February 2021 Email Update
The January median sales price for single-family homes set a record at $883,000 (14.7% higher than January 2020) and for condos was $452,000 (5.4% higher than January 2020). Demand for both single-family homes and condos remains strong with the number of single-family homes sales rose 9.8% and condos rose 3.4% and the number of single-family homes under contract climbed 25.1% and condos climbed 16.6%. The market is currently constrained by a lack of inventory and that is not likely to change any time soon. The number of new listings of single-family homes dropped 14.7% and the number of condos dropped 5.3%. Supply constraints are being aggravated by Governor David Ige’s eviction moratorium that prevents landlords from evicting tenants who have not paid rent and from evicting holdover tenants, tenants who refuse to move when the landlord has given them written notice to vacate.
Tim & Tracey often highlight the advantages of selling an Oahu investment property using a 1031-Exchange and we intend to highlight some of our clients’ success stories. One of Stott Property Management, LLC’s clients recently sold their Mililani house that needed significant cosmetic repairs and purchased a Maryland vacation property that will revenue three-times more rent and allow them to block off some time every year for their vacations. We will be happy to discuss options if you are not happy with the cash flow provided by your Oahu investment property. Visit the link to see a photo of each property.
Azure Ala Moana, on the corner of Keeaumoku and Makaloa, topped off in January and the contractor plans to complete the $300 million, 41-story, mixed-use tower in the fall. Most of the 330 market-priced units have been sold and there are a few Ewa and Diamond Head facing two-bedroom units remaining at prices ranging from $860,000 to $1,080,000. Please call us at 808-254-1515 or email us at [email protected] if you would like more information.
Carl Bonham, the executive director of the University of Hawaii Economic Research Organization (UHERO), has forecast a stagnant Hawaiian economy over the next several months due to limited visitor numbers since the state started the Safe Travels Hawaii program. Visitor counts have returned to the 5,000 to 7,000 daily arrivals initially seen in October as the holiday visitors counts ranging from 10,000 to 12,000 have subsided. Economic activity has stagnated at roughly 40% higher than the pandemic lows due to government shutdowns in April and May. Bonham does not see any improvement in Hawaii’s current unemployment rate of roughly 10% until enough of the population receives vaccinations to suppress COVID-19 infection rates.
Hawaiian Airlines has filed a WARN notice with the state Department of Labor stating that it will lay off 810 union employees in Hawaii on April 1st. The anticipated layoffs will come a day after the Payroll Support Program extension expires on March 31st. The airline hopes that the layoffs are only temporary and that they will be able to rehire these employees when anticipated airline traffic rebounds later this year.
UHERO published the results of its November Rental Market Survey and many more households continue to struggle paying rent due to Hawaii’s stagnating economic recovery. The survey reported a high margin of error and many of the questions were hard to quantify for property managers with large portfolios. For instance, the survey asked for renters receiving subsidies, including the military. Stott Property Management, LLC reported 20% of tenants receiving military subsidies because that is roughly the percentage of military tenants, but Stott Property Management, LLC does not track those figures. The survey showed that the rental relief programs run by the state and counties did help and Stott Property Management, LLC did receive rent from those programs for many of the tenants that were behind on rent. One statistic that stood out was that 73.49% of the units reported were rented below the median rent. Stott Property Management, LLC noted the same inconsistency, and it begs to question the median rent figures reported. The most likely reason is that the published median rent figures are simply too high. A link to the report is provided below.
The Honolulu Board of Realtors made the decision to suspend feeding rental listing data to Zillow due to Zillow’s decision to start charging a daily fee to place rental ads on the Zillow platform. Stott Property Management, LLC noticed a sharp decline in the number of vacancies advertised on the platform as a result and it appears to have provided a competitive advantage to Stott Property Management, LLC’s advertising campaign. Many potential renters continue to use the Zillow network to look for available rentals and Stott Property Management, LLC’s ads have become more prominent. Time will tell if the Zillow network continues to reach the same number of potential tenants because a lower percentage of vacancies are currently advertised.
While the COVID-19 pandemic has crushed Hawaii’s tourism industry, a new trend is starting to emerge as working from home becomes more permanent and tech workers start migrating to the islands, initially on a temporary basis. While some big names like Larry Ellison have announced Hawaii as their new home, other signs like rising private school enrollment in the outer islands have also occurred. Maui Prep, a private school in Napili between Kapalua and Kaanapali, welcomed 26 new students in January and enrollment has nearly doubled over the past year. Stott Property Management, LLC has seen applications from workers at Apple, Google, and Microsoft for their higher end rental properties on Oahu. Tim and Tracey also know of friends that have their adult children visiting for three months or longer and working remotely. Many of the new residents are coming from Silicon Valley where COVID-19 social distancing restrictions are very strict.
Catholic Charities in partnership with the state announced a $6 million stop-gap rental assistance program that will provide up to $1,500 per month per household for a maximum of two months. The limited application window allowed for mailed applications between January 6th and January 13th and online applications were accepted between January 11thand January 13th. Stott Property Management, LLC encouraged their tenants who have been struggling to make ends meet since March to apply as soon as the program was announced. Stott Property Management, LLC recently began receiving emails from Catholic Charities as the applications get processed.
