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April 2018 E-Mail Update

Here is our 04/10/2018 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.

Please click here to access our most recently published quarterly newsletter.

Oahu’s median sales prices in March were $760,000 for single-family homes (1.1% higher than March, 2017) and a record $435,000 for condos (8.8% higher than March, 2017). Single-family home sale prices have flattened over the past year and may have reached the limits of affordability for Oahu’s current income levels. Supply continues to be extremely tight with only 2.1 months of remaining inventory for single-family homes and 2.6 months or remaining inventory for condos. The supply constraints are likely to continue in both the short and long term and the housing cycle will continue to be driven by changes in demand. Affordability will constrain future price changes and rising interest rates pose the greatest threat to an eventual market downturn.

The University of Hawaii’s Economic Research Organization (UHERO) reports strong visitor growth. 5% more tourists visited Hawaii last year than in 2016 and the numbers will likely continue as airlines add to the number of available seats to the islands. Airlines have 10% more seats available in April compared to last year with Kauai seeing a 60% rise from the Western U.S. and Kona experiencing a 30% increase. Economists struggle with predicting when tourists will no longer be able to find places to stay as politicians drive an ever-larger percentage of accommodations market underground. Transient Vacation Rentals remain a major source of controversy on the islands and public dialog still focuses on trying to catch and punish property owners that violate city land and building codes. A Hawaii columnist accurately described a major driver behind the law-breaking trend by quoting one property owner. “People have worked out a way to actually pay their bills and get ahead for once. I don’t see how we can be treated as criminals when we are just trying to purchase property in Hawaii and have help paying for it.”

Hawaii real estate investors should keep a close eye on a bill that passed over from the Senate to the House that would seek a Constitutional amendment to increase taxes on investment real estate to fund public schools. The state teachers-union is pushing the bill that would establish a “surcharge” on investment homes valued at more than $1 million and on visitor accommodations. State legislators and public school teachers apparently took notes when the City and County of Honolulu successfully raised taxes on a majority of out of state property owners that can’t vote in Hawaii’s elections.

Mayor Kirk Caldwell recently signed a bill into law that imposes a moratorium of up to two years on building permits for houses whose interior square footage exceeds 70% of the lot size. For instance, a house may not be larger than 3,500 square feet on a 5,000 square foot lot. The new law has already affected a couple of sales for property that Stott Real Estate, Inc. has listed with development potential. The moratorium will not help Oahu’s affordable housing problem.

Daniel Akaka, the first Native Hawaiian to serve in the U.S. Senate and known as “ambassador of aloha,” died April 6, 2018 at the age of 93.

The state house of representatives has submitted a budget that removes the $8 million requested to fund existing homeless programs and provides $30 million for “ohana zones” across the islands against the recommendation of the U.S. Interagency Council on Homelessness and the U.S. Department of Housing and Urban Development. The national agencies report that government sanctioned tent cities don’t work and only distract communities by arguing whose neighborhood should host them. A recently shuttered temporary ohana zone highlights the problems of the tent cities. Of the 51 homeless that stayed at the camp while it was open for eight months, 28 were kicked out for behavioral issues or drug use, arrested, or left voluntarily. While two people found permanent housing, four moved in with family, and 17 others were placed in other temporary shelters, the camp failed to keep the chronically homeless off the streets and failed to help those suffering from drug addiction and mental illness. Most Hawaii residents feel that the homeless situation is getting worse and state officials are failing to take effective steps to alleviate the problem.

Stott Property Management, LLC’s recent experience with the City and County of Honolulu’s approach to housing the homeless made the Honolulu Star Advertiser’s article covering U.S. Vets master lease timely. We recently started managing a property that housed a tenant receiving financial support from one of the non-profits funded by the city. The non-profit e-mailed over a contract for Stott Property Management, LLC to sign that required the company to open its books to the city and non-profit if they suspected that the tenant was being treated unfairly. In other words, Stott Property Management, LLC would have to put up with a “fishing expedition” if the landlord tenant relationship went sideways. Stott Property Management, LLC refused to sign the contract and gave the tenant and the non-profit written notice to vacate after reading the onerous contract. The tenant vacated and left truckloads of personal belongings and trash behind when checking out and the non-profit took no action to remedy the situation leaving the owner holding the bag. U.S. Vets on the other hand, signs a “master lease,” and takes full responsibility of the rental property and then houses homeless veterans. The organization pays the monthly rent regardless of occupancy and is required to return the condition back to the landlord in the same condition minus normal wear and tear once the lease arrangement ends. This arrangement is a much better approach to helping those in need get off the streets.

Catholic Charities Hawaii has taken matters into their own hands by building Meheula Vista, a senior affordable rental project in Mililani. The second phase of the four-phase, 301-unit project, was recently dedicated and the charity is breaking ground on phase three. Each phase consists of 75 affordable units that provide one bedroom, one bathroom, a full kitchen, common areas, a community room and a resident manager’s unit. The non-profit decided to start with low-income seniors because they are a growing segment of Hawaii’s population. It is expected that more than 25% of Hawaii’s population will be over the age of 60 by 2020.

The city commenced a project in March to retrofit 53,000 street lights with Light Emitting Diode (LED) Technology. The LED bulbs are more energy efficient and produce less noise light pollution than the bulbs. The project is expected to finish December 2019.

Hawaii ranked dead last in WalletHub’s recent study of state taxpayer return on investment. The report stated that taxpayers paid the second highest taxes per capita with receiving only average government services (ranked #26). The report also ranked the state #48 for the worst roads and bridges.

