October 2019 Email Update

Here is our 10/10/2019 e-mail update. The newsletter is sent after the statistics for the preceding month have been posted on the Board of Realtors website. You can find previous newsletters by visiting www.stott.com/news. You may also follow us on Facebook and Instagram.

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The September median sales price for single-family homes was $777,000 (4.4% lower than September 2018) and for condos was $445,000 (4.0% higher than September 2018). The demand figures were mixed as well. Closed sales rose 12.3% and pending sales rose 6.9% for single-family homes compared to last year while closed sales dropped 8.8% and pending sales dropped 5.9% for condos. The supply of single-family homes rose 13.7% and condos rose 18.0%. It is difficult to draw any conclusions from this month’s data and it may take some time to see if a new trend develops.

Luxury home sales in August dropped 20 percent, and it will be worth watching to see what the future holds for luxury home demand. A recent lawsuit initiated by a Texas residential real estate investor against a seller of an Oahu luxury home and the listing broker may hold a hint of things to come. The house closed a few days before the passage of Ordinance 19-89 and the investor’s plan of renting out the home to tourists was seriously hampered. The investor claims that the seller reported revenues from a short-term rental operation and that the contract stipulate that the investor honor two months of bookings. Luxury home sellers should be wary of sharing any short-term rental revenue data in light of the new law. While the law may not help with affordable housing, it may provide opportunities for buyers looking for nicer homes if demand shrinks while the number of luxury homes for sale increases.

The University of Hawaii Economic Research Organization (UHERO) reported in September that Hawaii’s economic growth has slowed to a standstill in 2019 and the slump has extended to areas of the economy. Two years of population decline have reduced demand, tourist spending has dropped, and the “impeding shock to Oahu from the crackdown on vacation home rentals, and prospects for tourism growth look poor.” UHERO sees the economy “treading water” over the next few years and any outside shocks to the economy could push the state into a recession.

The Hawaii Tourism Authority (HTA) and the Hawaii Visitors and Convention Bureau (HVCB) have begun their Kuleana Campaign to educate visitors on a range of issues including outdoor safety, ocean conservation, and cultural concerns. The project funded by the Transient Accommodations Tax (TAT) is a collection of short videos that touch on these topics that will be provided by partner hotels and airlines to travelers. Goals of the project include reducing hiking accidents, ocean drowning, reef conservation, and resident discontent over increasing visitor counts.

Strong demand has led Southwest Airlines to start service between Honolulu and Sacramento and between Honolulu and Lihue two months earlier than initially planned. Southwest has also announced that it will start service between three more California cities and outer island locations starting March 7, 2020. The airline is also increasing the frequency of existing routes.

Hawaii was ranked as the happiest state for the second year in a row according to a study reported by WalletHub. The study focused on three areas contributing to happiness: emotional and physical well-being, work environment, and community and environment. Hawaii ranked #1 in emotional and physical well-being, #25 in work environment, and #12 in community and environment. We have included a link to the article below. One contributing factor not mentioned in this study, was that Honolulu came in at #13 for America’s “most fun” cities in another WalletHub survey.

Link to article 1

Link to article 2

The Thirty Meter Telescope (TMT) construction remains in a holding pattern as the state of Hawaii and the TMT protestors trade accusations. State conservation enforcement officers are investigating the destruction of four endangered vines in the Mauna Loa Forest Reserve near the site of protest movement that is blocking access to the summit. Officials at the Department of Land and Natural Resources have also stated that rare plants have been trampled in the area. The TMT protestors continue to accuse the state of trying to paint a negative picture of the movement by highlighting the environmental impacts of the protests in both 2015 and today. The TMT standoff is costing the state $50,000 per day. Hawaii County has already spent more than $4.4 million related to the TMT protests since they started in mid-July. The combined state and county expenditures have reached $8.3 million to police the protest site.

A recent Federal Transit Authority (FTA) audit of the Honolulu Authority for Rapid Transportation relocation project revealed how poorly HART has run the project to date. The FTA audited 100 relocation files and only six complied with the federal Uniform Relocation Assistance and Real Property Acquisitions Policies Act. 44 of the files were not in compliance, which negatively affected tenants and owners. 16 showed owners or tenants were underpaid, 28 showed owners or tenants were overpaid or did not qualify, and 50 showed that HART did not provide the required advisory services, and 75 of the files had problems that could not be fixed after the fact. The FTA has prohibited HART to use any federal funds to relocate future people as a result of the problems. The restriction will be of little consequence since the 1.55 billion in federal dollars is a now a drop in the bucket for the estimated $9.2 billion rail project.

