March 2019 Email Update in Oahu Real Estate
Here is our 03/11/2019 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 median price in February for single-family homes was $789,000 (2.1% higher than February 2018) and for condos was $415,000 (1.5% higher than February 2018). Demand continues to trend downward and as a result, the supply of both single-family homes and condos continues to rise despite a steady number of new listings. The number of sales for single-family homes dropped 4.1% and condos dropped 16.6% compared to last year and the reduction of pending sales continues to drop at double-digit rates. Despite the trends, the supply of available properties continues to be relatively tight. There are currently 3.2 months of inventory of single-family homes and 3.6 months of inventory of condos. 6.0 months of inventory is considered a balanced market.
The University of Hawaii Economic Research Organization (UHERO) recently released a somewhat downbeat forecast for Hawaii’s future near term economic growth. The introduction stated, “Hawaii’s economy ended 2018 on a poorer footing than 2017. Across a number of dimensions, the year saw a flattening out or outright decline in activity.” The report notes that tourism numbers have been essentially unchanged since the first quarter in 2018 and the fourth quarter saw a decline when compared to the fourth quarter of 2017. Per tourist spending dropped in the latter half of the year and UHERO now sees a higher risk of a drop in tourism dollars. The report also points to the negative population growth over the past two years weighing on demand for goods and services. The report concludes, “But the configuration of risks is not tilted decidedly downward. Fasten your seatbelts please.”
A recent report by GoBankingRates helps shed some light into why residents are leaving Hawaii. The report published March 4th calculates Hawaii’s average living wage at $136,437. The report states “Hawaii is the most expensive state in the country, mostly due to housing costs that run more than triple the national average at about $36,000 per year. As such, despite a median income of nearly $75,000 a year, a typical Hawaiian is still over $61,000 short of a living wage – the largest such gap in this study.” The study uses data from the Bureau of Labor Statistics and the 50/30/20 budgeting rule that allocates 50% of income to necessities, 30% to discretionary expenses, and 20% to savings. Even though the median income was less than the average living wage in every state, the median income in Hawaii barely covered the cost of necessities in Hawaii.
Hawaii was ranked the happiest state once again in 2018 placing in the top five in every category: Career, Social, Financial, Community, and Physical. Hawaii topped the U.S. in wellbeing for a record 7th time. The data is based on more than 115,000 surveys with adults across all fifty states and conducted in all 12 months. Hawaii placed #1 in career (liking what you do each day), social (having supporting relationships), and financial (managing economic life to reduce stress). It is a little surprising that Hawaii came out on top for financial with all the news and polls showing Hawaii’s high cost of living and affordable housing issues. Hawaii placed #4 in community (liking where you live) and physical (having good health and energy). Tim and Tracey are just as happy living in paradise.
The complexity of the repairs for the 105-foot floating concrete dock at the Arizona Memorial will result in additional delays. It may be 15 months or more before visitors will be able to access the Arizona Memorial again. The six concrete blocks and chains that used to hold the dock in place on the bottom of Pearl Harbor have become dislodged and the resulting pushing and pulling of the dock has damaged the loading bridge. The National Park Service has decided that helical steel pilings will be screwed into the bedrock and anchor the dock. An environmental survey is likely required because of the docks proximity to the USS Arizona, the remains of 900 sailors, and the possibility of unexploded ordnance. No new timeline has been offered.
Scientists have used surface-from-motion software to analyze 1500 aerial photos of the Big Islands newest lava flow and compared it to the pre-eruption landscape to determine the thickness of the lava from the fissures to the ocean. The thickest parts of the flow occurred at the ocean entry and measure up to 900 feet thick while Fissure 22’s thickness was measured at 180 feet and the now famous Fissure Eight was measured at a thickness of 100 feet. The eruption that began in May 2018 and ended three months later pushed roughly 1 billion cubic yards of molten rock across lower Puna, buried 13.7 square miles of land, and added about 875 acres of new land to the Big Island.
More Island related news….