WalletHub ranked Hawaii #48 out of 51 states and the District of Columbia for places to practice medicine. The findings are not surprising since one of the recurring articles in the Honolulu Star Advertiser are doctor shortages and teacher shortages. The metrics contributing to Hawaii’s dismal score include 2nd lowest average wages (adjusted for the cost of living), #50 in opportunity, last in average starting salary (adjusted for cost of living), and 5th for punitive state medical boards. Low rewards and high risk rarely attract professionals of any type.

Record tourist numbers and social media posts that make finding Oahu’s scenic hikes easier to find have resulted in ever increasing numbers of rescues by the Honolulu Fire Department. A typical search and rescue operation for hikers involves 12 to 17 personnel and costs about $1,500 per hour. At the more popular tourist destinations like Diamond Head Crater and the Lanikai Pillboxes, rescue teams typically treat people for heat exhaustion or sprains. However, more dangerous hikes can result in serious falls. In a two-week span this past January, firefighters airlifted three people who fell from 20 to 75 feet on the Pali Notches trail which leads to the highest point on the Koolaus. In fact, several hikers suffering serious falls were taking selfies at the time. Experienced hikers recommend hiking with a club first before tackling more difficult hikes on your own with friends. Officials at the Department of Land and Natural Resources recommends sticking to the state maintained Na Ala Hele trails system where information can be found on www.hawaiitrails.org.

The state has implemented policy changes that have increased payments from inmates and parolees that owe crime victims money by 70% in a four-year time span. The improvements were discussed at the National Association of Attorneys General in Washington D.C. to serve as a model for other states. Changes that have contributing to the improved collection efforts involve increasing the amount deducted from the inmate’s prison account from 10% to 25% of funds received towards victim restitution.   Inmates on work furloughs also have 25% of their income set aside for restitution and parolees must be current on their restitution payments before out of state travel will be approved.

Two-time speaker of the House, Joe Souki, was forced to resign by the Hawaii State Ethics Commission in March due to complaints by a former Director of Human Services for unwanted advances that included sexual comments, touching, and kissing. Four other women came forward after the Honolulu Star Advertiser reported on the complaint that was first filed this past fall. Souki claims that he did not remember the instances yet the Ethics Commission report documents that Souki admitted to the unwelcomed behavior.

Mayor Kirk Caldwell submitted a budget that included selling bonds to pay for administrative costs associated with the Honolulu Authority for Rapid Transit (HART) rail project has resulted in a leadership change in the City Council. Ernie Martin, one of Caldwell’s sharpest critics, has been reinstated as chairman in a 5-4 vote.   Apparently, revenues from the state’s General Excise Tax Surcharge has come below projected levels resulting in a hole in the city’s budget. Construction of HART’s elevated rail system has passed Aloha Stadium and is progressing along Pearl Harbor on its way to airport.

HART’s Interactive Route Map

The City Department of Transportation Services has started testing the Holo Card. The Holo Card is a smart card that the City of Honolulu hopes to roll out to the public for use with TheBus, HandiVan, and HART’s rail system when it becomes operational. The cards can be loaded with a minimum of $2.75 and a maximum of $200.

Board members at the Honolulu Board of Water Supply, the independent city agency that manages the city’s municipal water systems, has unanimously approved an increase in water rates starting in mid-2019. Residential customers that have above average usage will pay a larger portion of the rate increase than other customers. The agency has scheduled public hearings in April and May to solicit feedback from their customers.

Hawaii’s Merrie Monarch festival paid a special tribute to the Hokule’a, the Hawaiian ocean sailing canoe, when it returned to Hilo for the first time since 2014. The Hokule’a left Hilo in 2014 for its world-wide tour showcasing the Polynesian navigating techniques that brought the original people to Hawaii. The crewmembers of the original voyage in 1976 were given special canoe paddles and the hula dancing featured themes of voyaging.

When Tracey and Tim lived in Pflugerville, TX, Tracey would sometimes wonder if our kids would grow up with memories of eating at Springhill Café versus Tracey’s memories of eating at Zippy’s. We ended up moving to Kailua and our kids grew up eating at both restaurants. Mainland diners will have their opportunity to eat at Hawaii’s popular restaurant chain with their expansion to Las Vegas. Will a restaurant open in Pflugerville? Only time will tell.

A Waikiki icon has closed its doors in March after serving customers for 51 years. Chuck’s Steak House has served steak and seafood in the Outrigger Waikiki Beach Resort since 1967.

There were fewer than 60 Nene left on the planet in the 1960s. Today, there are nearly 3,000 and the Nene could be removed from the endangered species list next year.

Hawaii has just listed the feral cat as an invasive species, joining feral pigs, fire ants, and many other species introduced to the islands. A parasite spread by the cats’ feces can be fatal to indigenous birds and fish. Apparently the feral chicken is still OK even though they prowl the Safeway and Target parking lots in Kailua.

The Fish and Wildlife Service in Papahanaumokuakea Marine National Monument have reported events that could be scripted in a horror movie. Mice, who are omnivores, have been attacking nesting albatross on the island of Midway and essentially eating them alive because the nesting albatross refuse to abandon an egg. The Fish and Wildlife Service are considering spreading rodenticide multiple times to reduce the threat to the nesting birds.

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Current Oahu Homes for Sale
Area # Price Range
Central Oahu 56 $75k - $3.7m
Ewa Plain 55 $215k - $2.3m
Diamond Head 265 $40k - $37.0m
Hawaii Kai 84 $290k - $18.9m
Kailua 86 $346k - $27.5m
Kaneohe 118 $64k - $3.7m
Leeward Coast 90 $120k - $2.3m
Makakilo 23 $230k - $1.5m
Metro Honolulu 1601 $40k - $15.9m
North Shore 160 $195k - $45.0m
Pearl City 63 $95k - $10.0m
Waipahu 35 $220k - $4.5m
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