March 2017 E-Mail Update
Here is our 03/09/2017 e-mail update. It 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.
The February median sales price for single family homes was $755,000 (7.9% higher than February 2016) and for condos was $385,000 (1.7% higher than February 2016). Graphs of the median sales price distributed by the Honolulu Board of Realtors show that Oahu home prices have been essentially flat since setting records in May 2016. Supply remains constrained. There were 1,012 active single family home listings (9.5% lower than February 2016) and 1,525 active condo listings (8.4% lower than February 2016). There are currently only 2.3 months of single family home inventory and 2.4 months of condo inventory. While demand remains strong, affordability appears to be constraining any further growth in home prices.
In a sign of flattening economic activity, Young Brothers Ltd. reported shipments between interisland ports dropped 0.6% in 2016. The announcement lends support to the University of Hawaii Economic Research Organization’s (UHERO) that economic deceleration is underway after seven years of sustained economic growth. Tourism revenue has been essentially flat when compared to the decade before the Great Recession despite Hawaii hosting significantly more visitors now than a decade ago. The amount of revenue generated per visitor has steadily declined, partly due to the strong dollar. Oahu, which receives most of the visitors, saw spending decline 3% when compared to 2015 while the neighbor islands, which are more dependent on domestic visitors, have seen gains between 4% and 9%. Construction and health care are expected to moderate after strong gains over the past two years. The biggest economic uncertainty comes from federal spending. 55% of federal dollars spent in Hawaii is associated with the Department of Defense. Hawaii has recently seen a net migration of military and support personnel leaving the islands. A federal hiring freeze and shifting priorities could have a negative impact on Hawaii’s economy. Falling energy costs have recently kept a lid on inflation. That trend is ending and inflation is expected to pick up due to rising home prices and rents. The forecast through the end of the decade predicts slowing economic growth.
The number of Airbnb listings on Oahu has nearly tripled over the past two years with the majority of active listings consisting of single bedrooms in houses and condos. The average daily rate has also jumped 24% from 2015 to $237 per day. The Hawaii Tourism Authority chimed in that they are concerned that the lack of regulation in the vacation rental market could take away years of quality control built by the hotels despite 95% of Airbnb listings having four-and-a-half or five star ratings. The comment speaks volumes to the state’s protection of the hotel industry at the expense of the island entrepreneur. Hawaii will always be an expensive place to live. It may be time to recognize that those living on the islands should be able to open up their homes to visitors so that they can afford to live in one of the most expensive places in the country. Isn’t that the spirit of Aloha? Unfortunately, local and state politicians remain focused on a continuous failed effort to provide government funded or mandated affordable housing. Tim and Tracey have very different views concerning vacation rentals in residential neighborhoods and vigorously debate the issue constantly.
The last three P-3C Orion planes left Kaneohe Bay for deployment which will end in their new home on Whidbey Island in Washington. Until recently, eight P-3 Orion planes were stationed at Kaneohe Bay with about 360 personnel. Most of those personnel left around the holidays with the last 60 leaving the first week of March. The departure ends an era where up to seven squadrons of 50 P-3s flew out of Oahu since 1964. The P-3C Orion, a sub-hunting plane whose powerful radars and electro-optical surveillance systems have also proven useful in missions supporting ground troops in Afghanistan and Iraq. The P-3 is being replaced by the P-8A Poseidans and Kaneohe anticipates being home to two P-8A Poseidans airplanes in the future.
A UHERO report criticizes the state for keeping 10% of the General Excise Tax (GET) surcharge for the island of Oahu as being excessive. Act 247 suggests that the costs recouped by the state should reflect the additional burden imposed by collecting and administering the surcharge. However, the fee collected by the state for the surcharge has exceeded the entire budget for the State Department of Taxation each and every year the surcharge has been collected. UHERO calculates that it costs the state 0.35% of the GET surcharge revenue to administer the additional tax. In other words, the state pocketed 9.65% of Oahu taxpayers’ money for spending other than rail. The report highlights the hypocrisy of state lawmakers who rail against the much-maligned elevated train project while reaching into the pockets of Oahu taxpayers. The City and County of Honolulu is now asking the state to make the GET surcharge permanent in order to complete the Honolulu Authority for Rapid Transit’s rail project to Ala Moana Center.
