June 2020 E-Mail Update
Here is our 06/10/2020 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.
May sales data reflected that social distancing appears to be a concern for residents and buyers. The May median price for single-family homes was $797,000 (3.5% higher than May 2019) and for condos was $399,000 (4.4% lower than May 2019). The demand data was even more dramatic. Closed sales for single-family homes dropped 22.5% lower while for condos it dropped 51.2%. For the first time that Tim has noticed, the number of pending sales was higher for single-family homes (437) than condos (395). As a result, supply tightened dramatically for single-family homes (2.6 months of inventory) compared to condos (3.8 months of inventory). However, we must remember to keep things in perspective since the availability of Oahu property supply is still historically tight when six months of inventory is considered a balanced market.
The rental market has mirrored the sales market in terms of demand for single-family homes over condos, particularly high-rise Honolulu condos. The situation in Waikiki has become even more dire since the mayor declared that short-term vacation rentals are considered a non-essential business and the governor has required a 14-day quarantine of all Trans-Pacific travelers. The supply of Waikiki long-term rentals (one month or longer) has exploded and rents have dropped significantly. Stott Property Management, LLC has seen rents drop for Honolulu high-rise condos between $150 and $300 per month when compared to rents in February. On the positive side, a large majority of tenants have been able to remain current on their rent through the end of May.
The University of Hawaii Economic Research Organization (UHERO) published some disturbing, yet not surprising, forecasts for the Hawaii economy. In the pessimistic end of the forecast, visitor arrivals will post an annual decline over 70%, while in the optimistic end of the forecast, it will take five years for visitor counts to recover. Another estimate by the state Department of Business Economic Development (DBEDT) and Tourism forecasts a six-year recovery for tourism. The DEBDT expects visitor numbers to be 3.4 million in 2020, a 67% reduction compared to 2019 and a level not seen since the late 1970’s. UHERO expects population outmigration to accelerate with 25,000 more people leaving the islands in the next two years for better economic opportunity. Hawaii’s recovery is expected to lag the rest of the nation due to the state’s reliance on tourism.
Oahu’s local economy tentatively started to reopen in May. Residents could sunbath at Hawaii beaches for the first time on May 16th and the beaches have been packed since then. Outdoor malls were allowed open May 15th. Hair and nail salons opened May 29th and Tim was able to get a haircut for the first time in 2 ½ months. June saw more activity with restaurants allowed to reopen at reduced capacity on the 5th and bars and night clubs will be allowed to reopen on the 19th. Oahu may experience a “Footloose” moment since dancing is still forbidden.
Hawaii’s state-wide hotel occupancy rate dropped to 8.9% in April as the 14-day quarantine of Trans-Pacific travelers has essentially shut-down the tourist industry and the stay-at-home emergency orders kept residents at home. More hotels are expected to shut down since the losses are greater at these occupancy rates by staying open versus closing their doors. May and June numbers are expected to be equally dismal since the quarantine is expected to remain past June 30th.
Civil Beat highlighted one interesting measure of economic activity in an article dated May 18th describing a pair of letters exempting the City of Honolulu from paying Hawaiian Electric Company (HECO) for failing to deliver 800,000 tons of trash in any given year to the H-Power plant run by Covanta for HECO. The city has paid HECO $2.7 million over the past six years for failing to deliver enough trash. Trash deliveries have dropped by 15% due to the pandemic and the city is claiming a “force majeure” event prevents the city from having to pay the penalties. Who would have thought that producing less trash could have consequences?
Hawaii real estate investors and hopeful visitors should be prepared for the possibility that the state may not be welcoming tourists any time soon. An article by Lee Cataluna accurately describes the attitudes of some state residents and apparently many in state government. Some snarky comments in the article dated 5/29/2020 include, “The pandemic and tourism shutdown has opened their (landlord’s) eyes to the possibility that the people who live here can be potential assets rather than crybaby liabilities who whine about overnight guest parking on their lawn or partying at all hours and banging their rolling suitcases up the stairs in the middle of the night.” Another gem was, “who can blame folks for trying to survive the economic destruction, right? Hustlers gotta hustle.” Apparently Lee does not know many people that have found themselves unemployed as a result of the economic destruction, nor has she talked to many local tenants who are unable to pay their rent or owners who don’t know how they are going to pay this month’s mortgage. She seems confident in her position at the newspaper and that she will not join the 25% of the state that is unemployed even though the paper has shrunk and no longer prints a Saturday edition. Lee Cataluna’s articles aren’t typically as callous to certain segments of Hawaii’s population as this particular article, and Tim and Tracey look forward to reading them.
