February 2015 E-Mail Update
Here is our 2/9/15 E-Mail Update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors Website. To be removed from the mailing list; send us an e-mail stating that. Please include your first and last name to make it easier for us to find you in our database.
The median prices for single family homes and condos continues to trend upwards as inventory remains tight. The single family home median price was $675,000 in January (compared to $629,500 in January 2014) and the condo median price set a record in January at $381,500 (compared to $320,000 in January 2014). The months of remaining inventory in January was 2.6 for single family homes and 3.0 for condos (6.0 is considered a balanced market where neither buyer nor seller has the upper hand). Included at the bottom of this email are statistics going back 30 years.
The Honolulu Star Advertiser has run another front-page article on the significant risk to Oahu’s economy as the military faces budget cuts and has plans to reduce personnel accordingly (We have repeated this information from our Quarterly Newsletter per a request from several people on the monthly e-mail newsletter distribution). Hawaii legislators had naively hoped that the so-called Asia pivot would spare the islands from similar cuts that would be carried out in other parts of the country. It looks like that may not be the case as the U.S. Army looks at Schofield Barracks and Fort Shafter as places to cut back.
Ironically, the plan is in reaction to budget cuts imposed by the very same government officials that Hawaii residents routinely vote into office by large majorities. The current plan calls for a reduction of approximately 20,000 soldiers and civilians and equates to about 30,000 family members leaving the islands (5% of Oahu’s population). The state of Hawaii stands to lose about $1.35 billion annually in federal spending as well as over $9 million in general excise tax receipts. The Army’s two community listening sessions were packed with Army supporters overwhelmingly outnumbering critics. If the feared cuts occur, Wahiawa, Waialua, Schofield, Mililani, and Kunia would lose 38% of their current populations. Some residents and long-time agents remember the pain felt on Oahu when military downsizing and the burst of the Japanese bubble led to Hawaii’s prolonged recession and drop in real estate prices during the lost decade of the 1990’s. Hawaii members of the U.S. House and Senate have been noticeably quiet about the potential fallout.
Hawaii is ranked the second-worst state in taxing the poor due to the state’s reliance on the General Excise Tax. Since Hawaii essentially taxes every good and service including rent, food, clothing, and medicine, the poor in Hawaii pay taxes on more items than most other states. At least the State of Hawaii is consistent in that it taxes all Hawaii residents (rich and poor) more than the national average.
The FBI recently released its semiannual 2014 crime stats and the City of Honolulu is noticeably absent. The Honolulu Police Department is the only department out of America’s 25 largest cities and counties that has failed to report crime statistics since 2012. The lack of reporting calls into question HPD’s effectiveness as a force in addition to the highlighting the city’s and state’s continued failure to update their ancient information systems.
The Honolulu City Council appears to be getting nervous about the cost overruns associated with The Honolulu Authority for Rapid Transit’s (HART) elevated rail system. The city council is hesitant to sign a deal that would allow the cash strapped rail transit line to borrow hundreds of millions of dollars leveraged against the city’s general fund. The city council’s finance committee would like updated projections for the cost of the rail project and HART has been reluctant to even provide a general estimate on how much money will need to be borrowed over the course of construction. 40% of the project has still not been contracted out. Mayor Kirk Caldwell has been already publicizing a borrowing plan that would save $60 to $70 million in interest even though he has not published the amount to be borrowed.
The 2015 Legislative Session opened on January 21, 2015 with some grandstanding by House Speaker Joe Souki. The House Speaker stated that lawmakers “will hold the city’s feet to the fire and closely scrutinizing its request to extend the GET tax for rail.” Other state lawmakers are adding to the drama claiming that Mayor Kirk Caldwell should have foreseen these types of issues when he worked in Mayor Mufi Hanneman’s administration. Caldwell was one of the main drivers in selling the original 0.5% GET surcharge to finance the rail project. The comment is interesting in light of another article in the paper stating that the state’s general fund budget is projected to run a deficit over the next six years. We are looking forward to see how one government entity who is projected to spend too much is going to hold another government entity accountable for spending too much. We don’t hold much hope of any real work being accomplished on this issue.
