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August 2017 E-Mail Update

Here is our 08/10/2017 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

The median price in July for single family homes was $750,000 (0.5% higher than July 2016) and for condos was a record $425,000 (6.3% higher than July 2016).   Buyers won’t see any relief from tight supply and high prices in the foreseeable future. There is only 2.5 months of remaining single family home inventory and 2.7 months of remaining condo inventory.

While sales inventory is tight, the same can’t be said for rental properties, particularly larger West Oahu homes. A quick check on Zillow showed 224 three and four bedroom rental homes available in Waipahu, Ewa Beach, and Kapolei. 38% of the West Oahu rental homes have been advertised longer than 30 days.

The latest Seller’s market has led to a rebound in house-flipping, a strategy where an investor buys a home, quickly fixes it up, and sells it for a profit. People that are looking at Honolulu should think twice according to a recent study by WalletHub. Honolulu ranked in the bottom ten of 150 cities due to limited market potential and high construction costs.

A July fire in the Marco Polo building, a 36-floor high rise across the Ala Wai canal from Waikiki, has city and state officials looking into mandatory sprinkler system retrofits. The fire killed 3 people and damaged more than 200 of the 568 units before fire fighters brought the blaze under control. Investigators are having a hard time determining the cause of the fire because it burned so hot and completely gutted the unit where the fire started. The condo board decided against retrofitting a sprinkler system in 2013 due to the $8,000 per unit price tag. Fire fighters have also pointed out that many owners in the Marco Polo building have violated fire codes by installing screen doors outside their front doors and propping the front doors open to improve air circulation. The common practice allowed the fire to spread more quickly through the building. Costs to repair the damage are expected to exceed $100 million. Prospective buyers have taken notice and place a higher premium on sprinkler systems when evaluating high-rise condos. Several prospective buyers pointed out the sprinkler system in a condo where Tracey recently held an open house.

Tim learned of a trend in Hawaii that appears to be gathering steam when speaking with a handyman that Stott Property Management often uses for routine repairs. The handyman mentioned that he was approached by a large residential property management company in Hawaii to purchase his business and continue operating as an employee of the company. Owners of residential investment property who use a property manager should find out if their property management company utilizes this strategy because it sets up a potential conflict of interest with having management of the property under the same roof as repair services, and it is also very difficult to master the different skillsets in the property management and home repair fields. All property management clients should review their statements monthly and ask questions when expenses are different than expected.

Approximately 33,000 individuals who obtain insurance covered by the federal Affordable Care Act (Obamacare) will likely see their insurance rates climb again dramatically. The two insurers, HMSA and Kaiser Permanente, have requested rate increases of 27.1% (HMSA) and 19.9% (Kaiser).

A consultant hired by the state of Hawaii to analyze Hawaii’s tax structure warned that current tax collections would not be sufficient to cover the costs associated with the health insurance and pension funds for government employees. This is the second time in five years that the state has been warned of its unfunded liabilities. The state’s public workers’ pension fund currently has unfunded liabilities of $12.44 billion and the public workers’ health fund has unfunded liabilities of $11.7 billion. Lawmakers, concerned about the shortfall, passed Act 268 in 2013 that requires the state to start setting aside money to cover future obligations. In 2019, that amount will be over $811 million and will grow to over $2 billion in 2022. The consultants concluded that the state would either have to raise taxes or cut spending in order to meet those obligations based on revenue projections for the current tax rates.

A former Hilo judge concluded the state’s contested case hearing for the Thirty Meter Telescope (TMT) project and recommended that the Board of Land and Natural Resources issue a conservative district use permit subject to 40 conditions. Some of the proposed conditions include a $1 million “community benefits package” from the start of construction through the end of the sublease. The package requires TMT employees to attend mandatory cultural training and fill jobs locally when feasible.   TMT officials were please by the ruling, yet a separate contested case hearing must be conducted regarding the sublease. Opponents of the project reacted by contending that the judge was biased and the favorable ruling was all but guaranteed from the start.

