July 2020 Email Update Oahu Real Estate
Here is our 7/9/2020 e-mail update. The newsletter is sent after the statistics for the preceding month have been posted on the Board of Realtors website.
The June median price for single-family homes was $770,000 (3.8% lower than June 2019) and for condos was $421,500 (2.5% lower than June 2019). Demand for single-family homes dropped 7.6% compared to last year and for condos dropped 34.0% as Hawaii finished their third month of pandemic related restrictions. The supply of single-family homes remained extremely tight as sellers hesitate to put their houses on the market. There was only 2.5 months of single-family home supply while the supply of condos crept up to 4.1 months of inventory. The demand for condos has been falling faster then the reduction of new inventory.
Stott Property Management, LLC is seeing similar trends in the rental market. The summer moving season has gotten off to a slow start as the military struggles with pandemic related issues and local residents for the most part are sitting tight. Vacant single-family homes have been renting quickly (some in less than one week) while high-rise condos have been sitting vacant for months. A recent Zillow search showed that in Waikiki alone there are currently 53 studios, 110 one-bedroom condos, and 71 two-bedroom condos advertised for rent on a long-term basis.
One of Hawaii’s leading economists, Paul Brewbaker, held a webinar for the Hawaii Association of Realtors on June 17th discussing housing trends in light of the Covid-19 pandemic. In much of the presentation, he hinted that it is still a little too early to say what effect, if any; the pandemic has had on housing prices. Both supply and demand have dropped as a result of the pandemic resulting in fewer transactions. Since both supply and demand have dropped, there has not yet been any noticeable impact on prices and Brewbaker was hesitant to provide any predictions. He did point out that all the risk is currently on the downside and that condo inventory in terms of months of inventory is noticeably higher than single-family homes. The change in supply actually started with the passing of Ordinance 19-18 on Oahu that made the advertising of unlicensed vacation rentals a fineable offense. That inventory of divergence appears to have continued as a result of the Covid-19 pandemic. Brewbaker currently anticipates that the pandemic will have a greater impact in the commercial real estate market with retail and food service feeling most of the pain. He says that it is too early to tell if there will be a noticeable impact on Oahu’s residential condo market. Here is a link to the webinar.
Bank of Hawaii Foundation released a survey of 1,096 Hawaii residents highlighting the compounding economic troubles brought on by the coronavirus pandemic. 45% of island households stated that they have lost income, 25% are behind on some bills, and roughly 13% of households have requested food from a food drive or from the food bank.
9,116 visitors to Hawaii arrived in May, a 98.9% drop from the 841,376 visitors that arrived in May 2019. The quarantine has devastated the state’s tourism reliant economy and shuttered hotels and businesses tied to the tourism market.
Governor Ige has extended the fourteen-day quarantine requirement for passengers on Trans-Pacific flights until July 31, 2020 in his latest emergency proclamation. People flying to Hawaii should think twice before thinking that they will be able to skirt the rules. One Hawaii resident was recently arrested in the hallway of her condominium after neighbors reported seeing her sunbathing with her husband and walking her dog. Hotel personnel recently reported that a couple was violating quarantine and were arrested at their Waikiki hotel. One family recently spent one hour on Oahu before deciding to return home when they learned that the hotel was going to issue them a single-use room key and that they would not be able to open their room with the key for fourteen days. On August 1, 2020 visitors will be able to avoid the fourteen-day quarantine by obtaining a negative Covid-19 test taken within 72 hours of their trip to Hawaii. The state is currently working with CVS Pharmacy to launch a testing protocol and the state will accept any negative test result from a Clinical Laboratory Improvement Amendments (CLIA) certified lab. Those passengers that do not arrive with a negative test must still complete the fourteen-day quarantine.
The fourteen-day quarantine requirement for interisland travel was lifted on June 16th. Departing passengers must have their temperature checked and fill out a new form prior to getting on the airplane. Those with temperatures above 100.4 are not allowed to fly.
The U.S. Department of Justice filed a statement of interest on June 23rd challenging the constitutionality of the governor’s fourteen-day quarantine order saying in discriminates against out-of-state residents in a matter that harms Hawaii’s economy. The statement supports residents on Kauai and the Big Island who have filed a lawsuit challenging the governor’s use of emergency powers during the pandemic. The defendants in the lawsuit are the governor, state attorney general, and the state of Hawaii. A U.S. District Judge ruled on July 3rd that Governor Ige’s emergency mandate is reasonable during the public health crisis and denied a request for a temporary restraining order. The judges ruled that a temporary quarantine could be instituted in certain areas if evidence shows that unlimited travel would directly and materially interfere with the safety and welfare of the area.
