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February 2023 Email Update

The January median price for single-family homes was $970,000 (7.6% lower than January 2022) and for condos was $495,000 (2.9% lower than January 2022) as demand continues to stagnate.  The median price for single family homes dropped below $1,000,000 for the first time in 18 months and demand for both single-family homes and condos was less than half compared to last year.  New listings have continued to exceed demand and inventory has been creeping up.  There are currently 2.0 months of single-family home inventory and 2.4 months of condo inventory.  Available properties are taking twice as long to sell compared to last year, many skittish buyers are cancelling contracts during the inspection period, and sellers are giving concessions more frequently to close sales.

Rents have stalled as well with affordability driving many renters to team up and become roommates once again.  Stott Property Management, LLC has been forced to lower some asking rents as vacant units sit on the market much longer than previous years.  The nationwide trend impacts Tim and Tracey’s Austin duplex that has been vacant for over a month in Texas despite offering the third lowest asking rent in the area.

You can review more detailed current and past real estate market data on our website using the link below.

Monthly Statistics

Hawaii Landlords should continue to pay attention to proposed legislation when deciding whether to sell or continue renting.  The latest gem relates to bed bugs that are notoriously hard to detect and treat.  A new law would make it illegal to rent a property when the landlord “knowingly” has a bed bug problem.  Yes, they are a nuisance, but the state department of health does not see them as a health threat.  Let’s hope this new bill does not become law.
 
The University of Hawaii Economic Research Organization (UHERO) forecasts slow economic growth for 2023 due to central banks aggressively raising interest rates to combat inflation.  UHERO expects a slight uptick in unemployment and Japanese tourism slowly recovering from COVID-19 restrictions and a weak yen.  The housing market will continue to struggle due to high interest rates and high sales prices.  Tenants can expect some relief from rapidly escalating rents in 2023 and 2024.  UHERO does hedge its bets by claiming that uncertainty around their forecasts has increased based on future inflation numbers and resulting interest rates.
 
A 1031 Exchange company forecast the following trends for 2023.  While the article is geared towards commercial real estate, the trends would apply to residential 1031 exchanges as well.
 

·      Sales prices will decrease.
·      Properties will take longer to sell.
·      There will be more all cash 1031 exchanges due to high interest rates suppressing mortgage demand.
·      The market will soften as investors patiently wait to sell until the market recovers.
·      Residential transactions will exceed commercial office activity.
·      Increased purchases of qualifying vacation home rental properties in warmer climates and other rentals geared towards remote work.

 
Governor Josh Green followed in the footsteps of two other Governors, David Ige and Linda Lingle, in issuing an emergency proclamation to address Hawaii homelessness.  The emergency proclamation allows the administration to bypass dozens of state laws to quickly build shelters.  Instead of focusing on repealing the laws that contribute to Hawaii’s growing homelessness problem, activists criticize the governors for exceeding their authority.  Hawaii will continue to struggle with rising homelessness and unaffordable housing until they remove the hurdles to building a sufficient supply of homes.
 
Just another reminder of the state taxes that Hawaii landlords must pay.  Most landlords are aware of general excise tax, and transient accommodation tax (if applicable), yet are unaware of state income tax, particularly when they live in a state that does not have an income tax. Here is a link to the taxes owed by landlords published by the state of Hawaii.

An Introduction to Renting Residential Real Property

The Board of Water Supply (BOWS) sent a letter to all customers arguing against the latest Environmental Protection Agency regulatory agreement with the U.S. Navy over the Red Hill Bulk Fuel Storage Tank defueling.  Stott Property Management, LLC’s mailbox was filled with more than 80 letters during the week of 1/09/2023, While arguing that neither the EPA nor the U.S Navy could be trusted, a reasonable argument, BOWS objected to the state Department of Health (DOH) becoming the lead agency in the defueling oversight.  The letter encouraged neighbors to attend a contentious town January 18 town hall meeting where the BOWS, community activists, and residents lambasted the agreement as toothless.  The major complaints included the lack of deadlines and lack of fines if the U.S. Navy failed to meet the deadlines.  In order to prevent future spills, the work should be event driven, not deadline driven.  The letter spells out the BOWS’s objections.
 