Tourists that plan on defying the 14-day quarantine should refrain from posting their activities on social media until after they return home. Hawaii officials alerted by a tourist’s posts on Instagram showing him at the beach, riding The Bus, at Diamond Head, and several other locations arrested the individual one hour before he was to board a flight home. The individual posted that he was at the Daniel K. Inouye International Airport and leaving in a few hours. The Attorney General’s Department alerted state sheriffs who arrested the visitor at the airport just before he could board.
In a Zoom call featuring Governor Ige and all four mayors, Ige announced that the 14-day quarantine of passengers arriving on Trans-Pacific flights will be extended beyond June 30th and did not offer any dates on when the requirement will be lifted. According to the article, the bulk of the hour-long call involved the governor and mayors congratulating themselves on their success in flattening the curve as if that is the only concern that the residents have. Ige also failed to give a date when the quarantine requirements will be lifted for interisland travel. The 14-day quarantine for interisland travelers will be lifted on June 16th.
A power struggle continues between the state legislature and Governor Ige’s administration over the handling of the Covid-19 pandemic. Lawmakers voted on May 22nd to move more than $1.3 billion into the states “rainy day” fund where they would have more control over how the money would be distributed. Ige’s administration argued that such an arrangement would require Hawaii to return some of the money distributed to the state by the CARES act. In a separate incident, one of Ige’s top economic advisors told a Senate Committee that he would not make staff members available for testimony in front of the panel due to some senate members’ “hostility.” The state Senate is looking at the possibility of using subpoenas to obtain information that Ige’s administration is “withholding” from the public.
The front page of the Honolulu Advertiser on 5/28/2020 highlighted the tension as the state continues to order strict social distancing protocol while the number of infected continues to fall. One article describes Lt. Governor Josh Green’s criticizing Governor Ige’s slow approach to reopening the Hawaii economy and allowing travel between the different islands. Green stated, “we should have opened ten days ago (referring to interisland travel and reopening business). That was a mistake. From a medical standpoint, we would have been fine ten days ago.” Green is a Hawaii island emergency surgeon and has been highly critical of Governor Ige’s and his administration’s handling of the crisis caused by the pandemic. A second article describes Unite Hotel Local 5’s protest to demand that the state limit the perceived health risks associated with allowing tourists to return to the island without having to quarantine for 14 days. Their demands consist of requiring the hotel chains to maintain current employment levels despite the devastation inflicted by the quarantine requirements. The Local 5 financial secretary-treasurer stated, “They (the hotels) plan to reopen and leave 40% of us home forever.” Apparently, the union is miffed that the hotel industry has not committed to any of its “Safe Hotels, Safe Hawaii” report that the union published last month. And the third article described the first 2020 mayoral forum that appears to be wide open and has a mix of candidates including experienced politicians and business leaders. Former U.S. Rep Colleen Hanabusa argued “we need someone who understands all levels of government – federal, state, and county. We need someone who will make those connections because it is government that’s going to get us out of this.” Businesswoman Choon James countered “insanity is voting the same old insiders in and expecting a different result.” Every candidate had the opportunity to make their pitch as to why they are best suited to lead the City and County of Honolulu as the next mayor.
Hawaii’s Department of Labor and Industrial Relations (DLIR) stopped reporting daily unemployment counts on May 28th because the antiquated mainframe is providing inconsistent reports according to an article published by Civil Beat. Some workers that were laid off in mid-March still have not received an unemployment check. The last count showed 254,000 claims filed and 62,000 files left to process.
A statement made on May 12th by Major General Kenneth Hara, incident commander of Hawaii’s coronavirus response may have been prescient more so for the nation than that of Hawaii. He was quoted, “If we let the economy go the way its going, I feel there will be significant unrest that could lead to civil disobedience and, at worst case, civil disturbance and rioting.” This very issue is now being discussed throughout the country as anger exploded over the unnecessary death of George Floyd at the hands of a Minneapolis police officer.