Stott Real Estate, Inc. and Stott Property Management, LLC received e-mails from the state Department of Taxation specifying that all taxpayers required to file monthly General Excise Tax and Transient Accommodation Tax returns must do so electronically starting for tax returns beginning on or after July 1, 2020. The tax filing deadline is August 20, 2020. Investment property owners with annual tax bills exceeding $4,000 per year are required to file and pay monthly. Any taxpayer that must pay monthly and fails to e-file, will be charged a penalty of 2% of the tax owed. Here is a link to the tax notice.
The director of the state Department of Labor and Industrial Relations (DLIR) has taken a leave of absence as the stress related to the state’s failure to provide timely unemployment relief has taken its toll. Some frustrated members of the public have reached the breaking point financially and emotionally and DLIR employees have received death threats as a result. The state’s antiquated server, commissioned in the 1980’s, cratered under the unprecedented demand for unemployment benefits and the department had paid only about one-half of the 250,000 claims as of June 6th and 25% of those claims had not yet been processed. As of June 25th, DLIR has paid $1.7 billion in unemployment benefits to 145,684 valid claims. Close to 70,000 claims have been deemed invalid for various reasons. Roughly 11,000 people, some that filed in March, are still waiting for the first unemployment checks as of July 1st. DLIR reported on June 25th that it likely paid out $15.8 million in fraudulent Pandemic Unemployment Assistance benefits out of roughly $400 million in claims paid.
The state legislature passed a measure to approve raises to state workers totaling $150 million even though the state faces a $2.3 billion budget deficit over the next thirteen months. The approved raise occurs while approximately 250,000 private sector workers have lost their jobs since March.
The Hawaii Supreme Court unanimously rebuked the state of Hawaii for mismanaging the Hawaii Homes land trust and failing roughly 2,700 Native Hawaiians who have been waiting decades for land leases on lands held by the trust. The Hawaii Homes land trust was created nearly 100 years ago by the federal government to rehabilitate the Native Hawaiian race. The state took over management of the land trust upon statehood in 1959. People at least 50% Hawaiian are eligible to apply for 99-year land leases at $1 per year. A lawsuit was filed in 1999 on behalf of 2,700 beneficiaries who alleged a breach of trust. The wait list has since grown to over 28,000 applicants. The justices wrote, “rather that placing beneficiaries on homestead lots, the state placed beneficiaries on a long waitlist.” A significant number of plaintiffs have died while waiting. The ruling allows the plaintiffs to seek monetary damages from the state of Hawaii.
“Auntie Blanche” McMillan has created permanent homes for 32 homeless people from Waimanalo on state land at the end of Hilu Street behind her home on Hawaiian Homestead Land. McMillan, a long-time resident and former neighborhood board member, went to Waimanalo Beach Park in May and convinced 34 of the 350 homeless to follow her to the Department of Land and Natural Resources (DLNR) land and clear 15 acres of land of brush, abandoned cars, and other junk and construct tiny homes and plant gardens. The project called “Hui Mahi’ai Aina,” loosely meaning the land of group farming, was originally part of Lt. Gov. Josh Greene’s plan for a statewide system of tiny homes to provide permanent housing for Hawaii’s homeless. McMillan apparently grew tired of DLNR’s dithering and took things into her own hands. Residents must pitch in to provide security, follow a 10:00 pm curfew, and pay $100 per month to help support utilities and maintenance. Two of the original residents left because of the rules. McMillan hopes to expand the housing by another 100 tiny homes while the state says the plans were never allowed. We shall see what the state plans in response to McMillan’s initiative.
The CEO of the Honolulu Authority for Rapid Transit (HART) acknowledged on June 25th that the twenty-mile rail project will not be completed by the end of 2025 as planned. The current timeline has now slid a few more months and the opening is scheduled for the first half of 2026. The Federal Transit Administration insisted in the most recent recovery plan that HART include a September 2026 opening date. Experts currently say that there is only a 65% chance that the project will be completed by December 2026. Construction work is currently proceeding at the Daniel K Inouye International Airport and 70% of the guideways and stations have been completed.
The City and County of Honolulu has introduced a sidewalk dining program that allows restaurant owners to extend their available seating to adjacent sidewalks in an effort to help deal with capacity constraints from the new social distancing requirements for inside dining. The online application does not require any fees and the goal is to help restaurants survive the pandemic.