The state has not yet announced a rental assistance program related to the $25 billion in funding that the states are set to receive from the latest COVID-19 federal relief legislation that passed in early January. It will likely be months before the state announces the program based on the state’s slow rollout of rental relief related to the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March. The $100 million state rental relief program funded by the CARES Act was not announced by Governor David Ige until September.
A recent two-week exercise at Schofield Barracks highlights training involving the U.S. Army and the Marines as focus shifts to China’s increased military aggressiveness in the Pacific Theatre. Roughly 600 soldiers took part in the exercise that involved loading an Airforce C-17 cargo plane with soldiers and howitzers to and from the Big Island in a 24-hour period, having Chinook helicopters carry howitzers in slings from Kaneohe Marine Corps. Base to Scofield Barracks, and then having Chinook helicopters carry soldiers and howitzers to the Navy’s Pacific Missile Range Facility (PMRF) on Kauai. The exercise’s aim was to train soldiers in an island-hopping environment should the United States have to engage China in the Southern Pacific.
Beaches and beach access continue to be sources of concern and tension in Hawaii and have been a source of repeated coverage by the Honolulu Star Advertiser. Protestors held a sign-waving demonstration near the entrance of the resort community to raise awareness that the Ko Olina Community Association has coned off half of the public parking spaces to Ko Olina’s lagoons limiting easy access to the beaches. Then-Mayor Kirk Caldwell and the association came to this agreement after a public outcry in October when the parking lots were closed to the public in preparation of welcoming tourists back to the resort community. The campaign hoped to catch the attention of Mayor Rick Blangiardi and convince him to restore public access to all parking spaces. The association announced that it would make all public parking stalls available starting February 1st to the public in response to the sign-waving event consisting of roughly 30 people. Coastal hardening has been repeatedly covered in the past few months and it appears that the Honolulu Star Advertiser has become frustrated with the lack of action by state officials and resorted to publicly shaming various homeowners for installing and repairing seawalls or installing sandbags and boulders to slow down the erosion threatening their lots and homes. The people identified include former President Obama, famous surfers, and owners that rent their beachfront homes to vacationers. The paper’s complaints focus on the state’s preferential treatment afforded to some, the haphazard and arbitrary decision-making process for approving emergency measures, the failure to follow up when the emergency measures expire, and the failure to enforce fines imposed on property owners. To learn more please click the link below:
Hawaii residents are constantly reminded that ocean can be an unpredictable and dangerous place in the form of drownings, wave induced injuries, and shark attacks. One area of concern that is being studied is the significant number of snorkeling deaths identified in a new state study. Health officials are looking into rapid onset pulmonary edema (ROPE), when bodily fluids fill the lungs, as a cause of people drowning while snorkeling. A former director of ocean safety stated that “people think snorkeling is benign, easy to do, but unfortunately it isn’t. Lots of times at Hanauma Bay you found people floating face down and what caused it, we don’t know.” Researchers have determined that equipment with high air-flow resistance, which makes it harder to inhale air, may lead to ROPE. They are also looking that flying recently may make people more susceptible. Officials are recommending the following when snorkeling:
- Inexperienced snorkelers should stay in water depths less than those where one can stand with water at chest level.
- Learn to use the simplest snorkel safely before venturing to deeper water.
- People with cardiovascular health problems should avoid snorkeling.
- Shortness of breath can be a sign of danger. Remove the snorkel and get out of the water immediately.
Newly elected prosecutor, Steve Alm, has submitted a motion to dismiss the charges against U.S. Surgeon General Jerome Adams and his aide for allegedly violating then-Mayor Kirk Caldwell’s emergency order at Kualoa Regional Park in August. City prosecutors had continued to pursue charges against Adams even though roughly sixty thousand other cases had been dropped or dismissed. The U.S. Surgeon General visited the island to help kick-start Hawaii’s COVID-19 testing program since state officials were failing in their responsibility of providing sufficient testing capacity to Hawaii residents. Hopefully, other city and state officials will take note and start spending their time and money on helping Hawaii’s sick instead of harassing Hawaii’s residents and visitors.
Truth in Accounting, a non-partisan think tank that promotes transparency in government finance identified Honolulu as having the third worst finances, trailing only Chicago and New York City. The think tank CEO identified Honolulu as a “sinkhole city,” a municipality that has more debt than assets available to pay that debt. City taxpayers would have to pay an additional $30,000 each to pay for expenses that have already occurred and currently has $3.5 billion in debt due to future pension and healthcare liabilities to city employees. The bad news does not end with the analysis because Truth in Accounting did not account the city’s over-budget rail project. In related news, the city’s Comprehensive Annual Financial Report (CAFR) reported long-term debt totaling $6.22 billion and that figure has been rising $200 million to $500 million per year since the year 2000.
