December 2015 E-Mail Update
Here is our 12/9/2015 e-mail update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors website.
The median price for single family homes in November was $715,500 (down 0.9% compared to November 2014) and the median price for condos was $347,500 (up 1.3% compared to November 2014) in a market characterized by very strong demand for a limited supply of homes. There is only 2.7 months of remaining inventory for single family homes and 3.0 months of remaining inventory for condos (six months of remaining inventory is considered a balanced market). Median prices appear to be constrained by the relative unaffordability of housing on Oahu and discipline by lenders.
A compilation of home sales from January 2008 to September 2015 shows home buyers with local addresses purchased 72.5 percent of properties in Hawaii. As prices have risen, investors have become more hesitant, resulting in 78 percent of homes purchased by buyers with Hawaii addresses in 2015. Sales prices have continued to rise at a modest place, primarily driven by the tight supply of homes while rents have plateaued over the past year making returns less attractive to investors. Japanese buyers still buy more Hawaii real estate than any other foreign buyers with 247 transactions this year with most of those transactions involving property in Honolulu. Canadians were #2 with 130 transactions concentrated in West Oahu and Upcountry Maui. Chinese investors rounded out the top three with 20 transactions concentrated in Honolulu.
Retired First Hawaiian Bank CEO Walter Dods publicly announced that the key to fixing Hawaii’s housing problem is simplifying the state’s burdensome regulation. It currently takes 15 to 20 years to get land zoned for housing and in that time, the construction costs compound dramatically. The time cost of money is a concept that few island politicians grasp and is the major contributor to Hawaii’s high cost of housing and homeless problem. Areas that have overly restrictive and redundant regulations have higher home prices.
Hawaii’s unemployment rate fell to 3.3% in October compared to 4.1% in October 2015. The robust construction industry added 3,000 jobs to the labor market as strong demand has resulted in a shortage of skilled construction workers. It will be interesting to see if the high level of employment will start translating into higher wages for Hawaii residents.
Ala Moana officially opened its new Ewa (west facing) wing on November 10th. Out went Sears and in comes Hawaii’s first Bloomingdale’s along with 37 retail stores and restaurants. Construction in the immediate area continues at a frantic pace with the building of an ultra-luxury condo complex overlooking Ala Moana Beach Park, Park Lane Ala Moana, located between Ala Moana Mall and Ala Moana Boulevard.
Hawaiian Airlines will have a different competitor next year when Allegiant Air discontinues service to and from Honolulu in August 2016. The carrier currently offers flights between Honolulu and Las Vegas and between Honolulu and Los Angeles. Allegiant has decided to retire its Boeing 757 fleet rather than conduct scheduled maintenance due later next year. While Allegiant Air is exiting the market, Virgin America, has entered the market and is expanding with the announcement of its second Hawaii route. Travelers should enjoy Virgin America’s entry since the airline ranks near to top of customer satisfaction surveys.
Hawaii residents will see the cost of goods rise as Pasha Groups purchase of Horizon Lines shipping business to Hawaii results in reduced competition. Matson Navigation Company, Pasha Group’s only competitor, announced that it will raise cargo rates by $225 per westbound container effective January 3, 2016.
The University of Hawaii hired former Warriors quarterback Nick Rolovich to succeed Norm Chow as the UH football team’s head coach. Nick started as quarterback in 2001 for an injured Timmy Chang and led the team to an 8-1 season under head coach June Jones. UH chose Rolovich over June Jones who also applied for the position.
A statewide poll shows that a strong majority of Hawaii residents agree that there should be a way that science and Hawaiian culture can co-exist on Mauna Kea and support the construction of the Thirty Meter Telescope (TMT) project. The poll shows that 44% of Native Hawaiians also support the project with 49% opposed to the project. The poll also noted that most residents felt that failing to move forward with the project after all regulations were followed would hurt Hawaii’s already poor reputation as a place to do business. The Hawaii Supreme Court, in a classic case of judicial overreach, ruled that the board acted improperly when it issued a permit prior to holding a contest case hearing. TMT will have to go back to square one and repeat all the same steps before proceeding. As if on cue, those protesting the new telescope declared that they will never accept the TMT project and will resort to illegal means if the project eventually gets approved. The legal setback reminds many state voters of the Hawaii Supreme Court’s ruling that caused the Hawaii SuperFerry to cease operations and sell the state of the art ships to the U.S. Navy. In that case, an overwhelming majority of residents also supported the SuperFerry.
