May 2015 E-Mail Update
Here is our 5/8/2015 E-Mail Update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors Website.
The Oahu real estate market continues to plug along at a solid pace. April’s single family home median sales price was $674,900 (compared to $648,000 in April 2014) and April’s condo median sales price was $370,475 (compared to $355,000 in April 2014). The approximate 4% increase in prices seems to be standard for Hawaii’s market and what leading Hawaiian economist, Paul Brewbaker, describes as “boring is the new normal.” Single family home demand was particularly strong with a 22% jump over last years total while inventory remains tight for both single family homes (3.1 months of remaining inventory) and condos (3.5 months of remaining inventory).
Stott Property Management recently sent a letter to all of their property management clients addressing the changing rental market. Stott Property Management had been able to steadily raise rents over the past five years and that trend seems to have come to an end. Rents have increased approximately 15% to 20% since 2010 (based on a sample of rents from properties that Stott Property Management manages) while the paychecks of Hawaii residents have only increased about 7% to 8% over the same period (based on data from The University of Hawaii Economic Research Organization). Stott Property Management witnessed a larger than usual number of tenants moving from Oahu to other parts of the country starting in October 2014. It appears that Hawaii’s high cost of living is convincing more and more residents to relocate.
West Oahu landlords looking for new tenants will find a new competitor in the next few months. Texas-based developer, Hunt Cos., is scheduled to finish refurbishing the abandoned bachelor officer quarters at Barbers Point into 100 one-bedroom, one-bathroom units in June 2015. The new rental project named Wakea Garden Apartments started taking applications from prospective renters on April 17, 2015.
Hawaii has the largest percentage of multigenerational families living under one roof at 11.6% of Hawaiian households according to a report by the state Department of Business, Economic Development, and Tourism. Part of the reason is economical: Hawaii has some of the highest housing prices and rents in the nation. Some of it is cultural: Many Asian and Pacific Island cultures have a tradition of living with extended families.
Planning a trip to Hawaii? Hawaiian Airlines was recently ranked second in an airline quality report released by Embry-Riddle Aeronautical University and Wichita State University. The report compares the performance of U.S. airlines using a weighted average in several categories like on-time arrivals, involuntary denied boarding, mishandled baggage, and a combination of 12 customer complaint categories. Hawaiian Airlines placed second to Virgin America, which has announced that it will start launching flights from San Francisco to Hawaii in November.
In January, the federal government asked states with financially unstable health insurance marketplaces, including Hawaii, for contingency plans in the event that the federal government had to take over. A federal takeover of the Hawaii Health Connector could jeopardize Hawaii’s Prepaid Health Care Act and it’s current mandated employer provided health benefits. Hawaii Legislators approved $2 million in funding for the Hawaii Health Connector on May 5th in an attempt to prevent the take over. The federal government has currently restricted about $70 million in federal grants for the Hawaii Health Connector resulting from concerns surrounding the state-based marketplaces poor performance.
The Hawaii Senate passed a bill to extend Oahu’s 0.5% General Excise Tax surcharge, due to expire on December 31, 2022, another five years. Ironically, the House Speaker, Joe Souki, who was quoted as saying in his opening 2015 legislative remarks, that the state “will hold the city’s feet to the fire and closely scrutinizing its request to extend the GET tax for rail,” originally introduced a bill to extend The GET surcharge indefinitely even though the city did not produce any estimates on how much the final construction bill would be. In a blow to neighbor island taxpayers, the senate authorized the other Hawaiian counties to pass a 0.5% surcharge for future transportation projects that did not have to be linked to any rail transportation.
The state has abandoned a project to replace an out-of-date computer system in the state Highways Division after spending $13.9 million to replace a 30-year-old mainframe computer system that handled the accounting for the state Department of Transportation Highways Division. Governor David Ige stepped in to cancel the project after learning that the state has spent all this money on consultants and still has nothing to show for it.
The Hawaii State Legislature voted to approve a State Budget for the upcoming fiscal year that spends $12.147 billion. Many state legislators tried to describe the budget as fiscally responsible even though the measure requires another $1 billion in borrowing. Under the current budget, the state is projected to run out of cash as early as 2017.
The Big Island’s Mayor, Billy Kenoi, has found himself under criminal investigation for charging more than $129,000 of personal spending on his government credit card. The charges have included trips to Honolulu hostess bars, luxury hotels, a surfboard, and his Hawaii Bar Association dues. The mayor has only reimbursed the county $31,112.59. Many Big Island residents are understandably furious and have been demanding his resignation. Apparently, the Hawaii County Council does not consider the reckless spending a big deal since only one member has spoken up to address the issue. The remaining Council members had nothing but praise for the embattled mayor.