The state Supreme Court issued an order instructing the state Public Defender’s Office to file motions to release hundreds of jail inmates early to protect them from being infected by the Coronavirus outbreak in Hawaii’s prisons. 50 of more than 300 inmates released early have been arrested again, some multiple times. Some of the offenses include a 74-year old man being attacked by a golf club, a woman receiving cuts on her face, arm, and hands by an attacker with a sword, and a 14-year old victim who was sexually assaulted by an individual who was convicted of seven accounts of second-degree sexual assault. There have been no confirmed cases of the Coronavirus in Hawaii’s prison system. Lt. Governor Josh Green argued against the early releases stating that the inmates were likely safer in prison then being released to the general population. Unfortunately, additional victims suffered from the state Supreme Court’s ruling.
Young Brothers, LLC, Hawaii’s only regulated interisland ocean cargo company, has notified the state Public Utilities Commission (PUC) that its financial situation has been devastated by the economic disruptions caused by the coronavirus pandemic and has requested $25 million from the state’s share of federal Covid-19 emergency funds. Young Brothers, LLC’s parent company, Saltchuck Resources, Inc. has absorbed losses of $10 million last year and $11 million the year prior for Hawaii’s interisland shipping operations and expected a loss this year of $12.3 million before the pandemic. The company filed a rate increase proposal averaging 34% to PUC late last year and says it is currently losing about $3 million per month. While Matson also provides interisland cargo deliveries to other outer islands, Young Brothers, LLC is the only shipping company that delivers goods to Molokai and Lanai. The company’s spokesman explained that the parent company can no longer absorb the losses and Young Brothers, LLC will no longer be able to pay its bills and operate if it does not receive the funds. PUC has opened an emergency docket to evaluate Young Brothers, LLC’s financial distress.
A new statewide poll shows that Hawaii residents support for the Thirty Meter Telescope (TMT) is growing. The latest poll showed that 61% of residents support moving forward while 32% are opposed. The survey was taken just before the governor and mayors shut down the state in mid-March while a poll taken six months prior showed that support had slipped to 50% of the respondents. It is possible that residents were realizing that some diversification in the state’s economy was needed and that scientific discovery might be a worthwhile venture. According to the survey, two-thirds of Hawaii residents support the use of law enforcement to provide access to the mountain and to allow other projects to move forward. Three-fourths of Hawaii residents agreed that government should enforce the law and peacefully arrest protestors that break the law.
Parents looking at public schools should consider the latest information released by U.S. News and World report. Hawaii Kai’s Henry J. Kaiser High School tied for #1 in math and reading proficiency in the country.
University of Hawaii (UH) scientists have identified Puhahonu as the largest shield volcano in the world at 171 miles long and 56 miles wide. Puhahonu, which means turtle rising for breath in Hawaiian, is twice the size as Mauna Loa and nearly as large as the big island. 99% of the volcano is below the Pacific Ocean and it is so massive that the volcano causes the earth’s crust to sink. Five volcanoes formed the Puhahonu shield volcano.
Changes could be in store for natural treasures like Hanauma Bay. A study that began during the shut-down describes “remarkable changes “ due to an absence of humans. The researches have noticed larger fish feeding in the shallows, new coral growing on horizontal surfaces where they were likely to previously kicked by snorkelers, and up to two Hawaii monk seals resting on the beach when one used to be a rare sight. There seems to be a discussion about limiting the population of visitors at attractions like Hanauma Bay to help improve the balance between accessibility and allowing nature to recover.
Two small cottages maintained by the Seed Conservation Laboratory and the Micropropagation Laboratory could be the answer to preventing the extinction of over 400 threatened or endangered flowering plant species in Hawaii. Over 240 of the species are considered to have less than 50 plants remaining in the wild. The Seed Conservation Laboratory holds over 600 different plants, 40% native to Hawaii, in cooled or frozen environments. The seeds have been collected since the 1990’s when Hawaii became known as the extinction capital of the world.
Hawaiian musician Willie K passed away on May 18th at the age of 59 in his home on Maui after a two-year battle with small-cell lung cancer. He continued to perform while being treated for his disease. His versatility ranged from performing traditional Hawaiian songs to Jimi Hendrix and he entertained crowds for over 40 years.
Tracey and Tim have spent a lot of time ocean swimming while the pandemic restrictions have been in effect. Tracey has posted her best photos on an Instagram account and a recently linked Facebook account. You can see the photos with the link below.
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