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November 2023 Email Update

The October median price for single-family homes was $1,100,000 (4.8% higher than October 2022) and for condos was $515,000 (1.0% lower than October 2022).  Demand has leveled off with a 4.1% drop in single-family home sales compared to last year and an 8.3% drop in condo sales.  Properties under contract waiting to close show a similar trend with pending sales for single-family homes dropping 3.0% and for condos dropping 5.0% compared to the previous year.  Supply is stabilizing as well with 4.6% fewer single-family homes for sale and 9.4% more condos for same compared to October 2022.  Sellers still have the upper hand since there is only 2.9 months of single-family home supply and 3.3 months of condo supply.

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

Monthly Statistics
October 2023 Market Update

Paul Brewbaker presented to the Windward Region’s real estate agents in late August and provided updates on Hawaii’s economy, economic trends, and predictions for real estate in the long-term.  The biggest takeaways from his presentation include.
·      Hawaii’s overall economy has reverted to long-term trends following the pandemic disruptions.
·      Hawaii’s labor participation rate continues to drop about 5% per decade due to Hawaii’s aging population.
·      Oahu’s inflation rate has returned to the pre-pandemic average of 2.2% per year in 2023.
·      Total Oahu home sales will remain low due to higher mortgage rates.
·      Oahu’s real estate prices will return to an annual appreciation of about 2.2% higher than the inflation rate.
·      Hawaii’s gross domestic product growth has stabilized compared to the rest of the nation.  Hawaii GDP growth fell about 15% compared to U.S. GDP growth from 2018 through 2022.

Economist Paul Brewbaker joins Spotlight Hawaii

A Wall Street Journal article highlighted current mortgage rates combined with high sales prices have made home buying more expensive compared to renting since 1996.  Nationally, the median monthly mortgage payment is 52% higher than the monthly rent for an average apartment.  The article notes that the monthly mortgage payment for a house has jumped 60% over the past three years nationally compared to a 22% increase in rents.  The monthly mortgage payment for a median priced single-family home on Oahu would be $6,163.62 (Assuming mortgage of 80% and an interest rate of 8.0%), more than twice as expensive as the median rent for a 3-bedroom rental of $3,000.

If you are conducting a 1031 Exchange and closed on the relinquished property after October 18th, you have less than 180 days to close on the replacement property unless you file for a tax extension on or before the tax deadline.  The replacement date is determined by the 2023 tax return filing deadline anticipated to be April 15, 2024.  Therefore, if you sell your relinquished property on November 15th, you have 151 days to close on the replacement property.  The time to close will drop to 106 days on 12/31/2023 and return to the full 180 days on New Year’s Day.  The 45-days to identify replacement property is not affected by this rule.  Therefore, if you are closing on your replacement property near the April 15th deadline, then file for a tax extension now.  Here is a link to information on filing for an extension.

Topic No. 304, Extensions of Time to File Your Tax Return

Honolulu Civil Beat has been having a field day with poor association management and the latest involves the Makaha Surfside.  The owners in the complex learned that $300,000 has been embezzled from the association over the last couple of years from fraudulent payments to vendors that have not performed the work.  These payments were related to “planned” projects that have not been performed.  A discrepancy was found in a routine financial audit in March after a few individual owners raised questions about potential management and financial irregularities.  In what seems to be standard practice these days, the board resisted addressing the individual owners’ concerns and the owners persisted in their questions.  The board finally raised the matter to the president of Hawaiian Properties who pegged the theft at $339,364.83, the largest known loss in Hawaii.  Hawaiian Properties did reimburse the association in full and paid for the association’s attorney fees.  This latest incident serves as a reminder for owners to review the annual financial statements and ask questions if expenses don’t fall in line with the forecasted costs of approved projects.

1,400 Lahaina evacuees face an uncertain future at their current temporary lodgings as short-term rental communities desire to reopen to visitors clashes with the displaced residents’ desires to keep a roof over their heads.  The Red Cross signed short-term leases, and some expire October 31st while other evacuees have been told that they can stay through Thanksgiving.  The Red Cross is currently looking for new accommodations for the residents currently housed in the vacation rental communities.

