Here is our 05/10/2019 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 April median sales price for single-family homes was $766,750 (2.9% lower than April 2018) and for condos was $418,950 (0.7% higher than April 2018). The number of single-family home sales was 10% higher this April than last year and the number of condo sales dropped 13.0%. The number of pending sales for single-family homes in April was 3.4% lower than last year and for condos dropped 17.4%. Supply continues to creep higher. There are currently 3.5 months of single-family home inventory and 3.8 months of condo inventory.
The first four months of the year seem to show that Oahu’s real estate market has peaked or is peaking. Inventory has grown sufficiently large enough and prices have risen high enough that buyers appear unwilling to pay for properties that require a fair amount of cosmetic repairs or remodeling. Condos and houses are sitting on the market longer and in many cases; price reductions have been needed before a property attracted a willing and able buyer.
The University of Hawaii Economic Research Organization recently published a report showing the Hawaii’s economy continues to slow and there is little evidence that the economy will improve in the near future. Tourism peaked during the first half of 2018 and real visitor spending is currently running about 4% lower than 2018. Inflation-adjusted spending has slipped to levels not seen since 2010. According the US Bureau of Economic Analysis, Hawaii recorded the slowest income growth in the nation in 2018. The weakest sectors included government, construction, trade, finance, and real estate.
The entry of Southwest Airlines into the Hawaii market appears to be paying dividends. Travel booking site Kayak recently reported that all fares offering California to Hawaii service have dropped 17% compared to the same period last year. Southwest has also entered the inter-island market this month with introductory fares as low as $29 one way. Southwest currently offers four daily flights between Honolulu and Kahului and will begin flights between Honolulu and Kona starting May 12th.
Occupancy at state hotels dropped 3% to 79.6 percent for the first quarter of 2019 and the daily room rate fell 1.1% to $285. Revenue per available room dropped more than 4% to $227 and overall revenue dropped 6% to about $374 million. March’s soft numbers continued the trend in February that turned out to be the hotel industries worst month performance in a decade. Hawaii’s market is still considered pretty strong when compared to the performance of other hotel markets in the country.
For the second year in a row, Hawaii ranked among the bottom six states for economic outlook by the American Legislative Exchange Council in its “Rich States, Poor States” report that uses 15 state policy variables to rank states for competitiveness. The state does well in terms of debt service and property taxes, however, it lost almost 52,000 residents over the past 10 years and ranks 47th in top marginal personal income tax rate. Over the past eight years, Oahu lost a net 62,000 people to the mainland. The report shows that Americans are voting with their feet across states and they are voting in favor of states that create a free market environment that supports economic growth and opportunity. New York ranked dead last and has lost more than 1.3 million residents over the past 10 years.
It appears to be business as usual at the state capital based on the results of measures that passed and failed this year. State Legislators passed two bills to collect more in tax revenue, a bill allowing Airbnb to collect the Transient Accommodation Tax for vacation rental owners and a bill to require Real Estate Investment Trusts to pay corporate income tax in Hawaii. For the second year in a row, the state collected more in taxes than it spent and the state Constitution requires that lawmakers either make a refund to state taxpayers or make a deposit into the “rainy day” fund. The state ended the 2018 fiscal year with a balance of $894 million and 2017 ended with a balance of $750 million. Lawmakers decided to deposit $5 million in the “rainy day fund” so that they can spend more taxpayer money in the future. And once again, legislators failed to pass a bill banning lawmakers from holding campaign fundraising during the legislative session which critics state that the practice amounts to “pay to play.” The chairman of the Senate Ways and Means Committee held a fundraiser on April 18th suggesting campaign contributions of $500, $1,000, or $1,500 and the Senate Majority Leader held a fundraiser on March 21st with suggested contributions ranging from $250 to $4,000. Surprisingly, neither Senator answered questions from the Honolulu Star Advertiser about the subject.
The Federal Transit Administration (FTA) is still not ready to release the remaining $744 million in funds for the Honolulu Authority for Rapid Transportation (HART) rail project. The FTA wants the city to accelerate its contributions to help fund the project and also wants a better estimate from HART on completing the final 4.1 miles of the rail line through the dense city center.
The 56th Merrie Monarch festival was held the week of April 22nd in Hilo and the beleaguered Big Island residents welcomed visitors from around the world to participate in and watch Hilo’s famed Hula event. The festival kicked off almost a year after the devastating eruption of Kilauea Volcano’s East Rift Zone. The Merrie Monarch Festival is named after King David La’amea Kalakaua who aimed to revitalize Hawaiian culture and Hula.
The University of Hawaii (UH) Men’s Volleyball team bounced back from losing the final two matches of the regular season against Long Beach State to win the Big West Conference Tournament the very next weekend. UH received an automatic bid and the #1 seed in the NCAA tournament that was played at Long Beach State. Unfortunately, home field advantage seemed to be the key to victory as Long Beach State repeated as national champions beating UH in four sets, 23-25, 25-22, 25-22, 25-23. Long Beach State won all three home matches at the Pyramid, including the finals of the NCAA tournament, while UH won the two matches at home in the Stan Sheriff Center. UH finished the year at 28-3 and ranked #2 in the country.
