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November 2022 Email Update

Demand is decelerating rapidly with single-family home sales dropping to 222 (41.7% lower than October 2021) and condo sales dropping to 435 (28.8% lower than October 2021).  The October median sales price for single-family homes was $1,050,000 (5.0% higher than October 2021) and for condos was $520,000 (4.0% higher than October 2021).  The median sales price has been essentially flat for the past 14 months.  Motivated buyers who can afford to pay the higher mortgage rates are starting to see a larger selection of property with supply climbing to 2.1 months or inventory for both single-family homes and condos.

You can review more detailed current and past real estate market data on our website using the link below.

Monthly Statistics
You may also listen to our Monthly Newsletter from our recently created podcast, Real Estate Tips of the Day & Quarterly Real Estate Articles by clicking the link below:
Stott Real Estate, Inc. Podcast

While it is too late to receive relief from residential A property tax rates, owner occupants can reduce their tax bills in February 2024 by filing for their home exemption.  The City and County of Honolulu Residential property tax rate is $3.50 for every $1,000 in value or 0.35%.  The property tax rate for residential A property is 0.45% for property valued up to $1 million and 1.05% for every dollar above $1 million.  The filing deadline is September 10th.  Visit the link below and fill out and mail the form before other priorities distract you.

CLAIM FOR HOME EXEMPTION FORM

A federal judge has halted the City and County of Honolulu’s 90-day short-term rental law until April 26, 2023, in response to the Hawaii Legal Short-Term Rental Alliance’s lawsuit declaring the new law unconstitutional.  The lawsuit alleges that the new law interferes with the owners’ vested rights to own and rent property and violates state zoning law. The plaintiffs argue the bill caused immediate and devastating financial harm for property owners who purchased investment property and legally rented their property for 30 to 89 days.  The city started enforcing parts of the new law on October 24th that were not subject to the federal judge’s ruling.  Despite being understaffed by 80 people, the mayor is dedicating 7 full-time inspectors to his endeavor.  Those seven full-time inspectors might be better utilized helping work through the backlog of 8,000 permits.  The Honolulu Board of Realtors has provided guidance to landlords regarding the judge’s ruling:
 

·      90-day or longer leases are exempt.
·      Month-to-month leases, written or unwritten, are exempt since their tenancies are essentially indefinite per the state of Hawaii’s landlord tenant code.
·      Purchase leases like the early occupancy agreement for buyers and post occupancy agreements for sellers are exempt.

 
Changes to the City of Honolulu’s short-term rental program requirements as late as October 21st have frustrated legal short-term rental operators and bogged down the city’s online registration program.  The rushed website started accepting applications only one day prior to the new law’s effective date.  Per standard operating procedure, the DPP hotline was unable to handle the sixty phone calls from frustrated owners who were seeking answers and help with the cumbersome prospect.  DPP plans on enforcing fines on owners trying to follow the new law even though they are causing the delays claiming, “their hands are tied.”  A major hurdle is showing proof of liability insurance even though the short-term rental platforms like Airbnb and VRBO provide coverage that meets the requirements.  Investors who would like to continue renting short-term may register at the site below:

Short-Term Rentals

An October 24th front-page article in the Honolulu Star-Advertiser paints a bleak picture due to the new short-term rental law effective October 24th.  A couple who cleans Waikiki vacation rentals are holding their breath for fear of further economic hardship.  They used to mainly clean single-family homes until the 2019 passage of Ordinance 19-8.  Paul Brewbaker, a leading economist in Hawaii, states, “short-term rentals were a growing part of Oahu’s only factory.  If tourism production slumps, Oahu’s future looks a lot like Detroit in the 1970s after the closure of auto plants.  I don’t know how it isn’t obvious that some people will be way worse off.  A further decline could lead to more people leaving Oahu.  When Detroit’s economy shrank, people left.”

It is disheartening for Hawaii residents when the state announces “affordable rents” as part of a $150 million to subsidize middle income rental properties.  The state considers $2,287 affordable for a studio, $2,450 affordable for a one-bedroom, $2,940 affordable for a two-bedroom, and $3,396 affordable for a three-bedroom rental.  The state two-bedroom rents are $440 higher than the monthly rents for a well-apportioned two-bedroom condo in Moiliili with central air-conditioning and two assigned parking spaces.