Hawaii ranked 31st among states in tax competitiveness in the Tax Foundation’s 12th edition of the State Business Tax Climate Index. Hawaii dropped one spot when compared to last year. The top spot in the index was claimed by Wyoming while New Jersey finished last.
The state Department of Transportation signed an energy savings contract with Johnson Controls Inc. in 2013 that guarantees reduction in energy use across all state airports by 50%. The project started in January 2014 and has a scheduled completion date of December 2016. The project includes installing energy efficient light fixtures, replacing 372 inefficient transformers, and installing almost 9,000 solar panels. 75% of the work will be done at Honolulu International Airport.
The Hawaii Health Connector’s woes continue as executive director, Jeffrey Kissel, testified to the challenges associated with manually enrolling the 30,000 individuals that signed up for health insurance through the Hawaii Health Connector through the federal website, healthcare.gov. Currently, the average enrollment time is roughly 1.5 hours for each individual and can take as much as four hours for non-English speaking customers. Persistent problems with the healthcare.gov website and limited language resources require Hawaii Health Connector employees to sit with customers and coach them through the entire process. State officials do not think that all Hawaii Health Connector customers will be enrolled by the January 31st deadline. Jeffrey Kissel announced his resignation as executive director effective December for a new job in Washington, the Hawaii Health Connector laid off its entire staff on December 4th, and it transferred all functions to the state.
Pacific Business News summarized the disastrous implementation of Obamacare by the Hawaii Health Connector in a November article. Of the 37,800 individuals that signed up for coverage under the new federal law, roughly 17,000 individuals signed up through the connector and only 8,802 had paid for the insurance. The Connector spent $130 million of the $204 million in federal grants before the remaining $70 million was frozen when the Hawaii Health Connector failed to achieve financial independence. The state of Hawaii effectively spent $14,769.37 to enroll each person in Obamacare via the Hawaii Health Connector. Additionally, those insured individuals will have to dig deeper into their pockets to pay for health insurance as Kaiser received approval for a 34.4% rate hike in October.
Waianae High School has reinstated music classes after a 7-year hiatus when music was dropped to implement a rigid class schedule that focused on reading and math studies. Ukulele, band, and choir were restored and the school would like to add piano and orchestra classes. Many students that are not inclined to play sports have benefited from the opportunity to bond with fellow music students and band members.
Drama and grandstanding continue at the City and County of Honolulu regarding the Honolulu Authority for Rapid Transportation’s (HART) rail project. The Federal Transit Administration (FTA) is withholding its next $255 million in funding until the city council approves the five-year extension of the General Excise Tax (GET) surcharge. Chairman , Ernest Martin, suggested foregoing the federal funding, sticking Oahu taxpayers with the full bill, and then making the rail transit system less useful by shortening the length of the project by one mile. The city council is scheduled to vote on the GET extension in January, but Caldwell is urging the council to expedite the process. HART is expected to spend more than $2.5 billion this fiscal year compared to an approved $1.8 billion budget. HART says that the project can’t fund contracts for the next section of the rail route and may have to delay the schedule.
In an innovative twist, Uber Hawaii teamed up with Honolulu-based City Mill to deliver Christmas trees to select neighborhoods for $75 the weekend of December 5th and 6th. The five to six-foot tree came with a City Mill bucket versus a stand. The article did not mention if customers could order the trees themselves on-line.
Tim and Tracey recently returned from a trip to Groton, CT to attend Tim’s 30th high school reunion, and see the sights in New York City. The cold weather helped ring in the holiday season. Tim and Tracey were delighted to return to Hawaii’s warm climate. The entire staff wishes you a Mele Kalikimaka and Hau’oli Makahiki Hou.