the job of assisting you.
Tim and Tracey