Mayor Kirk Caldwell announced plans aimed at revitalizing Chinatown with programs to make it cleaner and safer for businesses and their customers. The initiatives include a $200,000 contract to power-wash and disinfect the sidewalks, step up police patrols, remove graffiti, enforce proper trash disposal, and engage the arts community. Businesses and the public have complained for years about the problems associated with homelessness and this is the latest attempt to clean up Chinatown. The city plans on blocking off hotel street to traffic from 5:00 pm to 9:00 pm and encourage people to walk, bike, dine and shop. The mayor is encouraging restaurants to bring out tables and fill up the sidewalks with outdoor dining. The city may hold additional events if the pilot “open street event” is considered a success. Similar open street events have been held on Kalakaua Avenue in Waikiki and have been well attended.
The mayor expanded Oahu’s face mask requirements to include all indoor public spaces as well as outdoors when physical distancing is difficult to maintain. The mandate went into effect on Friday, July 3rd, and includes private offices, enclosed malls, and public government buildings.
The work to rebuild the Royal Hawaiian Groin, a rock and concrete jetty that has helped ease currents and sand erosion at Waikiki beaches, started in May and is expected to be completed in July. The $1.5 million construction project is funded by Waikiki Beach Special Improvement District Association and the state Department of Land and Natural Resources. The groin was first constructed in 1927 and structural engineers found that the aging structure was at risk of collapsing.
The Board of Water Supply formally transferred ownership of the Haiku Stairs, also known as the Stairway to Heaven to the City and County of Honolulu. The city will solicit proposals from private companies to run and maintain the staircase so that it can be responsibly opened to the public. Visitors have been trespassing and climbing the staircase illegally for more than 30 years.
Financially strapped Young Brothers, the state’s only interisland tug-and-barge service, lost 21 shipping containers overboard off the coast of Hilo on June 22nd. The company recently received approval from the state Public Utilities Commission (PUC) to reduce its twice-weekly shipments between Honolulu and Hilo to once a week. The crew realized that the 21 containers were missing after mooring to the pier in Hilo and nine of the containers were spotted adrift eight miles north of Hilo. An investigation is underway to determine if Young Brothers overloaded the barge resulting in the lost cargo. The company asked the state last month for $25 million in funding for losses endured during the COVID-19 pandemic and resulting 30% drop-in interisland shipping activity. Here is a link to some photos concerning the lost containers.
29 of The Honolulu Star-Advertiser 60-person staff received letters that they would be laid off from the state’s largest newspaper at the end of June. The people receiving the notices include reporters, photographers, copy editors, online producers, graphic designers, and page designers. The staff had already had their hours and pay reduced by 20 percent when four-day work weeks were implemented. The employees’ union negotiated a settlement that twelve staffers have agreed to be laid off while the remainder will take unpaid furloughs totaling six weeks between July and February 28, 2021.
Kona Brewing Company’s Hawaii operations are set to become independent again. Craft Brew Alliance, the current owner of Kona Brewing Company is set to sell the Hawaii operations to a company executive and a Kansas City based investment firm. The construction of the $20 million brewery on the Big Island continues and it will have the capacity to brew 100,000 barrels annually. Kona Brewing Company’s Hawaii operations employs about 220 people.
A popular Honolulu eatery, REAL gastropub, served creative versions of classic pub food with a wide variety of microbrews on tap closed for good, just one year after reopening in Kakaako. The popular bar and restaurant had to close for 18 months starting in September of 2017 due to the closure of Ward Village as part of Howard Hughes Corporation’s development of the neighborhood. The new location featured a seven-barrel brewery where they brewed their own beer on site. The owners just could not figure out a way to open the bar and restaurant profitably at reduced capacity for the foreseeable future. A local restaurant association estimates that 40% of local restaurants will close by the end of the year.
Green sea turtles were nesting for the first time in documented history at Bellows Beach. Thirteen nesting sites have been identified and the city will keep the Bellows Field Beach Park Campground closed through September 4th. The Marine Corps has roped off areas and put up signs to keep people away from the nests.
The Ocean Voyages Institute arrived in Honolulu Harbor on June 23rd with 103 tons of trash pulled from Great Pacific Garbage Patch during the 48-day expedition. It eclipsed last year’s haul of 42 tons of debris collected over 25 days. The institute also deployed GPS-enabled satellite beacons during last year’s expedition that played a key role in locating and collecting the debris. The institute hopes that removing the debris from the gyre, a rotating current halfway between Hawaii and California, will spare coral reefs and wildlife from entanglements. The debris which includes large piles of rope, fishing nets, and discarded consumer plastics will be shipped to the West Coast to be transformed into fuel and repurposed into building materials. The Ocean Voyages Institute is raising funds for another cleaning expedition that departed at the end of June and for expeditions next summer. Here is a link to the Ocean Voyages Institute website.