The City of Honolulu is seeking its first fines under Ordinance 19-89 that makes it illegal to advertise a vacation rental for periods less than thirty days. The city is charging owners $1,000 per day for allegedly failing to correct their ads and continuing to operate the short-term rentals. Meanwhile, the Kokua Coalition and the city reached a settlement that was approved by a U.S. District Judge that allows landlords to enter into 30-day rental contracts with tenants even if the tenants do not plan on staying in the rental property for the entire thirty days. The terms of the settlement agreement prohibit the landlord for charging different rents for shorter or longer occupancy periods during that 30-day period. In other words, the landlord must charge the same rent if the tenant occupies the rental for ten days or thirty days. The settlement does clear up some ambiguity to the law, but removes some of the flexibility that landlords had in the past regarding rents.

Three hotel projects are planned adjacent to the Ala Moana Mall to take advantage of the city’s development incentives near the rail ending terminal. The city can relax height and density restrictions through a draft transient-oriented-development (TOD) zoning plan to encourage use of the rail system under development. The three proposed towers would add 1,210 hotel rooms and 489 residential condominiums within a 10 minute walk of the Ala Moana station.

Job approval ratings of both state and city officials have tanked in 2019. Only 35% of those polled approve of Governor David Ige’s job performance while 56% disapprove due to the TMT fiasco making him one of the most unpopular governors in the country. The state legislature polled even worse with 27% approving of their job performance and 51% disapproving due to its failure to address the weak economy and high cost of living in the state. Mayor Kirk Caldwell’s approval ratings have tanked as well with only 31% approving of his performance and 59% disapproving. The city council is seen in a similar light with with a 29% approving and 50% disapproving. Continued problems with the rail project and an inability to address both homelessness and the high cost of living seem to be the main reasons for discontent. We will just have to see how the dissatisfaction effects next year’s elections.

Police arrested 28 people on Thursday, 9/26/19, for blocking construction equipment and work crews trying to access Waimanalo Beach Park for a controversial $32 million development in an area named Sherwood Forrest in Waimanalo. Some Native Hawaiians are protesting the beach park expansion because of the park’s designation as a National Register of Historic Places and the protestors believe the area contains burial sites. Tim Kelley had to turn around in Waimanalo that day because the police closed Kalanianaole Highway in both directions during the standoff and drive to Hawaii Kai the long way through Honolulu. Mayor Kirk Caldwell halted construction on Wednesday, 10/2/19, after a University of Hawaii archaeologist found an “artifact” over the weekend. The State Historic Preservation Division is studying the object to determine its significance. The city will wait for the determination and then proceed with the development by following the recommended protocol. Meanwhile, a group that opposes the plan has filed suit in district court to restore the area to its pre-construction condition. The controversial expansion project will consist of a multipurpose field, 11-stall parking lot, and a playground. Many are also questioning the expansion since the city can’t keep the homeless population from camping out in the existing city parks.

Artifact Article

The Honolulu Zoo has submitted an application for accreditation to the Association of Zoos four years after it was stripped of its accreditation for a lack of dedicated funding and unstable leadership. Since then, Oahu voters approved an amendment to the City Charter dedicating 0.5% of property tax revenues to a special zoo fund in 2016 and the latest director has been in place for two years. The zoo has spent the last two years catching up on deferred maintenance and just completed a $400,000 remodel of a Malay sun bear exhibit. The two sun bears have not been available for public viewing for about four years.

The U.S. Army has awarded a $638.5 million contract to Hawaiian Electric Company (HECO) to maintain electricity for twelve Oahu installations over fifty years following a competitive process that began in 2016. The contract is part of a nation-wide privatization project to upgrade and sustain utility infrastructure more efficiently and economically. HECO will provide electricity to the twelve installations and upgrade the electrical system per capital improvement projects identified by the Army. The upgrades include development of micro grids at the installations that can operate independently of the electrical grid in times of emergency.