Southwest Airline’s Chairman and CEO recently announced that the Federal Aviation Administration (FAA) has cleared Southwest to launch its service to Hawaii. Southwest plans to fly to and from four California airports (Oakland, San Diego, San Jose, and Sacramento and four Hawaii Islands (Oahu, Maui, Hawaii, and Kauai). Southwest is known for no hidden fees, bag fees, or change fees. Many Hawaii residents and Hawaii tourism officials are looking forward to Southwest’s entry into the Hawaii market and the lower fares that they bring. The airlines wasted no time and started selling tickets to Hawaii at surprisingly low introductory rates. Flights to Oahu will start as early as March 17th and the first interisland flights between Oahu and Maui will start April 28th.
A recent article buried in the local section of the newspaper illustrates the liability to landlords for failing to abide by the Hawaii’s laws against discrimination. The Hawaii Civil Rights Commission determined that a Big Island landlord discriminated against an individual expressing her gender identity and awarded $95,000 to the plaintiff. Stott Property Management, LLC requires all adults to fill out an application when interested in a rental property and limits the checks to credit, references from previous landlords, employment verification, and a check for evictions in Hawaii’s judicial website. Since Stott Property Management, LLC aims to obtain owner acceptance of applications prior to approval, Tim has had to explain why it is company policy to refuse to answer or even ask questions that can be considered discriminatory. For example, some owners have expressed that they wanted to make sure that the tenants did not throw wild parties and disturb the neighbors. Therefore, they would ask Tim about the age of the applicants and Tim would have to decline since age is one of the protected classes.
Constant rains over the past few months have triggered landslides that has closed the Pali Highway until the state fortifies unstable slopes near the highway and remove portions of the damaged Old Pali Road above the Pali Highway. Sections of the Old Pali Road have shifted and pose a danger. Windward Oahu commuters will have to contend with longer commutes over the next few months until the repairs can be completed. State officials have started contra flowing traffic to Honolulu in the morning from 5:00 am to 9:00 am and back to Kailua from 3:00 pm to 7:00 pm during weekdays to help ease the rush hour traffic.
Hawaii’s largest pension fund’s assets dropped $1 billion in the fourth quarter due to the drop in the stock market. While the markets are unpredictable, the fund also paid out $125 million more in benefits than it received in contributions. The funds deficit is expected to grow until 2023 when the state’s taxpayers will be on the hook for higher contributions.
A state circuit judge denied the state’s attempt to subpoena rental records from rental booking site Airbnb. The state wanted Airbnb to provide access to its Hawaii booking invoices, receipts, statements and confirmations from 2008. It also wanted the personal host information including names, user IDs, taxpayer IDs, Social Security Numbers, and addresses. Airbnb sought to quash the subpoena stating that it was an “unprecedented attempt to amass a decade’s worth of detailed private data on about 16,000 people. The judge ruled that the state failed to show that Airbnb hosts were not paying their taxes and the information that the state was seeking was not readily available from other sources.
A state circuit judge has ruled that the Department of Business Economic Development and Tourism (DBEDT) has wrongfully allowed wholesale exemptions to a solar hot water heater mandate enacted 11 years ago by the state legislature. The Hawaii Solar Energy Association who accused the department of rubber stamping nearly all of the variance requests for tankless gas water heaters and undermining the solar mandate applauded the decision. DBEDT has currently stopped accepting variance applications. A tankless gas water heater costs about $1,500 while a solar hot water heater initially costs about $6,000. However, a solar hot water heater does pay for itself over time due to energy savings and state and federal tax credits.
Hawaii has experienced an 1,800% increase in pedestrian fatalities from the first half of 2017 to the first half of 2018. Hawaii had 15 pedestrian deaths in 2017, 44 in 2018, and has already had nine pedestrian deaths in the first two months of 2019. The report points to higher populations and an overall rise of smartphones. Hawaii can rule out higher populations since it has seen its population decrease over the past two years, but it has also attracted a record number of tourists. The study also reports that the increased sales of SUVs is a factor since injuries from large SUVs are typically much more severe than from cars.
The Honolulu Authority for Rapid Transportation (HART) has received three subpoenas this past month from the Federal Bureau of Investigation (FBI). The first subpoena requests documentation in connection with the 20-mile rail line, the second subpoena requests documentation about the project’s relocation program including files that revealed overpayment to owners or tenants being relocated from the rail’s path, and the third subpoena requests complete and unredacted minutes taken from executive sessions between January 1, 2011 to December 31, 2018. Les Kondo, the state auditor tasked with auditing HART’s project accused the agency early of dragging its feet regarding delivery of the executive session minutes. One of the city attorneys advising HART recently had to take a paid voluntary leave of absence in January when she received a target letter from the Justice Department related to the investigation involving former Police Chief Louis Kealoha and his wife, former city Deputy Prosecutor Katherine Kealoha.