In the meantime, the rail project continues to disrupt residents, businesses, and non-profit organizations as rail forces moves. The latest organizations to make moves are Blood Bank Hawaii and Energy Industries Corp.
In his first State of the State address, Governor David Ige acknowledged that all current state funds are committed to existing programs and services and the state is spending more than collecting in tax revenues. Part of Governor Ige’s plan is to go “hat in hand” and pursue $940 million in federal funds and initiate a “tax system modernization program” that he claims will “better secure tax information and increase tax revenues through its efficiencies.” It does not appear that state taxpayers will see any relief during his administration.
A House subcommittee will investigate Calvin Say to determine if he is qualified to represent his district that he has represented since 1976. The investigation is in response to a formal challenge from voters that claim he has not lived in his Palolo Valley home on 10th Street as he claims. In an unrelated case, State Senator Galuteria is being investigated for claiming a homeowner’s exemption on a home in Palolo while claiming to live in Kakaako. Senator Brickwood Galuteria claims to have made a mistake in claiming the exemption in response to a challenge from his latest general-election opponent. The City of Honolulu is currently calculating the back taxes that the senator owes.
The University of Hawaii can’t seem to get much right these days including the firing of coaches who violate NCAA rules. UH terminated coach Gib Arnold’s contract “without cause,” even through the university is now facing seven violations of NCAA rules which named Arnold in every violation. According to the contract, Arnold could have been terminated “with cause” and the university would not have been liable for any benefits or damages after the termination date. Instead, Arnold was employed through January 26, 2015 and paid a lump sum amount for the remainder of his contract through June 30, 2015.
A task force that reviewed operations of the University of Hawaii’s Cancer Center issued a report calling for an overhaul of the research facility’s “flawed” business plan. The cancer center finished last fiscal year with a $10 million deficit, a mortgage payment, increased operational costs, and declining cigarette tax revenue. At least $16.9 million of the cigarette tax was spent on construction even though there was a revenue bond for the construction of the new Kakaako facility. The report identified the center’s administrative structure as top heavy with an abundance of directors and assistant director positions that lack clear roles and responsibilities. The report offers recommendations for turning operations around and now it is time for the University of Hawaii to act.
In an ironic twist of fate, the United Public Workers (UPW) is suing the City and County of Honolulu’s plan to eliminate garbage disposal service for about 181 condominiums. The UPW claims that they are standing up for the condominium associations that have been unfairly targeted. A judge granted a temporary restraining order from ending the service on January 31st as planned.
Former Governor, Linda Lingle, has been named to fill the newly created Chief Operating Officer of Illinois by Governor Bruce Rauner. Illinois Governor Rauner referred to Linda Lingle as a “superstar governor.” Linda Lingle is one of a group of advisors that Governor Bruce Rauner is looking to help turn around the state of Illinois’ financial problems.
Hawaii’s doctor shortage jumped about 20% in 2014 to approximately 890 unfilled positions. The problem is likely to get much worse since 18% of the doctors are 65 years old or older. Time consuming government regulations imposed by Obama-Care and decreasing reimbursements are encouraging some doctors to throw in the towel and discouraging other doctors from starting up their own practices. The shortages are most acute on the neighbor islands where it is two to three times harder to find a physician.
In another Health Care twist, Kaiser Permanente is temporarily closing 10 clinics on Oahu, Maui, and the Big Island, as a result of a planned strike by Unite Here! Local 5 Members. The strike started on January 31, 2015. The Honolulu Advertiser reported this week that strikers were delaying patients’ entry into the clinics that have remained open causing some people that needed urgent care unnecessary distress.
The state temporarily suspended its online Medicaid eligibility system amid continuing problems with the technology that is set to cost taxpayers $144 million. The system known as Kolea, was launched October 1, 2013. The system constantly freezes, frequently loses applicant information, does not update eligibility in a timely manner, and is unable to upload documents required for verification.
The Hawaii tourism industry is receiving a needed boost from a 25% increase in tourists from China. In more good news, Chinese tourists spend more per day on average than any other group visiting Hawaii. Hawaii’s tourism saw its third record-breaking year in a row with 2014 annual totals reaching 8.28 million (1.3% higher than 2013) visitors who spent $14.7 billion (2.3% higher than 2013).