After two years and $7.8 million, the state is scrapping its effort to replace its 50-year-old Enterprise Financial System because the contractor could not meet the cost, schedule, or performance parameters because the state and contractor disagreed on the requirements.  Essentially, the state wanted a custom software package to support its “unique business practices” instead of using an off-the-shelf version of the software.  One vendor complained a major part of the problem is the state buys systems that have succeeded elsewhere and demand so many modifications the system becomes unworkable.  Software companies build software around best-known practices and most customization is a result of an organization’s resistance to change even when that change will improve operational performance.  The same contractor is struggling to implement a new software solution for the Department of Transportation who is also requiring extensive customization.  The state of Hawaii’s bureaucratic mindset has resulted in its failed Unemployment Benefits software.  The state is currently struggling to process 2,200 applications for federal disaster unemployment assistance of which 500 have been approved and a backlog of 15,161 regular unemployment claims of which 8,731 are currently being paid.

The U.S. Navy is building the next USS Arizona, a Virginia-class fast attack submarine whose keel was laid on the anniversary of the Pearl Harbor attack, December 7, 2022.  The Arizona will be based in Groton, CT when the shipyard completes construction.

Navy Authenticates Keel for Future USS Arizona (SSN 803)

Hawaii Pacific University (HPU) and Zippy’s are expanding their operations to Hawaii’s ninth island, Las Vegas.  HPU will initially offer two doctorate programs at the new campus, Doctor of Occupational Therapy and Doctor of Physical Therapy.  Zippy’s looks like its following L&L Bar-b-que’s playbook of expanding to Las Vegas first where many locals visit and live.

A new beverage company, Zingipop Sodaworks, opened in August and produces non-alcoholic craft sodas made from Hawaiian grown ingredients.  The sodas use locally grown fruit, roots, herbs and are sweetened with local honey.  The soda is sold in 12-ounce cans and sixtel kegs and can be found at Farm Link, Kualoa Grown, Grace in Growlers, Nii Superette, and The Country Eatery.

The state Division of Aquatic Resources completed planting the last of six lab-grown coral modules in Hanauma Bay to restore damage from a log scouring a boulder-sized brown lobe coral in 2020.  The Hawaii Coral Restoration Nursery pioneered a method of restoring Hawaiian corals by collecting coral fragments damaged by storms, quarantining them, and growing them in their lab.  The coral is cut in one-by-one centimeter pieces and the pieces are glued onto a concrete pyramid.  The coral grows along the edges and the pyramid is ready when the separate pieces touch.  The coral is then acclimated to the conditions where it will be planted.  The coral grows twenty-times quicker than coral in the wild and shows that damaged reefs can be restored.  The process takes about two years from collection to outplanting.

The Waikiki Aquarium released 150 tagged papio to the wild to obtain recapture data hoping to provide insights into the species and its potential for restorative aquaculture.  Papio is the same species of fish as the ulua, a member of the jack family of fish and a popular Hawaiian game fish.  The fish is named papio up to 10 lbs. and anything greater is called an ulua which can grow to over 100 lbs.

Waikīkī Aquarium releases 150 tagged pāpio into the wild

The Pacific Whale Foundation spotted its first humpback whale this season off the Maui coast.  The male humpback was last seen on August 19th off the coast of Alaska.  The humpback whales migrate 3,500 miles every year from Alaska to the warm Hawaii waters to breed, give birth, and nurse their young.  Federal regulations prohibit approaching the whales within 100 yards by boat and 1,000 feet when in an aircraft.

Fire ants have spread rapidly on Oahu and the Hawaii Ant Lab recently confirmed colonies at a Lanikai beach access by Mokumanu.  Officials identified four active sites at Lanikai homes and there are 30 known active sites around Oahu.  Researchers consider the South American invaders the world’s worst invasive species.  Fire ants were initially found in a Puna nursery on the Big Island, and they have spread to the other islands hitching a ride on infected plants.  Fire ant bites are extremely painful, and Hawaii may join the rest of the Southern U.S. in regularly treating yards to prevent home infestations.

The state Division of Forestry and Wildlife will try releasing alala, the Hawaiian crow, on Maui after failed releases on the Big Island.  Maui does not have the alala’s main predator, the io (Hawaiian hawk), which has been the primary reason for the earlier failed releases.  Researchers hope the alala will breed in East Maui’s wetter forests and experience better survival rates where io are not present.  The alala is one of the few species known to use tools.  The alala currently survive only in captivity.

Waiahole Poi Factory, a must stop in Heeia when driving along the Windward Coast, is opening a second eatery in the Windward Mall.  Waiahole Poi Factory specializes in Hawaiian plate lunches, freshly pounded poi, and Sweet Lady of Waiahole, its signature dessert.

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

Another Day in Paradise: Kahala Beach

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