Here is our 09/10/2019 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.
The August 2019 median sales price for single-family homes was $790,000 (2.5% lower than August 2018) and for condos was 419,500 (1.7% lower than August 2018). Demand remained at similar levels compared to last year while the supply of both single-family homes and condos continues to climb. There are 11.8% more single-family homes and 18.0% more condos on the market compared to August 2018 resulting in 3.6 months of inventory of single-family homes and 4.0 months of inventory of condos. Low mortgage rates this summer have helped support demand by making monthly payments more affordable compared to earlier this year.
Tracey and Tim recently returned from a business development seminar in Anaheim, CA and Steve Harney from Keeping Current Matters spoke about the possibility of a recession and what that likely means for the housing market. Steve reviewed four economic surveys conducted this year and compiled the results for a quick overview of the responses from market analysts. Two-thirds of the experts polled expected a recession to occur before the end of 2020 most likely triggered by trade policy, a stock market correction, or a geopolitical crisis. If a recession does occur, that does not mean that the housing market will fall as a result. In three of the last five recessions, home prices continued to climb. The Great Recession of 2008 was actually triggered by the housing crisis that caused house prices to drop almost 20% nationwide. The same economists expect housing prices to continue climbing through 2023. It is still important to pay attention to local trends since Hawaii’s economy and home prices don’t always follow nationwide trends. We have included a short video and a link to the slides.
What the Experts are Saying About Recessions
An editorial by Honolulu Star Advertiser columnist Lee Cataluna provided a reminder of how the trade winds have diminished during the summer, even on the Windward Side. A string of hot summers has created a greater demand for air conditioned homes that is particularly noticeable with rental properties. While rentals with no air conditioning may find tenants pretty quickly in the winter months, the properties often sit vacant for long periods of time in the summer. The summer months have prompted many tenants in existing leases to request permission to install window units on their own or for the owner to install air conditioning. Installing window A/Cs in the bedrooms can often pay for themselves through higher rents and shorter vacancy periods.
The USS Arizona Memorial reopened September 1st to foot traffic after officials were forced to close the memorial when they discovered damage to the attached dock back in May 2018. King tides are believed to have lifted the cement blocks anchoring the floating dock from the Pearl Harbor sediment allowing too much lateral movement. Helical pilings have been screwed into the seafloor, replacing the cement blocks. Three other nonprofit museums, the USS Bowfin Submarine Museum, the Battleship Missouri Memorial, and Pearl Harbor Aviation Museum should experience stronger turnout from the reopening of the USS Arizona Memorial. The Pearl Harbor Aviation Museum recently added two new Fighter Ace 360 Flight Simulators to its offering. The pilot (person sitting in the cockpit) controls the three-dimensional, moveable simulator that will go upside down and comes equipped with barf bags. The simulators are a great way to experience the thrill of aviation.
Though not fully functional, the telescopes on Mauna Kea are starting to pursue science projects for the first time in nearly four weeks as protestors reached an agreement to allow astronomy crews safe passage to the summit. About 25 employees were brought off the mountain on July 16th after protesters began blocking access to the access road to prevent construction of the $1.4 billion Thirty Meter Telescope (TMT). The TMT protests is taking an economic toll on some Big Island businesses that cater to tourists that want to visit the summit for sunsets and stargazing. One tour company has laid off nine of its twelve employees. The Hawai’i Island Festival of Birds, a convention of bird-watchers, cancelled the event scheduled for October due to the uncertainty surrounding access to Mauna Kea. About 800 people were expected to attend the convention. Eight tour companies licensed to bring visitors to Mauna Kea are losing about $1.2 million in revenue every month that access to Mauna Kea remains closed. Patience by the state may be getting thin as the state tore down an illegal structure built by some of the protestors across the street from Mauna Kea access road. State and county officials have not publicly stated how or when they will provide access to allow construction of TMT but Governor David Ige has stated that he will enforce the law.