The Hawaii Attorney General has asked the Hawaii Supreme Court to immediately suspend Honolulu Prosecutor Keith Kaneshiro who also received a target letter from the Justice Department related to the Kealoha investigation. Katherine Kealoha is under federal indictment on charges of public corruption and drug dealing while working for Kaneshiro. Meanwhile, the effort to impeach Keith Kaneshiro has been delayed at least a month and likely longer as Kaneshiro’s lawyer has argued that the city prosecutor was not properly served the petition and he was waiting on a request to use tax payer dollars to pay for his representation. The city council recently approved a $75,000 payment to Kaneshiro’s attorney. Keith Kaneshiro was absent at the hearing once again.
Oahu’s overall homeless population dropped 4% to 4,311 according to the latest point in time count. The homeless living in shelters dropped 19% to 1,910 while the unsheltered homeless living on the streets rose 12% to 2,410. The U.S. Department of Housing and Urban Development stressed that the numbers are not exact and that count should be only used to analyze trends. Hawaii still has the highest per capita rate of homelessness in the country.
Mayor Kirk Caldwell announced steps that the City and County of Honolulu will take in response to a rash of violence in Waikiki. The measures include installing more surveillance cameras, consider a moratorium on liquor licenses that allow drinking until 4 a.m., adding businesses to four Waikiki beach pavilions, beefed up bike patrols for new HPD recruits, enforcing a curfew for unaccompanied minors under sixteen, and removing concrete benches and walls where “bad elements are known to gather.” Many Waikiki residents, visitors, and businesses hope the plan succeeds.
A local developer and national builder recently teamed up to complete a 128-unit low income rental project near Ala Moana Center for tenants earning thirty to sixty percent of the median income. The advertised rents actually appear significantly lower for a new building. Rents for a one-bedroom range from $656 to $1,093 per unit, a two-bedroom range from $787 to $1,575, and a three-bedroom goes for $1,819. The building was constructed to meet the affordable housing requirements for another building completed in 2015.
The Honolulu Police Department (HPD) and the city’s Corporate Counsel announced that the two city ordinances passed four months ago have unspecified legal problems that prevent enforcement. Honolulu City Council Members and Mayor Kirk Caldwell have understandably voiced their frustration with HPD and the city’s Corporation Counsel for failure to raise these issues when the bills were being debated and for failure to specify what the enforcement problems are and how to fix them. Ordinance 18-34 states, “No person shall create, cause, or maintain an obstruction on a sidewalk that interferes, impedes, and/or prevents the full, free, and unobstructed passage of pedestrians upon public sidewalks or interferes with the normal flow of pedestrian traffic upon a public sidewalk during the hours from 6 a.m. to 10 p.m.” Ordinance 18-35 states, “No person shall lodge on a public sidewalk or other public place.” Law enforcement cannot issue a citation, make an arrest or otherwise enforce the ordinance unless “shelter space is readily available; an offer has been made to transport the person to the available shelter; and the officer requests or orders the person to refrain from the alleged violation of this section.” The HPD stated that there are concerns about the bill and its unintended consequences. It is interesting that the city bureaucracy should take this stance since they are not in the business of considering unintended consequences since that is the city council’s responsibility. Additionally, how does one know what the unintended consequences are when the HPD has not even tried to enforce the law.
A new rest stop for the homeless has opened in Honolulu that offers free hot showers, washers and dryers, mail service, a clean place to go to the bathroom, a kennel for pets, and social service help through an organization named Mental Health Kokua. The number of users has grown from eight the first day to 174 recently while only eight people on any given day have taken advantage of the social services. While most pets that come are dogs, the center has also temporarily kenneled a rabbit and guinea pig.
95-year old Saint Francis School in Manoa will shut down after its last graduation ceremony this May. The school reported that it is unable to overcome its debt load from the construction of a gymnasium completed in 2013 due in part to the school’s generosity in providing discounts and financial aid to families.