February 2020 E-Mail Update
Here is our 02/10/2020 e-mail update. The newsletter 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.
The January median sales price for single-family homes was $770,000 (0.3% higher than January 2019) and for condos was $429,000 (7.5% higher than January 2019). Demand for homes in the form of sales and pending sales are significantly higher than last year when the Federal Reserve (Fed) had been raising interest rates. Demand has been strengthening as the three quarter point reductions in the federal funds rate last year took effect. The supply of homes remains tight. There are currently 2.6 months of inventory of single-family homes and 3.5 months of inventory of condos. Signs of a slowing real estate market have faded over the past six months.
A tragic landlord-tenant dispute in the Diamond Head neighborhood resulted in death of two police officers, the landlord, and the tenant. The tenant also allegedly set the house on fire burning the structure to the ground and destroying six other houses. While the circumstances are extreme, it highlights the potential danger landlords place themselves and their neighbors in when failing to follow some common-sense guidelines. The landlord took three actions that we have recommended avoiding in our newsletters. The landlord allowed a handyman to stay at the property for free in exchange for maintenance on the home. The landlord continued to allow the tenant to live on the property despite the tenant barricading himself in the property four years beforehand when police came to the residence to arrest the tenant for assaulting a neighbor and after seven temporary restraining orders were filed against the tenant by four neighbors. And finally, the landlord tried to handle the eviction herself when she finally wanted the tenant to move. The tenant, who neighbors claim was mentally ill and had nowhere to go, erupted in a fit of rage that resulted in four deaths, the destruction of seven houses, and left at least eleven people homeless.
There are many landlords that manage their own properties successfully and they follow the same rules and processes of professional property managers. First and foremost, they charge market rent for their properties. Asking a tenant to leave is rarely a big deal when that tenant can quickly find another similar rental property for the same rent. Carefully screening tenants through credit checks, seeking references from previous landlords, and verifying the tenants have sufficient income to cover the rent helps avoid future evictions. And finally, when an eviction is necessary, hire professional process servers or the sheriff to serve and physically remove the tenants from the premises. If the landlord lives on the property and has been threatened by the tenant, then the landlord should seriously consider moving away temporarily until the eviction is complete. The tragic death of a landlord is not a one-off event. Another landlord-tenant dispute involving an eviction in Kauai last year resulted in the landlord’s murder. Well-run businesses stress the safety of their customers and employees first and managing a rental property is no different.
Hawaii’s housing shortage is unlikely to get any better according to another state study. Hawaii needs to build 50,156 new homes over the next five years and only a small fraction of that number will likely be built. A similar study conducted three years ago called for 60,000 homes and the only reason that the number has shrunk is due to Hawaii’s population shrinking due to outward migration. Hawaii averaged about 5,600 new homes before 2008, averaged 2,800 new homes from 2011 through 2014, and 2,675 homes from 2014 to 2017. Fewer new homes have been built recently and that trend is expected to continue through 2030. The upward pressure on prices (both rents and sales prices) due to a lack of supply has caused nearly 7,000 Oahu residents to become homeless in 2019. Governor David Ige pointed out that an average of 616 homeless people per month were placed in permanent housing in 2019 yet failed to acknowledge that the state is barely keeping up.
A major reason for the housing shortage on Oahu is the failure of the Department of Planning and Permitting (DPP) according to the latest city audit released on January 6th. The issues summarized by the auditor include that DDP has excessive review times and lax controls that allow private companies to “game” its appointment system, disadvantaging others. It takes DPP an average of 108 days to approve a residential permit; 157 days for approve a small commercial project (under $50,000), 206 days for a medium commercial project ($50,000 to $999,999), and 432 days for larger commercial projects, ($1 million to $10 million). The audit found that three applicants representing one company booked 21% of the total appointment slots during a thirteen-month period between January 2018 and April 2019.
Several local articles discussed migration in January and some numbers are worth paying attention to. A recent report by the rental website and database Apartment List highlighted that 30% of Honolulu county renters are looking to move from the state. Stott Property Management, LLC recently received two notices from renters that are breaking their lease to pursue opportunities in the Continental United States. Another article by the Honolulu Star Advertiser highlighted migration patterns on Oahu and traffic appears to be a major issue based on a poll of 2,140 random households. 85% Ewa residents want to move elsewhere and 49% of those want to move to East Honolulu. Ironically 75% of East Oahu residents want to move and 50% want to move to Urban Honolulu. The two areas were residents want to stay are Urban Honolulu (75%) and Windward Oahu (68%). A likely factor with people wanting to stay in Windward Oahu is that three major highways lead into Honolulu (Pali Highway, Likelike Highway, and H-3).
The Department of Housing and Urban Development released updated guidance regarding service animals and assistance animals. The document identifies best practices for property managers and landlords including questions that landlords may ask, documentation that may be asked for, documentation that may not be sufficient (internet certificates for example), and a series of steps in determining if the information provided is sufficient to identify the animal as a service animal or assistance animal. A link to the guidance is provided below.
A news story last year about New York City’s mayor’s office sending an unidentified homeless family to Hawaii with a guaranteed job and a year’s worth of rent caused an uproar on the islands. It turns out that Hawaii has flown 744 homeless people back to their families since 2014. The homeless people must have family willing to take them in and willing to pay half of the airfare before the individual is provided a one-way ticket back home.
