April 2016 E Mail Update for Oahu and Stott Real Estate
Here is our 04/11/2016 e-mail update. It is sent after the statistics for the preceding month have been posted on the Board of Realtor's website. You can find previous newsletters by visiting www.stott.com/news.
The median price in March for Oahu single-family homes was $725,000 (compared to $700,000 in March 2015) and for Oahu condos was $385,000 (compared to $380,000 in March 2015). Demand for both houses and condos grew about 20% compared to last year and supply shrunk by around 25%. As a result, there is only 2.1 months of remaining inventory of single family homes and 2.3 months of remaining inventory of condos. Additionally, the prices of active listings are skewed to the higher end of the market. Currently only 31% of the available Oahu houses are priced under $800,000 while only 41% of the Oahu condos are priced under $375,000. Competition for “modestly” priced homes appears to be heating up for the busy spring and summer season.
Hawaii economists predict steady economic growth of 2 to 2.5 percent in 2016 but there are risks on the horizon. The shrinking military (currently 46,000, down from a high of 51,000 in 2014), slowing construction (fewer building permit applications), and lower visitor spending pose risks to continued expansion. Paul Brewbaker, one of Hawaii’s leading economists, thinks that lower spending by tourists is the single most important strategic economic development for Hawaii. Real visitor spending has dropped 0.7% per year on average from 1997 to 2014 when inflation is taken into account. He attributes the spending declines to consumers shopping at discount and big box stores versus department stores, and repeat visitors have learned how to make their trips less expensive. Hawaii has been unsuccessful in finding an industry that would diversify the local economy beyond tourism.
West Oahu residential investment property owners should get ready for stiff competition from a new 499-unit rental housing development scheduled to be completed in July 2016. Kapolei Lofts will offer one, two, and three-bedroom units ranging from 400 square feet to 1,200 square feet and include commercial spaces, a community center and clubhouse, a one-acre park, and parking.
Howard Hughes Corp. has announced that it will hold a lottery starting April 15th for the 375 “affordable units” in a 424-unit tower called Ke Kilohana at 988 Halekauwila Street. One-bedroom units will be offered for prices between $323,475 and $442,246, two-bedroom units will be offered for prices between $473,789 and $538,612, and three-bedroom units will be offered from $521,774 and $560,774. The condos will range from 461 to 988 square feet.
Federal Regulators approved a planned $1.6 billion offshore wind farm that will be located about 10 miles southeast of Barbers Point in West Oahu. The project still needs a power purchase agreement with Hawaiian Electric Company (HECO) in order to provide electricity to Oahu’s grid at an expected price below 20 cents per kilowatt-hour. While that rate is expensive in most states, it still represents a modest savings over what HECO’s customers currently pay (about 24 cents per kilowatt-hour). HECO needs to find new sources of renewable energy since it recently cancelled several purchase agreements from renewable sources last month.
Fitch Ratings assigned the second-highest rating, “AA,” to the state of Hawaii’s general obligation bonds, however, it warned of the state’s high levels of debt. The two main contributors are the state’s direct responsibility for many functions delegated to local governments in other states (like public school education) and the chronic underfunding of the Hawaii’s Employee Retirement System. The retirement system can only pay for about 60% of its retirees and has a growing $8.6 billion deficit. Debt levels will likely continue to grow since Governor David Ige submitted a budget that spends more than projected tax collections and the legislature appears to be willing to approve most of it.
The defunct Hawaii Health Connector continues to cause problems for Hawaii taxpayers. Officials believe that 80% of the 1095-A tax forms sent to Hawaii households in January have errors. Individuals and households that purchased Obamacare plans through the Hawaii Health Connector must include the forms as part of their filings to prove that they have health insurance. Otherwise, they could be forced to pay penalties proscribed by Obamacare.
One of the most popular attractions on Oahu, Hanauma Bay, is struggling to find the right balance between visitor satisfaction and protecting the environment. Approximately 384,000 people visited Hanauma Bay in 1975. That number grew to over three million in 1988 and the onslaught of visitors was damaging the reef, polluting the water, and creating unnatural fish behavior. Several rules have been put in place to help protect the bay’s fragile ecosystem. In 1990, the city banned tour buses from dropping off beachgoers resulting in about 2 million fewer visitors. The ban, along with a ticket window, and requirement to watch a video that emphasizes the need to stay off the reef and not feed the fish has helped turn things around. Hanauma Bay helps limit the number of visitors in the park by allowing only 125 visitors to watch the video every 15 minutes. While this helps with crowds in the park, long lines regularly occur causing widespread frustration. Gone are the days that Tracey fondly remembers as a kid back in the day. She would often go to Hanauma Bay without waiting in line and fed the fish with a bag of frozen corn or peas. Tracey often jumped in the “toilet bowl” which has been closed to the public.