University of Hawaii is experiencing the same enrollment declines that the rest of the country has also contended with. Annual enrollment has declined 12% over the past five years and the numbers have been falling faster every year. President David Lassner aims to return enrollment back to record levels reached in 2011 despite a birthrate decline, which has reduced the college-age population. Lassner claims that the University of Hawaii has excess capacity but seems to be ignoring that he would have to take market share from other universities in the continental U.S. That goal seems to be a real stretch considering the logistical challenges of an island economy and aging infrastructure.

While investors in Hawaii’s eight medical marijuana dispensaries may ultimately be a profitable venture, getting started has proven to be more difficult than originally envisioned. The dispensaries received another setback when HEMIC, the state’s largest worker’s compensation insurance company, gave notice that it was cancelling their worker’s compensation policies. Even though medical marijuana is legal in Hawaii, the drug remains a schedule 1 drug under federal law and the legal uncertainty proved too risky for HEMIC. Five dispensaries have received approval to start growing plants and three have harvested crops as of the end of June. The state certified the first medical pot testing lab in early August enabling the approved dispensaries to start selling medical marijuana to patients once they can get their employees and places of business up and running. Two dispensaries have quickly opened their doors to patients on Maui and Oahu.

It appears that city officials are neglecting the importance of street capacity when trying to make Honolulu increasingly friendly to pedestrians and bikers. A three-month pilot project to extend city sidewalks in Chinatown that started a few weeks ago has snarled traffic and hurt local businesses. One shop-owner has seen a 20 percent drop in sales since the sidewalk expansion and city buses have to turn into on-coming traffic at some intersections because the streets are now too narrow. Chinatown residents and businesses are urging mayor Kirk Caldwell to remove the extensions immediately.

Hawaii businessman, Duane Kurisu, broke ground on the Kahauiki Village affordable housing project. His goal is to build 150 permanent homes for homeless families to house 600 adults and children on land between Nimitz Highway and Keehi Lagoon. He hopes to move the first 30 families into prefabricated units by Christmas. Homeless families with Children who want to live in the village must go through programs offered by Salvation Army, Catholic Charities of Hawaii, or the Institute for Human Services. The one and two-bedroom units will include a full kitchen and bathrooms along with a communal coin-operated laundry area. Kurisu wants to build a plantation-like community that includes vegetable gardens, fruit trees, and fish farms. Former first lady, Vicky Cayetano, has pledged jobs at her laundry business for any adults willing to work within walking distance of the village.

The state Department of Transportation (DOT) has come up with a new plan for homeless sweeps along parts of Nimitz highway and the H-1 freeway. The DOT has spent about $300,000 per year to remove homeless from DOT bridges and land only to have homeless people often return and set up camps hours later. The department plans to spend $2 million this year to conduct more regular cleanups and coordinate with social service outreach groups to help the homeless find permanent shelter.

The Honolulu City Council recently authorized $350 million in city-backed bonds to keep the beleaguered rail project moving forward. The 6-3 vote authorizes the sale of general-obligation funds on behalf of the rail project next month, just before the Honolulu Authority for Rapid Transportation (HART) stated that it would run out of money.

The Blood Bank of Hawaii has filed a counter claim against HART in response to the agency’s lawsuit filed in May to force the purchase of a 10-foot portion of the blood bank’s land on Dillingham Boulevard to make way for the $10 billion rail project. The Blood Bank of Hawaii argues that HART should be required to purchase the entire property since the anticipation of the upcoming construction has already resulted in the loss of over 2,000 donors and $3 million in lost revenue. The Blood Bank of Hawaii has stated that 70% of the donors that donated blood at the Dillingham location have started donating at the nonprofit’s mobile centers or Young Street location while 30% of the donors have not returned to donate. HART has offered about $422,000 for the 10-foot portion of the land while the entire property was recently appraised at $4.8 million.

