August 2015 E-Mail Update
Here is our 8/10/2015 e-mail update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors website.
Oahu’s median sales prices continue to remain in a narrow band near record levels. The median price for a single-family home was $710,000 in July (a 3.9% increase over July, 2014) and the median price for a condo was $350,000 (a 0.5% decrease from July, 2014). The supply of homes continues to be constrained, however, months of remaining inventory is starting to creep higher as more sellers take advantage of near record high prices. There are currently 3.3 months of remaining inventory for homes and 3.7 months of remaining inventory for condos. Six months of remaining inventory is typically considered a balanced market.
The Hawaii Tourism Industry had a good first half of the year logging 4% growth compared to the first six months of last year. An increase in visitors from the West Coast more than offset the declining number of visitors from Japan.
Fannie Mae has lowered the bar for those homeowners looking to qualify for a new home purchase without selling their previous home. Previously, Fannie Mae required that an owner have 30% equity in their current home and provide a signed lease before they could use rental income from that property to qualify for a new home loan. Now, buyers just need to provide a lease agreement on the home in order to use that rental income to qualify for a new mortgage. In unrelated news, Freddie Mac recently launched a first time home-buyer program with reduced mortgage insurance requirements and as little as 3% down.
Honolulu has ranked #4 in another dubious category due to the high cost of living and its unfriendly business climate. Bloomberg Business reports that Honolulu has one of the highest rates of local people leaving the city for other cities in the United States. The study describes that as the locals leave, foreigners seeking opportunity, move in to the city and make it work by packing multiple adults or families in a single apartment or house. It is an arrangement that most Americans are just not willing to pursue. Investors need to take this changing dynamic into account since Stott Property Management has already noticed and reported this trend to its clients. Ultimately, landlords may have to make the decision between offering a lower rent to attract the much sought after one family household or be more willing to consider renting to multiple unrelated adults. Screening tenants will become more of a challenge because many new foreign people do not have any credit history or landlord references. This trend will also raise the importance of assigned parking when owning a condo or the availability of off-street parking at a house. Two or three bedroom condos with two assigned parking will be able to command higher rent because multiple bread winners that own cars for their daily commute will gravitate toward these dwellings. Additionally, young singles often seek out homes that have off-street parking for three or more cars in order to stretch their rental dollars in areas where street parking is already difficult to find.
Oahu became the last island to implement the plastic bag ban for most retail operations. The legislation was signed into law three years ago by former Mayor Peter Carlisle and some merchants have been preparing at lease a year for the change. Most merchants have switched to paper bags or encourage shoppers to bring re-useable bags. Foodland offers shoppers 5 cents off their purchase or three HawaiianMiles for frequent flyers if they bring re-useable bags in with them to carry out their purchases. Tim Kelley was recently at Foodland and was baffled by the cashiers’ question, “would you like credit or miles?” These questions were directed at customers who brought bags with them and Tim did not put two and two together until reading an article in the paper. Tim just hand carried his two items out of the store without using a bag. He was very relieved that he did not have to answer that very difficult question.
The University of Hawaii received a much needed $4 million grant from Microsoft co-founder Paul Allen through his company Vulcan, Inc. The grant will fund research to develop highly resilient coral strains in test beds in Hawaii and Australia. The goal is to create a stock of healthy coral strains that can withstand warmer, more acidic ocean water and replace diminishing coral populations around the world.
Governor David Ige signed a bill into law that would increase the meager food/excise tax credit for low-income taxpayers to $100 per year from $75 per year for individuals earning less than $10,000 per year and to $55 per year from $45 per year for individuals earning between $20,000 and $30,000 per year. In signing the bill, he stated, “I am honored to be able to sign this into law.” The General Excise Tax Rate is 4.5% on Oahu and the tax credits don’t even cover the taxes paid on about two months of groceries. Governor Ige also signed a bill into law extending Oahu’s surcharge of 0.5% until 2027 (five more years) and invited the other islands to raise their taxes for transportation projects of their own.
Governor David Ige gave homeowners some welcomed relief from the state’s bureaucrats by signing a law that exempts thousands of homes built more than 50 years ago from requiring preservation reviews whenever a homeowner applies for a permit. The requirement has delayed the granting of permits for a period of many months. 40% of existing houses on Oahu are over 50 years old and some neighborhoods have percentages as high as 85%. Homes that are not designated or nominated for the Hawaii Register of Historic Places or the National Register of Historic Places and are not located in a historic district are exempt. Tim and Tracey are happy that their single-walled “shed” no longer has to go through this unnecessary review.
After wasting 130 million taxpayer dollars on a failed system, the Hawaii Health Connector has issued a request for proposals to dismantle the hardware and archive the data. Governor David Ige pulled the plug on the insurance exchange to comply with federal requests when the Hawaii Health Connector failed to be self-sustainable by January 1st.
The state’s hospital system woes have spread to Oahu. Two hospitals in Honolulu that serve mostly Medicare and Medicaid patients will lay off 64 workers and remove at least 76 skilled nursing beds. Low federal reimbursements cost the Honolulu region about $200 per patient per day.