Some participants in one of Hawaii’s largest annual hula completion, the Merrie Monarch Festival, won’t use the ohia lehua tree blossoms in their costumes to help prevent the spread of the ohia lehua blight. There is no current cure for the fungal disease that has destroyed about 34,000 acres of forest on the Big Island. The state is trying to contain the spread by prohibiting the transport of ohia products and plant parts without a permit from the Big Island. The Big Island is currently the only island affected by the fungal disease. Click here to see photos of ohia blossoms.
The chief architect for the Honolulu rail transit project has left, and the Honolulu Authority for Rapid Transportation (HART) does not plan to fill his position. The chief architect has been part of the project for the past seven and a half years and warns that HART might be tempted to deviate from his plans for the segment that passes through the downtown segment of Honolulu. It appears that pressure to contain costs has convinced the chief architect to depart versus compromising on his designs. Design criteria and standards for the remaining sections of the rail route may be left to the discretion of the firms holding the design-build contracts.
The New York Times recently chimed in on HART’s struggle with ballooning construction costs in an article titled “Hawaii struggles to keep rail project from becoming a boondoggle.” The article presented concerns about the 20-mile elevated train line, its design, delays, and escalating costs. HART’s chairman responded that the cost overruns have been addressed by extending the General Excise Tax surcharge and that operational costs savings will be achieved “by utilizing new synergies with TheBus and other City services including the introduction of a systemwide Smartcard.” He added that federal funding will pay for a projected operational loss of $71 million for the first full year of rail operations. The Honolulu Star Advertiser ran an article not a week later highlighting that the recent General Excise Tax extension may not cover the most recent cost versus revenue projections.
The Honolulu Zoo lost its accreditation through the Association of Zoos and Aquariums (AZA) primarily due to the unreliable funding from the City and County of Honolulu. The zoo’s non-profit arm has not focused on fundraising and contributes only about 5% of the zoo’s operating budget while the majority of funds comes from private fundraising (53%) at other AZA accredited zoos. No immediate impact on the zoo has been announced, but officials worry that the zoo could have to give up the 90 animals that are on loan from AZA.
Impatient city council members are clamoring for funds for each council district to address the ongoing homeless problem on Oahu. The city council members pushing for action make a valid argument that appropriate solutions in Waikiki are not appropriate for the North Shore. However, some critics are countering that the temporary solutions being discussed, “tent cities with hygiene centers, “ end up becoming permanent and create more problems than they solve.
The National Oceanic and Atmospheric Administration (NOAA) is preparing to propose rules to help protect spinner dolphins while they sleep in shallow waters off the Hawaii coast. The dolphins are nocturnal and spend the night hunting fish and they need their rest after foraging all night. During sleep, half the dolphins’ brain shuts down while the other half stays awake to surface and breathe. The dolphins appear to be awake because they continue to move. One indication that the dolphins are sleeping is the synchronization of the dolphin pods’ dives and swims. The dolphins are a popular attraction for tourists and several tour operators take people to the shallow waters so they can swim with the dolphins. NOAAs concern is that the tour operations are disturbing the dolphins’ sleep, which could cause long-term health issues. Their goal is to allow people to observe the dolphins in their natural habitat while allowing the dolphins to get their sleep through education and regulation.
Both the University of Hawaii’s men’s and women’s basketball teams completed a very successful year by winning their respective conference tournaments and qualifying for the NCAA tournament. The men’s team won its first ever NCAA tournament game over the University of California – Berkeley before losing to Tracey’s alma mater, University of Maryland in the second round. The men’s team finished the year with a record 28 wins. Hawaii men’s coach, Eran Ganot, won the UH rookie coach of the year award for the men’s basketball team’s historic run. The women’s team lost to University of California – Los Angeles (UCLA) in the first round. The women finished the season with a 21 – 11 record.
