January 2016 E-Mail Update
Here is our 01/12/2016 e-mail update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors website.
Oahu’s strong real estate market continues with median sales prices rising and the median sales price for condos setting a new record. December’s single family home median sales price was $700,000 (1.4% higher than December 2014) and the condo median sales price was $386,250 (6.9% higher than December 2014). The number of sales, number of pending sales, and number of new listings all increased compared to the previous year as both buyers and sellers appear to be motivated to do business. Median sales prices should continue to rise as supply remains relatively constrained. There is 2.6 months of remaining inventory for single family homes and 2.9 months of remaining inventory for condos.
PKF Hospitality Research, A CBRE Company released an initial study showing that new vacation rental listing sights like Airbnb and VRBO have little impact on the hotel industry. Hawaii’s consistently high occupancy levels indicate that there is significant unsatisfied demand the alternative vacation rentals help serve. The study does not address the regulatory risk from county statutes that prohibits rental term less than one month in many neighborhoods and from potential condo association fines and legal action resulting from prohibited vacation rental activity. Stott Property Management has sent cease and decist letters to four tenants that subleased their apartments in violation of the lease and state statutes and required three of the four tenants to move since they were month-to-month tenants. County statutes currently hold the property owner financially responsible for any regulatory violations associated with renting a house, condo, or room.
The City and County of Honolulu and the State of Hawaii continue to try to clamp down on “illegal vacation rentals.” The latest law introduced by state Senator Laura Theilen and signed by Governor David Ige requires that all ads for transient accomodations list the transient accomodations tax number. The intent of the law is to make sure that landlords are paying the transient accomodations tax for short-term rentals and to help the counties identify potential violations of local statutes regulating rental properties. Fines can be up to $500 per day for the first violation, $1,000 per day for the second violation, and $5,000 per day for additional violations.
Governor Ige continues to make headlines about his desires to provide affordable housing, and he acknowledges that the state and local government create many of the hurdles, yet he refuses to listen to developers and economists who recommend removing the state Land Use Commission. Most states give zoning authority to the counties while the state of Hawaii duplicates many of the review functions carried out the counties and provides a second venue for special interests to veto much needed housing projects. Instead of recognizing the problems and repeated failings associated with state housing projects, Governor Ige complains about a lack of water and sewer connections on state lands. A lack of available new housing stock will continue to make affordable housing an issue in Hawaii. In a purely symbolic move, Governor Ige extended the state’s emergency proclamation on homelessness by 60 days. There is no funding specifically attached to the proclamation. In related news, the Hawaii Supreme Court ruled against the appeal made by the Sierra Club Hawaii Chapter and former state Senator Clayton Hee who argued that the Land Use Commission’s reclassification of land for D.R. Horton-Schuler Homes’ long-planned 11,750-home-master-planned Hoopili project in Ewa Beach violated the state constitution.
WalletHub ranked Honolulu dead last in monthly median starting salaries when adjusted for cost of living, among the 150 largest job markets in the United States. The news comes as little surprise to young adults who try to make ends meet. Honolulu ranked third from the bottom for housing affordability.
A Chinese developer purchased nearly 23 acres of land in Ko Olina with plans to develop two towers. The total development will include a 150-room luxury branded hotel and a 150-unit luxury condo complex with condo residents having access to the hotel amenities. In related news, Oahu’s first Four Seasons Hotels & Resorts-branded property is slated to open in the spring of 2016 after the former Ihilani hotel completes a major remodel.
A planned $300 million golf resort community in Makaha Valley will include a 300-room, four-star hotel according to the developer. The hotel is scheduled for completion in two years. The resort and residential project will protect the valley’s heiau, expand existing taro patches, and restore the valley’s watershed and native environment. The developer’s goal is to upgrade the existing neighborhood while collaborating with the University of Hawaii at West Oahu to develop curriculum supporting the local economy.
Larry Ellison has decided to throw in the towel and sell a controlling interest of Island air to a Honolulu-based investment fund. Ellison will keep a non-controlling interest in the company through a separate entity. Island Air lost $21.78 million in 2014, stopped flying to Kauai, cancelled delivery of two new planes, and laid off staff to preserve cash flow. Island Air has recently improved on-time performance and customer service.
The owner of the Blue Note Jazz Club in New York City opened its newest location, Blue Note Hawaii, on December 28th in the Outrigger Waikiki Beach Resort. Ukulele virtuoso and composer Jake Shimabukuro and American jazz artist and saxophonist Kenny G. will be among the first musicians to play in the 300-seat, 9000-square-foot facility designed by a local architectural and interior design firm. The venue will showcase two performances nightly, every day of the year and offers a full-service restaurant and bar. Blue Note currently operates five music clubs in New York City, one in Washington D.C., one in Milan, Italy, and two in Japan.