The Hawaii Board of Land and Natural Resources’ voted to approve an emergency rule prohibiting camping and restricting access to Mauna Kea’s summit between the hours of 10 p.m. to 4 a.m. in response to increasingly hostile protests. Attorney General Doug Chin stated that campers have blocked the road to the summit with boulders and cars, inadvertently introduced invasive species, and opened unauthorized toilets. Activity logs released by the Office of Mauna Kea Management cite hostile engagements with the protestors and threats to personnel. Water consumption, which must be trucked up the mountain, has been at a record high. A woman was arrested after the ruling for allegedly damaging a park ranger’s vehicle by hitting it with her own car. The Mauna Kea access road reopened on July 13th while the visitor center and its public bathrooms remain closed. The road had been closed for three weeks while the state repaired the damage to the road by some protestors. Governor David Ige signed the emergency rule on July 14th and it will expire in 120 days. 150 Hawaii National Guard soldiers have taken civil disturbance training in the event that protestors violate the emergency rule.
In a nod to the growing microbrewery business in Hawaii, Governor David Ige signed a bill to allow those business and restaurants that hold retailer dealer or restaurant liquor licenses to sell beer, malted beverages, or hard cider in growlers (securely sealed glass, ceramic, or metal containers). This makes it much easier for small breweries that don’t own expensive packaging equipment to sell their products to the public.
Maui Brewing Company will be gutting and renovating a space at the Waikiki Beachcomber hotel when Jimmy Buffett’s closes early next year after a five-year run. The new restaurant will be a brewpub restaurant operated by veteran restaurant operators in the fall of 2016. Tim is particularly fond of Maui Brewing Company’s Coconut Porter.
As ultra-luxury condos get built, Kakaako continues to struggle with a growing homeless problem. State Representative, Tom Brower, was hospitalized after being beaten while taking photos of a homeless encampment by at least two assailants. Later this month, the Star Advertiser reported that assaults have risen dramatically around three homeless encampments in Kakaako. Authorities have not come up with a solution to the growing problem and are currently unwilling to force the homeless to move. Kakaako is just the latest area to struggle with a homeless population that has been growing as rents and home prices have reached record levels. Governor David Ige has announced that a team of county, state, and federal government officials will meet weekly to purchase land, secure funding to develop transitional and permanent housing, and provide health and outreach services for the homeless. Hawaii’s estimated homeless population has grown over 35% since 2009. The U.S. Department of Housing and Urban Development just awarded the state approximately $14.2 million to address homelessness and build affordable housing.
The University of Hawaii Economic Research Organization has published a report highlighting concerns with Hawaiian Electric Company’s current net metering program. HECO’s current net metering currently allows consumers with photovoltaic systems to both buy and sell power at retail rates, effectively using the grid to store surplus power. UHERO argues that under the current system, customers with roof-top PV don’t pay any fixed costs for the grid and those costs get passed on to customers without rooftop solar. UHERO argues that as consumers continue to install PV systems, the electricity produced at mid-day becomes less valuable than evening or nighttime power. Researches noted that Hawaii’s high electricity rates coupled with an inefficient pricing system could encourage many consumers to install stand-alone systems and unplug from the grid. The report appears to be more concerned with rising costs for some versus embracing technology that can end a monopolists grip (HECO) on electricity production and enable consumer choice in the electricity market.
A solar powered aircraft, Solar Impulse 2, landed at Kalaeloa Airport in West Oahu on July 3rd setting records for the longest solar powered flight in both time and duration. It took pilot Andre’ Borschberg five days to fly from Nagoya, Japan to Oahu, the longest leg on the planned around-the-word flight that began on March 9th in Abu Dhabi. The pilot only slept for periods of 20 minutes at a time and used breathing exercises and yoga techniques to remain functioning in an unheated and unpressurized cockpit. The Solar Impulse 2 will remain on Oahu until April because repairs to the plane’s batteries won’t be completed for about a month and shorter days make the remainder of the trip too risky. We will never complain about flying coach (until we fly again).
Turtle Bay finally has some competition on the North Shore. Tourists can now stay at the Courtyard by Marriott Oahu North Shore in Laie. The 144-room property opened in late June and is located next to the Polynesian Cultural Center. The hotel is the final piece in the puzzle for making the Polynesian Cultural Center a more inviting destination for Hawaii visitors.
Nonprofit organizations, The Trust for Public Land and Livable Hawaii Kai Hui have been working to raise $4 million to purchase land along the Ka Iwi Coast near Hawaii Kai in order to keep the land vacant and undeveloped. 182 acres between Hawaii Kai Golf Course and Makapu’u are for sale and the Trust for Public Land has until August 30, 2015 to raise $500,000 to secure the sale. Currently, about $329,000 has been raised with about three weeks to go. You may visit www.kaiwicoast.com to learn more about the groups’ mission and efforts.
The assets of a troubled automobile dealership, Acura of Honolulu, have been sold to an unknown buyer. The company has notified its employees that an undermined number of employees will be laid off when the sale has been completed.
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