Business is going well for Kona Brewing Company and they recently broke ground on a new $20 million facility capable of brewing 100,000 barrels per year for the local market and the new canning operation will help the company sell more beer in cans. Tim plans on helping out by drinking one barrel per year when the facility becomes operational in 2018.
One of the most interesting visitors to Pearl Harbor is the Sea-Based X-Band (SBX) Radar platform, a powerful part of America’s Ballistic Missile Defense System. It comes to Pearl Harbor for routine maintenance and calibration between operations off the Aleutian Islands. The vessel looks like a giant white egg on stilts and can be seen from many places on Oahu when it is in port. The self-propelled platform is about the size of two football fields and is operated by a crew of 86 when underway. Here is a link to a video of the radar platform as it is towed into Pearl Harbor.
Good news for those people trying to get to Lanai after Island Air ends their flights to the Pineapple Island this month. Ohana by Hawaiian will operate five daily flights between Honolulu and Lanai starting in May. Looks like Larry Ellison’s guests won’t have to swim to visit his island after all.
Big Island Mayor Billy Kenoi was indicted by a grand jury on the charges of theft over the use of his county purchase card (government credit card) for personal expenditures. The mayor has acknowledged making unauthorized purchases on his county credit card and claims to have reimbursed the county for his personal expenses.
Government sponsored green energy is not free or cheap. Tim noticed a $1.30 Green Infrastructure Fee on his electric bill and started digging. According to the GEMS website, www.gems.hawaii.gov/learn-more/about-us, the Hawaii Green Infrastructure Authority was established to “provide innovative financing products that result in electricity bill savings for consumers on day one, no money down.” The latest meeting minutes showed that the fund balance is currently $145,461,072.21 from monthly $1.29 fees to Hawaiian Electric Company’s (HECO) customers since December 2014. The Hawaii Green Infrastructure Authority has spent a total of $430,201.13. The authority has funded three consumer loans on Oahu totaling $107,000 since the GEMS program’s inception. It would have cost HECO rate-payers less to randomly give three solar customers $107,000. In related news, The Honolulu Board of Water supply signed a $33 million contract with an energy service company to implement energy efficiency, renewable energy, and operational improvements, that guarantees enough savings to pay of the contract in 20 years. The project cost is being financed by a loan from the Drinking Water State Revolving Fund managed by the Department of Health.
Some may wonder what will happen with all of this money from the fees associated with GEMS. In August 2014, Watchdog.org wrote an article about another program set up by the state, the hurricane relief fund, requiring homeowners to contribute. The fund was set up shortly after Hurricane Iniki struck Kauai in 1993 and most insurers either went out of business or refused to serve the Hawaii market. When the hurricane insurance market improved in the following years, the fund discontinued issuing hurricane policies. Senate Minority Leader Sam Slom introduced a bill to refund money to homeowners once the hurricane insurance market recovered but that bill was defeated. The $126 million fund was raided by the state legislature in 2011 to balance the state’s books. The state repaid $111 million to the fund in 2013 and 2014.
Even though Hawaii does not require hurricane insurance, many lenders require the endorsement to obtain a mortgage. The endorsement makes up about 60% of a policies cost if hurricane insurance is included in you homeowner’s coverage. The policy covers you in case of wind damage to your home during a hurricane, but does not cover damage from flooding which often accompanies a hurricane. You will need to purchase flood insurance separately. Please note that insurance companies usually have waiting periods before these policies become effective. Therefore, you won’t be able to obtain coverage at the last moment if a hurricane is about to strike. Tracey purchased her first house on Oahu shortly before Hurricane Iniki struck Kauai and her flood insurance “waiting period” was still in affect when the Hurricane landed. Fortunately, her home was spared.
The Hawaii Undersea Research Laboratory recently retrieved a bronze ship’s bell from a World War II Japanese I-400 mega-submarine that was sunk off the southwest coast of Oahu in 1946. The 400-foot submarine was capable of holding three folding wing floatplane bombers that could be launched by a catapult with each carrying an 1,800 lb. bomb. The submarine was one of five Japanese subs brought to Pearl Harbor after the war. The U.S. Navy sank the subs and claimed no knowledge of the subs’ locations when the Soviets demanded access to the subs under terms of a treaty that ended the war.
Thank you for all the complimentary comments about our new websites. We appreciate the kind words about the company’s history and congratulations to those who recognized that the pictures of the food in our mixed plate section are Hawaiian dishes.