Attorneys for approximately 2,700 Native Hawaiians will argue their case in front of the Hawaii Supreme court 60 years after Hawaii became the 50th state for the state’s failure to award homestead lots. One of the conditions of statehood was that Hawaii manages a trust set up in 1921 by Congress to help people at least 50% Native Hawaiian return to the land and assist in their economic self-sufficiency. A ruling after a five-week trial in 2009 found that the state failed to manage the trust and was liable for damages. The state appealed the ruling claiming that the lower court’s decision was flawed. Many expect that if the plaintiffs win in front of the Hawaii Supreme Court, the state will appeal the decision to the U.S. Supreme Court. An estimated 400 Native Hawaiians have died waiting on resolution to this case.
Hawaii has a growing shortage of workers in 76 medical professions with 44% of those unfilled positions in hospitals according to the Healthcare Association of Hawaii. 19 of the 76 professions in the survey have no local training programs and many of those that go to the mainland to receive the training never return. Often others that move to Hawaii in those positions leave again after a few years. The state is also suffering from a shortage of nearly 800 doctors and the shortages are more acute in the rural neighbor islands.
The Pali Highway opened for traffic in both directions on September 1st for the first time since a rockslide closed the highway in February. The Pali will be open in both directions from Sunday through Friday from 5:00 am to 7:00 pm. Construction will continue on Saturdays through November to allow final repairs before the roadway is opened again 24-7.
Hawaii again, ranked near the bottom, 47th out of 50 states, for poor road conditions according to an annual report published by the Reason Foundation. The report describes Hawaii having the worst urban interstate pavement condition in the country despite having the smallest state-owned road systems at 1,012 miles. Hawaii’s urban fatality rate was 1.32 per 100 million vehicle miles driven, above the national average of 0.77 and its rural fatality rate was 6.99, far above the national average of 1.71. The national fatality rate has risen over the past few years and distracted driving is presumed to be the largest factor. The lead author commented that Hawaii could improve its ranking by improving its pavement conditions and lowering the fatality rate, however the report noted that Hawaii ranks 41st in the country in spending per mile and 42nd in the nation for capital and bridge costs per mile. The report recommended more enforcement on major busy roads, not the highways in particular, to help reduce the fatality rate.
The Federal Transit Authority (FTA) has finally approved the fourth revision of the recovery plan submitted by the Honolulu Authority for Rapid Transportation (HART) clearing the way for release of the remaining $744 million in federal funding for the rail project. The recovery plan was first submitted in 2017 and added the state’s multi-billion dollar bailout fund and adopted a public-private partnership (P3) to complete construction to Ala Moana Shopping Center. Construction is currently progressing along the H-1 freeway and approaching the Daniel K. Inouye International Airport.
Click HERE to read about the Honolulu Authority for Rapid Transportation
A second and third lawsuit have been filed by the owners of the Waikiki Banyan and Waikiki Lanais condominium complexes, joining the Kokua Coalition in challenging Ordinance 19-89 that now makes it illegal to advertise a vacation rental that is not properly permitted or located in a hotel-resort zone. The Waikiki Banyan owners argue that the complex has been operated as a hotel since the day that new condominium owners took possession of their new units in 1979 and has continually offered guests the typical hotel experience. The Department of Planning and Permitting (DPP), the department in charge of enforcing the ordinance, refers to the Waikiki Banyan complex as a hotel three times on its own website. The Waikiki Lanais lawsuit contends that the law’s fines and restrictions violate the due process and equal protection provisions of the Hawaii Constitution by treating similarly situated properties differently. A temporary restraining order sought by the Kokua Coalition, a group representing short-term vacation rental operators, has been put on hold by the judge because the city and the coalition are trying to mediate their differences. Meanwhile, the city has put several property owners on notice that they are violating the law, including a house in Tim & Tracey’s neighborhood. The owner of that house has already resolved the complaint.<
The City of Honolulu hopes to team up with Family Court Judges to order mental health treatment for potentially hundreds of homeless people on Oahu that suffer from mental health issues. The city has entered a $500,000 contract with the Institute for Human Services (HIS) to order and provide treatment for fewer than 10 homeless clients. HIS aims to help those that have been left to sleep alone in their own urine and feces and several have untreated wounds with maggots growing. The ultimate goal is to get people with mental illness off the streets so that they can receive the necessary treatment for mental illness. Chronic homelessness continues to plague the city as homeless people have reclaimed a beach near Diamond Head after the city just spent over $2 million repaving the footpath just east of the Diamond Head lighthouse. The slopes of Diamond Head have been plagued by hardcore homeless who hide out in the brush for years and create huge piles of trash along the shoreline.