NextEra Energy and Hawaiian Electric Company (HECO) have started an advertising campaign designed to convince wary customers and stakeholders that HECO’s sale to NextEra Energy will be to their benefit. Many people are concerned that problem’s associated with HECO’s monopoly status will only get worse if the company is sold to a larger company based out of the state. NextEra and HECO have held 13 community meetings throughout the state in April to answer questions and try to address concerns.
HECO filed public documents describing plans to start construction on a new $170 million, 50-megawatt plant at Schofield Barracks starting in 2016 with a planned operational start in mid-2017. Six internal combustion engines that utilize a blend of biofuels and natural gas will provide Oahu’s electrical grid additional flexibility required by the island’s growing rooftop photovoltaic inventory.
Maui County has budgeted $30,000 to study the best utility and ownership structure to support the island’s goal of producing 100% of its electricity from renewable sources. The county has commissioned the study due to concerns about HECO’s proposed sale to NextEra Energy, Inc. Three business models are being studied: the current regulated monopoly, a new business model of the existing poles-and-wires operation with the generation assets split off, and a new poles-and-wires utility with an independent grid operator.
A major initiative aimed at reducing utility costs at Hawaii’s public schools, named “Ka Hei,” is finally gaining some traction after Hawaiian Electric Company (HECO) initially held up installation of rooftop PV solar systems. HECO, under pressure from the Public Utilities Commission (PUC), has finally approved systems for 24 schools, with another 45 systems being reviewed. Opterra Hawaii, who was contracted by the Department of Education, aims to save schools approximately $62 million per year in electricity, gas, water, & sewage fees.
Former UH assistant basketball coach, Eran Ganot, has been hired as the new men’s basketball coach. Despite interim head coach, Benjy Taylor’s, success this season keeping together a team embroiled in controversy, UH decided that Ganot was the best candidate to take the team forward in the future.
The Thirty Meter Telescope project (TMT) is responding to an opposition movement through a new microsite (www.maunakeaandtmt.org) and via social media. The $1.3 billion internationally backed project held a groundbreaking ceremony in October 2014 after completing a seven-year public and agency review. More than 120 people showed up to testify at a University of Hawaii Board of Regents’ meeting in Hilo, Hawaii on April 16, 2015. Several of the board’s new members were not present when the board approved the project over five years ago and agreed to hear testimony to learn more about the management of the mountain and the opposition’s arguments. In an ironic twist, the protestors have introduced an invasive species of ants at Mauna Kea’s summit. Governor Ige stated that TMT is legally entitled to use its discretion to proceed with construction while TMT has not stated when construction will resume. TMT will pay $1 million per year in rent with 20 percent going to the Office of Hawaiian Affairs.
Nordic PCL Construction began construction on Ka Makana Alii in West Oahu, the first Oahu regional mall to be built in more than three decades. The project will consist of over 150 shopping and dining options, a movie theatre, two hotels, and office space. The first phase of the development has a late-2016 scheduled completion. The development was almost scrapped in 2010 as a result of the Great Recession.
Island Air, the #2 airline for inter-island travel in Hawaii, announced plans to cut its workforce by 20% and close its Kauai operations and cancel orders for new aircraft. The Honolulu-based airline lost $21 million in 2014.
Acura of Honolulu appears to be on the financial ropes. Oahu’s only Acura Dealership is being sued for defaulting on a credit line and the state of Hawaii has filed a tax lien. American Honda Finance Corp. accuses Acura of Honolulu of failing to make payments, for bouncing checks, and for failing to notify the lender of any changes in its business or financial strength.
Pacific Links Hawaii plans to invest nearly $200 million to develop a 483-unit project consisting of hotel rooms, luxury villas, and time-shares at the former site of the Makaha Hotel and Resort on the Waianae Coast. The company gained control of the former hotel that went through foreclosure after 40 years in operation. Pacific Links Hawaii also plans to invest $30 million and hire Greg Norman to redesign the golf course at Makaha West Golf Club.
Pacific Business News published Hawaii’s top ten golf courses as determined by a poll of Hawaii golfers that responded to a recent survey. The golf courses ranked from #1 through #10: Ko Olina Golf Club (Oahu), Waialae Country Club (Oahu), Manele Golf Course (Lanai), Ewa Beach Golf Club (Oahu), Hawaii Prince Golf Club (Oahu), Turtle Bay Arnold Palmer Course (Oahu), Mauna Lani Resort (Big Island), Kapolei Golf Course (Oahu), Koolau Golf Club (Oahu), Mid Pacific Country Club (Oahu).
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