·     “Does not contain clear deadlines for completing the work.
·      Does not contain strict penalties for noncompliance.
·      Lacks opportunities for stakeholder and public participation.
·      Does not contain actions to address the latest release of aqueous film forming foam (AFFF) concentrate containing per- and polyfluoroalkyl substances (PFAS).
·    May conflict with existing Hawaii Department of Health’s (DOH) Emergency Order and enforcement actions and the existing Administrative Order on Consent from 2015.  DOH is not part of this proposed Consent Order.
·     Is premature given that the full extent of the damages to the environment including our water resources are unknown, and the Red Hill Bulk Fuel Storage Facility still stores 104 million gallons of jet fuel and diesel over the aquifer.
 

The U.S. Space Force has joined the fuel spill club by dumping 700 gallons of diesel fuel at Haleakala’s summit.  For some unknown reason, a pump was left running for about twelve hours without any supervision.  The reliance of an automatic shut-off of a backup generator was named the culprit.  When Tim was in the Navy, loading diesel fuel was essentially an all department operation that occurred during normal working hours.  The lack of concern for fueling operations by the military’s top brass is disturbing.

Hundreds of gallons of diesel fuel spilled at Space Force facility atop Haleakala

The Honolulu Star Advertiser featured an article on rising crime and violence that has plagued Honolulu since the COVID-19 restrictions were lifted.  Community involvement in the Safe and Sound Waikiki program has referred 456 arrests to city prosecutors from September through December 2022.  The program mirrors Chinatown’s Weed and Seed and hopefully prosecutors will successfully put the perpetrators in jail for their crimes.

Mayor, Rick Blangiardi, announced Handi-Van’s 48 vehicle order in the wake of mounting criticism of the service provided to handicapped individuals on Oahu.  The purchase stems the bleeding but does not fully address the city’s failure to maintain the fleet resulting in 84 vans being placed out of service.  Maintenance woes and staffing problems have resulted in a 36% on-time pickup record and 17% of calls being answered.

House Bill 72 proposes a $500 fine for feeding feral chickens.  The bill proposed by an elementary school principal claims the chickens, who are as large as some of the students, have become aggressive.  Apparently encouraging highly active 6th grade boys to chase the chickens is too dangerous.  Ironically, a photo of grade school kids practicing for a national flag football tournament showed them chasing each other around a park. 

One neighbor is apparently afraid of walking his dog due to the number of chickens.  Tim and Tracey’s dog, Buddy, would love the opportunity of a chicken approaching within the range of his leash.  The problem has been around for decades, and a new law won’t change a thing.  In an unrelated event, Mid-Pac Country Club asked members to stop feeding the ducks.  Tracey finally convinced the ducks to stop hanging out near and in the Kelley pool by chasing the ducks away with a pole.

Oahu residents may report potholes, broken streetlights, cracked sidewalks, illegal dumping, broken signs, and other forms of vandalism by visiting Honolulu 311.  You may submit a work request by using the following link.

Honolulu 311

Honolulu Lifeguard Luke Shepardson won the 2023 Eddie Aikau Invitational Big Wave Contest at Waimea Bay riding the top of the largest wave of the day, dropping in the steep face, and completing the ride after a series of maneuvers.  He defeated 2nd place finisher, John John Florence, who won the last “Eddie” in 2016.  The wave faces averaged 50 feet during the contest and Shepardson started the day as a lifeguard during the early rounds.  Here is a link to the highlights of the “Eddie,” including some epic wipeouts.

The 2023 Eddie Aikau Big Wave Invitational - FULL HIGHLIGHTS (Event Recap)

Pacific Business News, a local business publication, celebrated its 60th anniversary.  Tim and Tracey read the newspaper weekly to keep up to speed on Hawaii’s business environment, enjoy the editor’s “Pupu Platter” articles, and attend educational seminars put on by the staff and other business leaders.  Here is to another successful 60 years.

The first of three coordinated Hawaiian Islands Humpback Whale National Marine Sanctuary Ocean Count documented eighty-three whale observations on Kauai, 75 whales off Oahu and the Big Island, and nine sightings on Maui despite heavy rain.  Three counts occur during the last Saturdays in January, February, and March.

Take a look at our Another Day in Paradise's Video

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