The United States Supreme Court issued an injunction that halted the race-based Native Hawaiian-only election on behalf of five Hawaiian residents and one Texas resident of Hawaiian descent who opposed the election-process as discriminatory. The purpose of the election was to select delegates to a planned constitutional convention that would lay the ground rules for a separate Native Hawaiian entity.
Hawaii suffered “a black eye” when the U.S. Women’s National Soccer Team canceled a “friendly match” with Trinidad and Tobago on the day of the event. The U.S. team claimed that the field was in poor condition while some Hawaii football coaches contend that the field is in good condition. The U.S. Soccer team provided an open practice at Aloha Stadium on Saturday, December 4th, and decided during the practice that the field was unfit for competitive play. About 15,000 disappointed fans, many who already flew in from other islands, were understandably upset by the decision.
Hawaii employers received some good news when the Hawaii State Department of Labor & Industrial Relations announced a 26% reduction in business contributions to the unemployment insurance fund. The Unemployment Compensation Trust Fund, which went bankrupt in December 2010, currently has $460 million in the bank.
The state of Hawaii continues to underfund pensions and has one of the poorest funded pensions in the nation. The state can only currently pay about 60% of its retirees and the pension hole will grow by another $200 million next year according to the Employee’s Retirement System. Earlier this year, the Grassroot Institute of Hawaii said at least 134 retirees continued to receive pension payments worth more than $500,000 in public pension money after they died. The state has hired a consultant to determine areas of risk and it is waiting for the results. How about requiring the heirs of those retirees to return the unauthorized payments? The state could face higher interest rates when issuing general obligation bonds as accounting changes will require the state to add these unfunded liabilities to the state’s balance sheet.
The 2015 Energy Resources Coordinator’s Annual Report highlighted Hawaii’s progress in creating electricity from renewable sources. The state generated 21.1% of its electricity from renewable sources, far exceeding the original goal of 15% by the end of 2015. Wind and rooftop solar voltaic systems generated over 56% of the state’s renewable electricity. Despite having active volcanoes, Hawaii still only generates 12.3 % of its renewable energy from geothermal and has only one new geothermal plant in the works out of a total of 60 new planned renewable energy projects.
A University of Hawaii data visualization project received $600,000 from the National Science Foundation for development. The University of Hawaii will contribute and additional $257,000 for a system that will be the most modern in the United States when complete. The project comes at a time when enrollment in information and computer science at UH is growing rapidly. Approximately 950 researchers and students are in line to use the system for projects in oceanography, astrobiology, mathematics, computer science, electrical engineering, biomedical research, archeology, and computational media. The system is scheduled to be operational within the next three years.
The University of Hawaii Rainbow Wahine volleyball team saw their fantastic season end a week before they would have liked. UH fell to the University of Minnesota in four sets in the Elite Eight of the NCAA tournament a day after sweeping two-time defending champion Penn State. The Rainbow Wahine finished the season with a 29 – 2 record.
One of Hawaii’s signature events, the Honolulu Marathon, has seen participation grow to over 31,000 participants, an increase of about 1,000 runners compared to last year. The Honolulu Marathon is the fourth-largest marathon in the United States behind New York, Chicago, and Boston. Just thinking about running 26.2 miles makes us tired.
Local Burger connoisseurs will have a new location to visit when Five Guys Burgers and Fries opens its first Hawaii restaurant in the Town Center of Mililani and a second restaurant in Kapolei. The burger chain will move in as part of the Town Center of Mililani’s $5 million renovation to the shopping center’s main entrance, center court, promenades, and theater court area.
Hawaii’s biodiversity is quite astounding considering its small footprint and relative isolation from the rest of the planet. The number of known specimens recently grew with the discovery of 74 new beetle species of round-wasted predatory beetles found living on Haleakala volcano. Currently there are 239 know species of beetles in Hawaii, all of which descended from a single common species.
A newly discovered fungus is killing hundreds of thousands of ohia lehua trees on the Big Island. The disease, called rapid ohia death, was found to have affected 50% of the ohia trees across 6,000 acres of Big Island forest and is believed to have spread further. Stopping the spread can be tricky because a tree can be infected months before showing any signs of the disease. Ohia is important to Hawaii’s water supply because it is very effective at soaking rainwater into the ground and replenishing the water shed. The tree’s nectar is a critical food source for many native birds and animals.
High costs of doing business in Hawaii coupled with environmentalists’ labeling the industry as a public health nuisance has sunk the last commercial sugar operation in Hawaii. Alexander & Baldwin, Inc. announced last week that it will close its Hawaiian Commercial & Sugar Co. plantation on Maui and lay off nearly all of its 675 employees starting in March. The company forecast of roughly $30 million for the operation is forcing the company to re-evaluate its options. Under a new model, Alexander & Baldwin, Inc. will divide up the plantation into smaller farms for different uses and develop an agriculture park.
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