Turtle Bay Resorts has embarked on a plan to upgrade and integrate the 469 acres of farmland with the hotel and two golf courses. The plan envisions putting farm-fresh produce on the plates of visitors in addition to establishing a large farmers market.
The iconic Coco Palms will have to wait at least another two weeks to obtain permits needed to start rebuilding after being destroyed by hurricane Iniki in 1992. The Coco Palms Hui LLC also plans on opening the ocean-front Seashell Restaurant. Tim Kelley’s parents stayed at the Coco Palms and ate at the Seashell Restaurant back in the day. They remember their stay fondly and we would not be surprised if they returned when it re-opened.
Hawaiian Host, Inc. has entered into an agreement to acquire the Mauna Loa Macadamia Nut Corp. from The Hershey Company. The purchase would return the iconic brand back under local ownership. Mauna Loa planted its first trees on the Big Island in 1946 and has become one of the largest macadamia nut processors in the world. Hawaiian Host has more than 250 products sold in 23 countries.
Did you know that two sailors planted the first Macadamia nut trees in Hawaii? The original grove was planted up in the Tantalus area of Oahu by two Australian sailors from Brisbane in 1892.
A 29-year-old St. Louis School alum has opened BungoBox Hawaii, a Florida-based moving rental franchise. BungoBox offers plastic moving containers for rent at about $1.75 per week per box. The plastic boxes will usually last about 400 moves versus a cardboard box which may only be used a couple of times. The new owner of BungoBox, Joshua Rosen, stopped by our office just days after we read about his new business and wrote part of this paragraph. He is hungry for business and we appreciate both his enthusiasm and professionalism. You can find the business at the following web address: http://bungobox.com/honolulu-moving-boxes
Another new Kakaako condo complex, Park Lane, opened sales to owner-occupants for 107 available units on January 10, 2015 for a 30-day period. The complex is located between the Ala Moana Mall and Ala Moana Boulevard. According to the advertisement, prices start at $1,192,000 for a one-bedroom with unit sizes ranging from one to five bedrooms. Please contact us at [email protected] if you would like more information.
MW Group Ltd., a Hawaii real estate developer, has opened its fourth assisted living senior care community in Pearl City. The four locations in operation, The Plaza at Punchbowl, The Plaza at Mililani, The Plaza at Moanalua, and The Plaza at Pearl City provide assisted living options, along with a memory care program for residents suffering from Alzheimer’s disease, and a short-term respite care program. MW Group Ltd., is currently developing two more communities in Waikiki and Kaneohe.
The 130,000 square foot Target store in Kailua is scheduled to open March 4, 2015. Target installed over 1,650 solar panels on the roof to help reduce the cost of electricity.
40-foot waves arrived on the North Shore in late January attracting large crowds and keeping rescue workers busy. On January 21, there were 34 rescues on the west side of Oahu and another nine rescues on the North Shore.
The popular Makapuu Point lighthouse trail will be closed during the week for the next four weeks to replace aging drainage culverts that are causing some areas of the path to crumble. The state will then close the path again in July to repave the trail. Additional improvements include the addition of four new lookouts and the installation of two binoculars at the whale-watching lookout.
Kauai’s Film Commission recently made $3 million in movie production expenditures from “Jurassic World,” the fourth film of the Jurassic Park movie series. The recent news reminds us of a fond memory involving our son, Mark, years ago. The family went on a “movie tour” where the guide showed the sites of many movies filmed on the island of Kauai. The tour was actually well done and the tour guide reminded us several times that Kauai County required all the sites to be returned back to their original state once filming was complete. The final stop was the site of the gates to Jurassic Park. When our son saw the old gates to the entrance of the privately owned ranch, instead of the magnificent gates that he expected to see from the movie, our son loudly exclaimed “What a rip off!” After a good laugh, we learned that the gates to Jurassic Park were made of Styrofoam.
If you need assistance buying, selling, or managing Oahu property, we want to apply for the job of assisting you.
Tim & Tracey