The Criminal Justice Institute has reported that 58% of jailed individuals released from prison early due to COVID-19 concerns have been charged with new offenses. The report presented to the state House committee reveals the impact on public safety from court-ordered early releases that were suspended in November. A First Circuit Court Judge who reviewed some of those cases was quoted, “Clearly, some of the offenses occurred, there’s no debate that they compromised public safety. The individuals who were the victims in those cases suffered the consequences of those individuals being released. No debate there.”
A Waikiki Beach sand replenishment project began in late January with the goal of dredging 20,000 cubic feet of sand from a canal 2,000 feet offshore and pumping it on a stretch of beach between the Kuhio and Royal Hawaiian groins. The first sand replenishment project pumped 24,000 cubic feet of sand onto Waikiki beach back in 2012 and the sand will be screened this time to prevent depositing dead coral rubble on the beach, a complaint that surfaced during the last project. The three-to-four-month project will close parts of the beach that receive the sand and other parts of the beach will be temporarily closed during the day to allow operation of heavy equipment. You can visit the Waikiki Beach Improvement and Maintenance program website for additional information.
Waipahu High School has developed an interesting concept for their new building that incorporates traditional classes with practical disciplines that can directly translate into private sector employment. The two-building campus will have one building that houses the traditional classrooms and a second building that builds on their success with a culinary school and student run restaurant. The “academy building” hopes to build on Waipahu’s already established Marauder Café that opened 26 years ago. It opens for eight weeks every spring and the students run a restaurant that serves the public. The café has become so popular, that reservations for this year are full before opening day. The six academies include the Arts & Communication, Health & Sciences, Industrial & Engineering Technology, Professional & Public Services, Natural Resources, and Ohana of Excellence. The goal is to have students graduate high school with college credits or industry certifications to prepare them for college or a skilled trade in the private sector. You can visit the webpage below for more information.
The University of Hawaii (UH) has announced that it will play its home games at its practice field on the lower campus for the 2021 season and beyond as it negotiates future seasons at the new Aloha Stadium scheduled to be completed for the 2024 season. The practice field currently has the capacity to welcome a few thousand fans while Division 1 college teams must average 15,000 paid or actual attendance per game one out of every two seasons. A proposed $6 million retrofit would add 6,000 seats and move the scoreboards from the shuttered Aloha Stadium. The expansion would allow about 10,000 fans to watch home games and UH mentioned that parking should not be an issue since the Stan Sheriff Center next to the practice field already has a 10,000-seat capacity. UH must increase seating capacity in the next eight months and no mention has been made that the planned seating capacity with 5,000 seats short of the Division 1 attendance requirements.
The UH Maui College became the second campus in Hawaii to generate all its electricity needs through renewable energy, joining UH Leeward College on Oahu. The campus installed 3,300 photovoltaic panels on site and 13.93 MWh of battery storage eliminating the need to generate electricity using 4,400 barrels of oil per year.
Hawaiian Airlines announced a new route connecting Long Beach, CA to Kahului (Maui) beginning March 9th. Southwest Airlines announced two new routes to Hawaii, a daily route connecting Long Beach, CA to Honolulu and a daily route connecting Long Beach, CA to Kahului beginning March 11th.
The Polynesian Cultural Center reopened on January 18th after an approximately 10-month closure. One of Oahu’s top tourist destinations will operate initially with limited hours of 3:45 pm to 9:00 pm on Monday, Tuesday, Thursday, Friday, and Saturday. Visit their website for more information.
The empty track and trestles from a deactivated tramway leading to a deactivated military radar station at Koko Crater Summit were turned over to the City and County of Honolulu in 1966 and became the popular hiking trail known as the “Stairmaster from hell.” The trail has suffered significant erosion and more than 250 of the wooden tramway ties remain. The city has allocated $1 million to a public-private partnership with the Kokonut Koalition to procure supplies and immediately start repairing and improving the trail. Many hikers have spontaneously volunteered to help coalition members while they are working on the tramway and carried up buckets of gravel to the repair site.
Refinancing your home leave you stressed out? Aloha Beer Company just opened a quick-service counter in Central Pacific Bank’s main branch in Downtown Honolulu. The counter looks to serve the downtown office crowd with grab-and-go food along with a selection of Aloha Beer Company’s most popular draft beers. Tim’s favorites include the Hop Lei IPA (often served at the Kailua Racquet Club) and the Portlock Porter.
Looking for something to do while cooped up at home? Surf Shack Puzzles started selling puzzles online in November designed by Hawaiian artists. The 1,000-piece puzzles come in a reusable cotton mesh bag and $1 of each sale is donated to a conservation nonprofit. Visit the link below if you would like more information.
Last month we highlighted that this newsletter reached people in different countries around the globe. We recognized that we may have unknowingly left some countries off the list and soon heard back from a reader in Ecuador. We are happy that many enjoy the newsletter and love hearing comments. In that spirit, we would love to hear from readers about real estate topics or Hawaii related news that they would like included. Send us an email at [email protected] and we will do our best to cover the topic either directly or in a future newsletter.