The state of Hawaii’s pension fund shortfall set a record of $14.08 billion and is expected to continue increasing until 2025 when it is projected to start falling. The Employee’s Retirement System (ERS) announced that the total liabilities were negatively impacted by lower investment returns, higher salary increases, and “other changes in underlying assumptions.” ERS did not change its forecast or model to reflect the new data. It appears that the ERS may follow the Honolulu Authority for Rapid Transportation’s (HART) for failing to accurately forecast costs until it becomes another crisis.
State Attorney General Clare Connors is seeking an additional $1 million in funding for salaries and asking for ten additional staffers to combat public corruption and theft from state programs and a sense of lawlessness from recent protest movements including the ongoing protest of the approved construction of the Thirty Meter Telescope at Mauna Kea. The State Attorney General is asking for the additional funds to help “strengthen public confidence in government.”
Mayor Kirk Caldwell recently warned of the possibility for additional delays in the Honolulu Authority for Rapid Transit’s (HART) troubled rail project. The announcement follows Caldwell’s meeting in Washington D.C. with officials in the Federal Transit Administration (FTA) where the FTA questioned if the project would be finished by December 2025. Caldwell’s warning also follows an announcement by HART’s Executive Director stating that the first segment rail line would be ready to ride in October despite the city’s and state’s warning that they are not ready. The latest ominous sign involves HART’s failure to submit a traffic management plan for construction downtown that was due in November. HART now hopes to have an approved traffic plan in place by the end of February.
Mayor Kirk Caldwell is trying to find a position to put City Corporate Counsel, Donna Leong, after she was placed on paid administrative leave following her receipt of a U.S. Department of Justice target letter. She received the target letter that is part of the federal criminal investigation concerning ex-Police Chief Louis Kealoha and his wife, ex-Deputy Prosecutor Katherine Kealoha. Leong advised the Honolulu Police Commissioner to approve Louis Kealoha’s retirement with full benefits and a $250,000 severance check without obtaining approval from neither the Honolulu Police Department nor the Honolulu City Council. Leong receives an annual salary of $171,336 and received a 3.5% raise in July while doing nothing. The city is currently trying to claw back the $250,000 severance payment from Louis Kealoha after he pleaded guilty. City Prosecutor Keith Kaneshiro is also on paid administrative leave since March 2019.
The City of Honolulu announced that it would continue with the first phase of the controversial Waimanalo Bay Beach Park expansion into an area known as Sherwood Forest. The project will end with phase one, installation of an eleven-stall parking lot and a multipurpose field, and the site will become a cultural and historic park. The change in plans is a compromise between the city and members of Save Our Sherwoods who have staged protests over the development.
A housing village for homeless individuals, Kahauiki Village, celebrated its two-year anniversary. The village was the brainchild of Hawaii businessman Duane Kurisu and it welcomed the first two families in January 2018. The village is now home to 79 families and the village will open its third phase this summer and welcome its 100th family. The village sits on leased land from the City and County of Honolulu and is run and operated by the aio Foundation. All rent paid goes into maintaining the community. It is a powerful example of what local organizations and businesses can accomplish when government gives them the freedom to make it happen.
Southwest Airlines announced new routes that started in January as it continues its push in the Hawaiian market. Southwest launched a Honolulu-Hilo route offered four times daily, a daily Kona to Kahului route, routes connecting Kona to San Jose and Oakland on alternate days, and routes connecting Lihue with San Jose and Oakland.
Hawaiian Electric announced that solar capacity increased 21% in 2019. The report highlighted percentage of single-family homes that have rooftop solar: Oahu – 37%; Big Island – 21%; Maui – 27%. The report did not mention Kauai since the Kauai Island Utility Cooperative runs the island’s electrical grid.
Honolulu came out on top in Wallethub’s report of cities that supported an active lifestyle. Hawaii came out on top due to the number of sports facilities and outdoor activities. It does help that we can essentially play outdoors 365 days per year if you don’t mind getting wet occasionally.
A new solar telescope at the summit of Haleakala (the house of the sun) provided the first high-resolution images of the sun’s surface according to the National Science Foundation. The images captured a surface of bubbling plasma cells, each as large as Texas, covering the sun. The telescope will become fully operational in July. University of Hawaii (UH) astronomers hope to better understand how the sun impacts life here on Earth.
Heavy January rains brought new mudslides and fallen trees to the Pali Highway. Fortunately, the events only resulting in the closing of one lane while crews cleaned up the debris. The mudslides serve as a reminder that the Pali’s close proximity to the Koolau Mountain Range will result in future mudslides despite the state’s efforts to reinforce the mountainside and extend the tunnels.
The UH Rainbow Warriors football team will start the 2020 season with a new head coach. Nick Rolovich accepted the head coaching job at Washington State University and marking the end of his successful four-year run at UH. The Warriors accumulated a 28-27 record and won two out of three Hawaii Bowl games under Rolovich’s leadership. He also introduced the phrase, “Live aloha, play Warrior,” which is displayed in two UH practice gyms and above the walkway to the Rainbow Wahine Softball Stadium. Former Arizona State coach Todd Graham has been selected as Rolovich’s replacement.
The Four Seasons Resort Lanai was ranked #1 on a list of best hotels in the country according to U.S. News and World report. Tim and Tracey celebrated their 25th anniversary in 2018 by staying at the hotel for three glorious days on Lanai’s southern shore.
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