The scorching summer has resulted in 14% higher electricity usage in July compared to last year. High temperatures arrived earlier this year and have persisted through September. Stott Property Management, LLC has noticed that rental properties with air conditioning rented quickly during the last three months and attracted higher rents while property without air conditioning sat vacant for much longer periods of time and most saw rents decrease compared to previous years. Landlords should pay attention to these trends since a couple-thousand dollar investment in air conditioning can help avoid $4,000 to $5,000 in vacancy costs during the summer months. Installing air conditioning seems to be a major value added activity the past several years.

Three solar farms in Kawailoa, Mililani, and Wahiawa started producing electricity to Hawaiian Electric Company’s (HECO) power grid representing the largest collection of solar farms in the state. The 833,000 solar panels will generate enough power to supply 18,000 homes and represents about roughly three to four percent of Hawaii’s electrical consumption.

Turtle Bay Resort announced the opening of its community garden with a blessing held on Friday, 9/13/19. The resort and nonprofit organization, Pono Pacific, welcomed the first 32 gardeners to the roughly 50-acre piece of land on the makai side of the resort’s 540 acres of agricultural land. The 540-acre agricultural project will eventually include a BioGrass farm that will produce natural gas for the resort’s tiki torches and help support its cooking needs plus providing land for eleven to twelve commercial farmers who will start growing food for the resort.

Interisland shipping is about to get much more expensive as Young Brothers requested the Public Utilities Commission to raise average shipping rates 34%. Young Brothers stated that increased operating costs and lower cargo volume are the main reasons for the large rate hike.

A coral nursery located on Oahu’s Sand Island is working on restoring slow-growing coral reefs in Hawaii suffering from frequent bleaching events. Coral bleaches when food-producing algae that live in coral tissue leave once ocean temperatures become too warm. Coral in Florida grows 15 to 20 centimeters per year, coral in Australia grows 20 – 25 centimeters per year, while coral in Hawaii grows one to two centimeters per year. The nursery has developed a Fast-Grow Protocol that result in growth rates of 40 centimeters per year through a microfragmentation process. The team collects reef-building corals from harbors where coral provides fewer “ecological services,” quarantines them initially since the coral can carry algae, invasive species, and ship chemicals, and then cuts them up in small pieces with a band saw once the tissue is clean for 30 days. The fragments are then glued to cement modules shaped into pyramids that serve as a substrate on which the coral grows. The fragments are placed in a tank with optimal lighting, cleaning, and food for the first eight months, then placed in outdoor tanks to acclimate to outdoor conditions, subjected to wave action, and then planted in the ocean. The current facility can plant about 80 modules per year and new facilities will help produce 200 modules annually. A copy to the article with a video is included below:

Article with Video

A ten-year old student from Aina Haina appeared on “Shark Tank” Sunday, 9/29/19, to pitch “The Baby Toon Soft Baby Spoon” to the “Sharks” that she developed as a school science project to solve a problem. The student noticed that her baby sister sucked on a spoon during feeding time and noticed that the long stiff design could be dangerous and a chocking hazard. She designed animal-themed handles that limit how far the spoon could go into the baby’s mouth with no dangerous back end. The spoons can be found on the allsharktankproducts.com website.

Tree hugger Tracey Stott Kelley finally came across a tree that she did not like in our neighborhood. The offending plant had been growing out of a street gutter on Iana Street since last winter and the city’s street cleaners and tree trimmers would simply ignore it. She contacted State Senator Laura Theilen and the tree was removed in days. You can report an issue for the city to address using the following link.

Link to reporting issues

Waikiki Brewing Company is expanding to Maui with its third location and it’s the first outside of Oahu. The location will house the smallest operation with a capacity of three-barrel system compared to the seven-barrel system in Waikiki and the twenty-barrel system in Kakaako. The smaller size will allow the company to experiment with more types of beers. The beer offerings will include traditional barrel-aged beers, sour beers, and imperial stouts.

Kauai-based Koloa Rum broke ground on a new 45,000 square-foot distillery and warehouse that will represent a doubling of its current operational capacity. The new facility will include a tasting room, company store, and café. Koloa Rum will also increase its 15-acre sugar cane plantation with an additional 10 to 12 acres of sugar can at the new headquarters. Apparently Hawaii alcohol production appears to do well as concerns of an overall economic slowdown in Hawaii persist.

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