A consortium of seven companies including Hawaiian Telcom recently completed installation of a 9,000 mile, $250 million undersea fiber cable. The cable connects Indonesia, The Philippines, Guam, Oahu, and California and will provide additional bandwidth to enhance communications and Internet access between the Southeast Asian countries and the United States. Data and voice traffic will begin flowing through the cable later in August.

Biki, Honolulu’s new bike sharing system, sold more than 47,000 rides to almost 13,000 individual users. 2,340 people have signed up as members, indicating that they are repeat customers. Biki currently charges $3.50 for a single 30-minute ride and unlimited 30-minute trips are available for $15 per month. The bike share program currently has 800 bikes in service and 89 stations with the most popular stations being located in Waikiki and Ala Moana/Kakaako. It would be interesting to know what level of activity is required to make the bike sharing system self-sustaining. Please visit the following link for bike station locations.

Japanese travelers have started migrating to alternative accommodations versus hotels. The hotel industry reported a 2.5% drop in the percentage of Japanese visitors staying in a hotel for the first half of this year. The numbers follow a trend noticed in 2016 by the hotel industry with American tourists. We fully expect to see the hotel industry pressure City and County of Honolulu officials to crack down on vacation rentals in order to protect market share.

Rocky, a Hawaiian monk seal, gave birth to Kaimana on Waikiki’s Kaimana Beach in late June. The two have been a sensation with locals and tourists. Kaimana will be relocated to a secluded beach once Rocky finishes weaning the pup and leaves her behind. Officials have made the decision to allow Kaimana to grow as a wild seal with less human interaction and exposure to man-made hazards. Hawaiian monk seal pups typically linger behind on their birth beach learning to find food before taking to the open ocean. Kaimana was recently found in the crumbling Waikiki Natatorium and wildlife experts are worried that Kaimana could get injured if the pup continues to swim there.

A Kauai man was sentenced to four-years in prison for harassing a pregnant Hawaiian monk seal. The sentencing was believed to be the first since a 2010 law made it a felony to harass the endangered species. The penalties were made stiffer in response to a fatal shooting of a pregnant Hawaiian monk seal in 2009 by another Kauai man.

Cleanup of the Ala Wai Watershed has begun in Manoa. Approximately 995 tons of sediment is sent to the Ala Wai Canal each year from stream bank erosion. The Ala Wai Canal Watershed Association hopes to reduce the erosion by replacing invasive plants from the shuttered Paradise Park with native Hawaiian plants to shore up the crumbling stream banks. The association’s goal is to reduce pollution in the Ala Wai Canal and Malama Bay.

The top ten most-visited sites in Hawaii (listed in order of most visited) were Hawaii Volcanoes National Park, Dole Plantation, World War II Valor in the Pacific National Monument (includes the Arizona Memorial), Haleakala National Park, Diamond Head State Monument, Hanauma Bay Nature Preserve, Polynesian Cultural Center, Battleship Missouri Memorial, Honolulu Zoo, and Kualoa Ranch.

TripAdvisor recently awarded Charley’s Taxi a 2017 Certificate of Excellence for quantity and quality of positive reviews submitted on the travel website. Charley’s Taxi is the only Hawaii taxi company to receive a Certificate of Excellence from TripAdvisor.

A recent study by WalletHub determined that a family of three earning $100,000 per year in Maui would have just $292 at the end of each month in their household budget and in Honolulu would have just $302 remaining each month. Maui and Honolulu ranked the 7th and 8th worst locations for high cost of living.

Many people don’t need a new reason to eat macadamia nuts. The U.S. Food & Drug Administration (FDA) recently recognized that eating macadamia nuts could help reduce the risk of coronary disease. Hawaiian growers hope the qualified health claim will raise demand for their products.

The end of an era is over in Hawaii retail. K-Mart, the first big-box discount retailer to arrive in Hawaii, is closing its last store on Oahu. K-Mart will close its Kapolei store over the next two to three months. The closure will leave only two K-Mart stores in the state (one on Maui and one on the Big Island).

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