Disney, Marvel Studios, and IMAX are planning a major movie and television series project at a location in Kalaeloa, location of the Navy’s former air base, Barber’s Point. The ABC series “Marvel’s The Inhumans,” based on popular comic book characters will start production soon. The first two episodes will be shot using IMAX cameras with a planned release date of the IMAX movies in September with the television series starting soon after. Jean Higgins, co-executive producer of “Lost,” is the producer for this latest Hawaii project. One major reason for ABC to choose the Hawaii location is the film tax credit that Hawaii offers: 20% on Oahu and 25% on the neighbor islands. The project is expected to employ hundreds of workers in the state. It is shocking that state government officials still fail to recognize that lower tax rates create opportunities for the constituents when business leaders repeatedly point to tax incentives as a major reason in choosing Hawaii as a location to do projects.
The U.S. Navy is joining the solar party on Kauai with its announcement of leasing 181 acres of Department of Defense land to a developer for forty years to construct, operate, and decommission a solar farm and battery storage facility. The project planned in two phases, would provide 44 megawatts of electricity to the Pacific Missile Range Facility (PMRF) at Barking Sands and to the public grid managed by the Kauai Island Utility Cooperative (KIUC). The project could make the PMRF a net-zero energy facility.
Pacific Biodiesel Technologies began farming its largest biofuel crop by planting 115 acres of sunflowers on Maui. The project is the largest in the state and the only locally sourced biofuel project. Pacific Biodiesel Technologies was founded in 1995 and it created the first retail biodiesel pump in the United States. The company has a current production capacity of 5.5 million gallons per year.
Court rulings against The Thirty Meter Telescope (TMT) have not only had a negative impact on Hawaii’s business reputation, it now negatively impacts the University of Hawaii’s (UH) bank account. TMT did not make the $150,000 rent payment in January due to a judges ruling that questions the legality of the sublease agreement between UH and TMT.
University of Hawaii’s iconic women’s volleyball coach, Dave Shoji, has announced his retirement after 42 years as the Rainbow Wahine’s head coach. Shoji’s legendary career includes the second most number of wins ever, 1,202, and four national championships. Robyn Ah Mow-Santos, a former All-American, Olympian, and assistant coach will try to continue the program’s success as only the third head coach for UH in the women’s volleyball program’s history. Ah Mow-Santos is considered one of the greatest players in school history. UH fans hope that she can continue her success as the head coach.
Air Asia X, a long-haul low cost airline, announced that it would commence flights four times a week from Malaysia to Honolulu via Japan. The airlines announced introductory rates of $99 from Honolulu to Osaka and $149 Honolulu to Kuala Lumpur via Osaka for travel between June 28, 2017 and February 6, 2018. The route provides the Hawaii tourism market access to Malaysia for the first time.
A new report shows that Hawaii consumers saved an average of $945 per year by improving energy efficiency through the use of energy efficient appliances and lighting. Hawaii’s number one ranking in dollar terms reflects the high cost of electricity in the state. Hawaii ranked 17th in kilowatt reduction meaning that there is additional room for improvement.
If you looking for a caffeine fix and want to try something other than Starbucks, Island Brew offers a local alternative specializing in 100 percent Hawaiian grown coffee and espresso. Island Brew just opened its third Oahu store in Ala Moana Center next to Bloomingdale’s on the third level. Island Brew also has stores in the Hawaii Kai shopping center and Kaimuki Atrium.
Hawaii has been hoping that Dick’s Sporting Goods would replace Sports Authority after the chain closed all of its stores after filing for bankruptcy. Despite having no other competition in the state, none of the executives at Dick’s Sporting Goods have mentioned Hawaii in the company’s expansion plans. It looks like Hawaii residents will have to look to Amazon and other internet providers to buy sporting goods not carried by the islands’ department stores.