A bill to provide relief for older buildings that must comply with the automated sprinkler requirements has stalled with the city council resulting in great uncertainty as associations struggle to comply with the requirements.  The current law allows associations to do the following:

“13.3.2.26.2.3 Notwithstanding any other provision of this paragraph (15), the association of apartment owners of a condominium or the cooperative housing corporation of an existing high-rise  residential building 10 floors or higher may opt out of the automatic fire sprinkler system requirement; provided that, a majority of unit owners of a condominium or a majority of shareholders of a cooperative housing corporation vote to opt out of the requirement within three years of the completion of the building fire and life safety evaluation at a regularly scheduled or special meeting of the owners or shareholders, convened and noticed in accordance with the condominium’s or cooperative housing corporation’s by-laws; and provided further, that the building receives a passing score on the building fire and life safety evaluation through the implementation of alternative fire prevention and fire safety systems. An association of apartment owners of a condominium or a cooperative housing corporation that has opted out of the automatic fire sprinkler system requirement shall provide verifiable, public disclosure of its action to all current and future owners shareholders and residents. Verifiable public disclosure shall include signs posted in the building’s public notification areas and real estate sales disclosures as may be required by Hawaii real estate industry practices.”

A Wall-Street Journal article on 11/1/2022 serves as a warning to investors looking to diversify their portfolio through private real estate funds versus public real estate funds.  Private real estate investment trusts (REITs) are offered by wall-street firms like Blackrock who set valuations monthly based on the funds underlying cash flow from apartment buildings and commercial buildings.  Public REITs trade on the stock market and are updated every time a share is bought and sold.  Private REITs have appreciated about 10% while public REITs have fallen 26% this year prompting some financial advisors to advise selling private REITs before the correction occurs.  A popular 1031 Exchange has been to sell an investment property and then purchase shares in a Delaware trust that invests in commercial real estate.   While it provides strong cash flow in a low interest rate environment, these trusts can struggle when interest rates rise.  Investors in 2008 and 2009 had their equity wiped out when these types of vehicles underlying real estate values prevented them from refinancing, resulting in a wave of foreclosures.

Tim and Tracey have been inundated by phone calls from investors that would like to buy their investment properties.  These investors start calling the home number at 4:00 am and the phone rings throughout the morning.  Tim listed his home phone number and cell phone numbers on the Do Not Call Registry and have been rewarded with a bit more silence.  If you are receiving an unacceptable number of sales calls, you may register your number at the following site:

NATIONAL DO NOT CALL REGISTRY

The state board approved a variance for a 1005-unit Moiliili tower that will provide over 50% of the units to low-income families.  DPP has first right of refusal if a affordable-unit condo is sold within the first ten years according to the agreement.

A retired DPP plans examiner pleaded guilty to accepting $100,000 in bribes to pre-screen plans and expedite permit approvals.  The examiner set up a business to help accept bribes and told the FBI that the $100,000 was a loan from an architect.  The examiner had retired in 2017 and was indicted March 17, 2021.  The architect pleaded guilty on April 7, 2021, for paying more than $89,000 in bribes.  The architect will be sentenced on December 1st and the examiner will be sentenced on March 9, 2023.  

The Board of Water Supply has started looking into methods to remove fuel contamination from wells to provide safe drinking water should the pollution spread from the Red Hill Shaft.  Treatment technologies include gravity separation, biologically active filtration, ozonation, ultraviolet oxidation, granulation activated carbon, dissolved air floatation, and coagulation and flocculation.  One method may not be sufficient to resolve the contamination alone since multiple types of fuel have leaked since the fuel tanks were built.  The treatment study is scheduled for a 2023 completion.

The Navy’s water woes continue as a water main break on a 36-inch line serving 90,000 residents forced service-members to boil their water to make it safe to drink.  The Navy did not have a repair timeline in place claiming the repair is “complicated.”  On October 17th, a fourth water main broke and the Navy announced that it would delay defueling the Red Hill fuel tanks as a result.  The Navy’s struggles to maintain its drinking water infrastructure begs for a Board of Water Supply management takeover.

The military started unpacking 1 million gallons of fuel from pipelines in preparation of draining the Red Hill Fuel Tanks on October 25th, two weeks after water main breaks forced 90,000 families to boil tap water.  The procedure allows the military to repair, modify, and enhance the pipelines to remove the fuel as safely as possible.  The procedure took about six days even though fuel movement took about 12 hours to complete.  The remainder of the time involved putting safety measures in place.  The 3.5-mile pipeline is gravity driven and engineers will use pumps to remove any residual fuel from the pipes.  The tanks currently hold 104 million gallons of fuel and the Navy plans on emptying the tanks by June 2024.  The Navy plans on closing the facility in 2027 after it cleans the sludge and other waste left in the tanks and pipelines after the fuel is drained and cleaning up the petroleum contamination in the soil and groundwater.  The Navy hopes to consult with the community for alternatives to the site for nonfuel purposes such as a hydroelectric plant.