The Honolulu City Council is pressing forward with establishing a ban on single-use plastics including takeout containers, utensils, straws, and carry out bags. The second of three approvals passed 9-0. The ban would take effect January 1st, 2020. Several leaders in the food industry and other businesses urged the council to give them more time to make the change. Concerns by business ranged from additional costs to available supply of replacement products like paper straws.
The Honolulu City Council approved a measure allowing Mayor Kirk Caldwell to move forward with the controversial $345 million Ala Wai flood mitigation project. The U.S. Army Corps of Engineer’s project is designed to protect areas around the Ala Wai Canal, Waikiki in particular, from heavy flooding during large scale storms by building a series of detention basins along the Ala Wai watershed. Many neighbors in Makiki and Kapahulu are concerned that the project will increase flood risks in their neighborhoods when the project is completed.
Alexander and Baldwin (A&B) is considering options for renovating Pali Lanes bowling alley in Kailua after many residents protested closing the bowling alley in favor of other development. A&B is exploring ways to preserve the Pali Lanes building while enhancing walkability, safety, and community amenities. The bowling alley has not been upgraded since 1961 and A&B contends that complimentary uses of the building are necessary to the facility’s economic success given the declining financials of bowling operations across the state.
Pali Lanes in Kailua Reimagined as found on the Kailua HEA Group website.
The University of Hawaii (UH) Warrior football team and Rainbow Wahine volleyball team have started off strong in 2019. The UH Warriors have won two close games in the closing minutes against the University of Arizona Wildcats and the Oregon State Beavers to start the season 2-0. The women’s volleyball team began the season unranked but emerged from their first tournament ranked #20 after winning the 31st Hawaiian Airlines Classic championship with wins over the #13 University of Washington Huskies and #21 University of San Diego Toreros. The UH Rainbow Wahine are currently undefeated at 6-0.
Hawaii just fell short of repeating as national champions in the U.S. Little League World Series. Central East Maui lost in the finals to Louisiana 9-5, just falling short of repeating Hawaii’s championship run last year. A team from Honolulu won it all last year. Louisiana then proceeded to defeat Curacao 8-0 to take home the championship.
Fisherman dragged heavy nets across the peaks of an area that is now part of the Papahanaumokuakea National Monument for decades causing devastating damage to the coral reefs that scientists thought irreversible. The United States claimed much of the region as a part of its exclusive economic zone in 1977 keeping out foreign fishing fleets and President George W. Bush included the area as part of the national monument in 2006 providing more protection. A research team from Florida State and Texas A&M have found baby coral and coral growing from fragments on nets left behind providing hope that the area will recover. In addition to trawler scars, researchers found some spots were unscathed. The team does not know how long it will take for the area to fully recover, but in the meantime, they will be analyzing coral samples to determine their age and diversity.
New black sand beaches have been forming as a result of the 2018 Kilauea eruption that destroyed homes in several subdivisions and buried the tide pools in Kapoho Bay. People are urged to be cautious at the new beaches because the currents are rough and it is about a one-hour hike to the new beaches.
Howard Hughes Corporation’s two-year renovation of the Kewalo Basin Harbor will finish next month resulting in an additional 35 boat slips, free harbor-wide WiFi, new electrical outlets, fire extinguishers, cabinets at every slip, new security, a new fuel doc, a fish haul-out station, and weigh-in station for fishing tournaments. The development is looking for a place to land an elevated walkway so people could cross over Ala Moana Boulevard from Ward Village. The small boat harbor is another piece in Howard Hughes Corporation’s vision for its village in Kakaako.
Espacio, the Jewel of Waikiki, is scheduled to open on September 7th for those that are willing to spend $3,000 to $10,000 per night to stay at one of their ultra-luxury suites. A Japanese owner converted the 88-unit Waikiki Beachside hotel into one with nine units at a price tag of $5.6 million per unit. Each suite spans one floor and comes with two or three bedrooms, three and a half baths, custom furniture, a full kitchen, washer, dryer, a sauna, 300 square foot lanai, a private Jacuzzi, a butler, concierge, and car service.
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Tim and Tracey