A second part of the battleship USS Missouri’s superstructure is receiving a $3 million restoration as the memorial continues its never-ending battle with rust. The tallest portion of the superstructure received a $3.5 million dollar renovation in 2018 and the aft portion of the superstructure is currently being worked on. The structure will be sandblasted, about 8,000 pounds of steel will be replaced, and then about 500 gallons of battleship gray paint will be applied. The “Mighty Mo” was the site of Japan’s unconditional surrender on September 2, 1945 in Tokyo Bay. World War II was the deadliest conflict in history with an estimated 50 to 80 million people killed. There will be a week’s worth of planned activities at the USS Missouri and the Pearl Harbor Aviation Museum in September 2020 to commemorate the 75th anniversary of the end of the war.
George Stott was briefly assigned to the USS Missouri for a summer training cruise when he was a midshipman at the United States Naval Academy in the 1950’s. Tim and Tracey remember him telling his grandkids that part of his duties was to polish the brass. He was also amazed that he could have unlimited soft serve ice cream from a machine in the crew’s mess. We have included some photos of George back in the day and of Tim, Tracey, and their kids during a 2012 visit to the Mighty Mo.
Two telescopes on Mauna Kea were part of a project that involved eight telescopes around the globe and a group of about 200 scientists to develop the world’s first image of a black hole. The black hole, 54 million light years from Earth, was given the Hawaiian name Powehi. Powehi means “the adorned fathomless dark creation” or “embellished dark source of unending creation” and comes from an 18th century Hawaiian chant. Hawaiian language professor Larry Kimura, the person who came up with the name of the black hole, mentioned that there are 100 different kinds of darkness in the Hawaiian language. There may be more black holes with Hawaiian names in the future.
The Hawaii Rifle Association has filed suit against Honolulu Police Chief Susan Ballard and state Attorney General Clare Connors in U.S. District court on behalf of four individuals who were unfairly denied in their applications to obtain a permit to carry handguns. Attorneys also filed for an injunction claiming the plaintiffs have suffered irreparable harm by having their constitutional rights violated under the U.S. Constitution’s Second Amendment. A three-judge panel of the 9th Circuit Court of Appeals ruled last July that Hawaii’s law violates the Second Amendment but the case is on hold pending a Supreme Court decision on a similar case in Florida.
Tommy Waters won a hotly contested special election for the East Honolulu seat on the Honolulu City Council by capturing 51% of the votes, a margin of 1,004 votes. A special election was required when the Hawaii Supreme Court nullified Tommy Ozawa’s 22-vote victory in November because elections officials counted mail-in ballots received after the 6:00 pm deadline. The candidates spent a combined $421,000 for a seat that pays about $66,500 per year.
Blackstone, owner of Turtle Bay, plans to start a $70 million renovation by the fourth quarter of 2019. The renovation is the precursor for Blackstone’s plan to add about 700 more units during a build-out that could start in two to three years. It is the first time in 45 years that the resort will get a major overhaul. The renovation includes expanding the lobby, building new adult and family pools, a new pond and bar, updating the resorts 42 ocean cottages, updating the tennis area that will offer two tennis courts and introduce four pickleball courts, updating the resorts’ technology so that guests can gain internet access throughout the 875-acre property, and refreshing the resorts 452 existing guest rooms.
A recently completed two-year study by the U.S. Geological Survey has worked with engineering and insurance companies to model 2,000 miles of coral reef coastline across the United States using supercomputers to calculate the value of protection that the reefs provide to different coastlines from wave energy. Hawaii receives $835 million in protection every year by dissipating up to 97% of the wave energy offshore. The study may prompt further measures to protect and restore various reefs off Hawaii’s shores in order that Hawaii’s valuable real estate remains protected.
Hoakalei Country Club recently opened its $23 million clubhouse 10-years after the Ernie Els-designed golf course opened in 2009. The two-story clubhouse has a lobby, pro shop, offices, bar, restaurant, and kitchen on the main floor and the lower level houses men’s and women’s locker rooms, a golf cart barn, storage, and a lounge. Reflections Restaurant offers a menu featuring Hawaiian-Japanese and Euro-American food and will be open Tuesday through Sunday. The private clubhouse also has an infinity pool and spa next to the bar. The private club currently has about 310 members and 60% of those members are Hawaii residents.
Matson started installing three new 65 long-ton capacity gantry cranes built by Mitsui Engineering & Shipbuilding in Japan to service its four new cargo ships. The larger cranes are needed to fully service the largest container ships built in the United States. The cranes should be ready for operation in about two months.
A tragic helicopter accident killed three people when it crashed on a Monday morning on a busy street in Kailua. Fortunately, no one else was hurt during the crash that occurred just after the morning rush hour. The helicopter impacted Oneawa Street at 9:12 am and the impact was severe enough to spread debris several blocks throughout the neighborhood. A portion of Oneawa Street and the Kailua Racquet Club was closed for two days as officials surveyed the wreckage as part of their investigation into the cause of the crash. The accident has some residents and legislators questioning the practice of tour helicopters flying over residential neighborhoods.
A rash of plumbing leaks in older condos, all built in the 1970s, have highlighted an owner’s increased risk exposure from deteriorating drains. Most of the drains were made of galvanized steel and those pipes have rusted to the point of failure. One client recently was dropped by his insurance company because it decided to no longer insure condos in that particular building because the number insurance claims have made it unprofitable to maintain the policies. A new insurance company that was willing to issue a policy charged the owner a rate more than double. Additionally, two associations refused to get involved with plumbing leaks because of the fear that the associations would lose their insurance. Last year, one Waikiki condo association decided to bite the bullet and replace all the galvanized steel drain piping over the course of three months. The work was extremely disruptive and the owner had to provide the tenants $2,100 in total rent reductions to compensate them for their inconvenience. Selling might be the best option for those homeowners and investors that don’t have the resources to pay for a major leak.