Mauna Loa is showing signs of a new eruption after 38 years of quiet.  Elevated seismic activity and ground swelling suggest that magma may be filling the mountain.  The Hawaiian Volcano Observatory started issuing daily updates on 10/6/2022.  40-50 small earthquakes have been shaking the mountain daily at a rate of two to three per hour.  The Hawaii County of Civil Defense has been helping the state develop an evacuation plan should the mountain erupt.  The lava is fast moving, and it only took three hours to reach the Kona coast in 1950.  The Hawaii Volcanoes National Parks has closed the summit since evacuations are very difficult at an elevation of 14,000 feet.  Residents around the volcano have been encouraged to pack a “go” bag in case of an eruption.  Here is a link to the national park services site for the most recent updates.

National Park Service | Hawai'i Volcanoes

Hawaii is experimenting with a new asphalt that includes recycled plastic from consumers and recovered from the ocean.  The state will pave a stretch of Fort Weaver Road in Ewa Beach from Kilaha Street to Puuloa Beach Park.  The mixture looks like asphalt, smells like asphalt, and compacts like asphalt.  The state will monitor the wear performance of the pavement over the next 18 months and make sure there is no escaping plastic.  The state is also experimenting with a mixture of 50% recycled asphalt from old roads to reduce the amount of new asphalt that must be created.

Haseko has announced the planned opening of a 52-acre recreational lagoon and commercial development in 2023 that includes three wave pools, restaurants, a coffee shop, bar, boardwalk, and dock.  Lagoon tours in 12-person electric boats are planned.  The facility plans on attracting a larger percentage of the local population initially.  Haseko anticipates offering surf lessons in the wave pool that creates two- to six-foot breaking but not barreling waves.

A recently completed study by Hawaii scientists documented the benefits of ocean sanctuaries like the Papahanaumokuakea Marine Sanctuary.  The study started in 2016 and documented a 54% increase of yellowfin tuna, a 12% increase of bigeye tuna, and an 8% increase of various reef fish in and near the sanctuary.  The study offers good news to the tuna fishing industry who have resisted creating expansive marine protected areas due to the loss of fishing grounds.  Scientists hope the study will help promote better management of our ocean resources.

Downed seabirds may have a new “Buddy” to help them out in their time of need.  Turtle Bay is testing a program using specially trained dogs to find downed seabirds hidden from their human rescuers.  The dog teams have found 90% of hidden seabird carcasses and conservationists hope that translates to dogs finding live birds before they are hunted by predators.  Here is a link to find help for any distressed sea creature that you come across.

Report a Sighting or Animal in Distress

A new study by University of Hawaii found that the diversity of algae living symbiotically with the coral varies significantly from one part of Kaneohe Bay to another.  Algae provide most of the energy coral needs to survive. Researchers collected and logged 600 rice coral colony specimens throughout Kanoehe Bay and found that two types of algae are commonly found in the coral.  Cladocopium is more broadly present and heat resistant Durusdinium is found in coral at shallower depths and provides the coral added resistance to heat stress.  Coral in the extreme North and South of the bay showed lower levels of the heat resistant strains than the rest of the bay since is receives less daily sunlight.

The VinFast Ironman Triathalon Championship returned to Kona for the first time in three years.  The 2020 event was cancelled, and the 2021 Championship was hosted in Utah.  Approximately 30,000 people attended the event this year.

Tracey loves glass balls found on the shores of Oahu.  She just found out about a book titled “Glass Ball Marks,“ which provides information about what the markings on the glass balls signify.  If you have glass balls found on the ocean shores, you may want to take a look at this book.

Georgia may have made headlines earlier this year by supposedly restricting voter access, but Hawaii quietly perfected the art.  Tim did not receive a ballot in the mail like he should, found out that the Kaneohe voter assistance office closed two weeks prior to election day, drove one hour round trip to Honolulu, walked 2,370 steps or 1.2 miles to Honolulu Hale, and waited in line 40 minutes to cast his ballot.  Fortunately, Tim has a tremendous staff who took care of business while Tim made the effort to vote.  Tim likes to vote to often cancel Tracey’s votes, which is their running joke each election year.

This week Tracey and friend went to the west side to try and get a clear mile plus swim in as they are in a competition with Tracey’s brother.  They were completely surprised by a pod of dolphins.  Enjoy!

This year both Tim & Tracey had unexpected, sudden, conditions that warranted hospitals stays for each of them at different times for different things.  We are both fine!  We both came out of the experiences grateful for each other, our family, our friends, our health, our lives and our lifestyle.  You are part of that.  We so enjoy discussing and debating what should be in our newsletter.  We enjoy hearing from so many readers throughout the year.  We enjoy helping clients accomplish their real estate goals and learning about their lives and stories.  In this time of being grateful, we are simply grateful for all our journey has been and what the future has in store. Happy Thanksgiving! Happy Veteran’s Day as well!

Take a look at our Another Day in Paradise's Video

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