October 2018 Email Updates for Oahu Real Estate
Here is our 10/9/2018 e-mail update. It is sent after the statistics for the preceding month have been posted on the Board of Realtors website.
The September median sales price for single-family homes set a new record of $812,500 (6.9% higher than September 2017) and for condos was $428,000 (0.7% higher than September 2017). The latest sales price growth cycle could be coming to an end as demand for existing homes has been dropping. The number of single-family home sales in September dropped 17.4% and the number of condo sales dropped 2.9%. Pending sales have also fallen again. Pending sales of single-family homes have dropped 21.8% and of condos have dropped 12.9% compared to September 2017 figures. Tracey recently asked escrow companies about their business and they replied that is has been slow. The supply of existing homes has ticked up for both single-family homes (2.8 months) and condos (2.9 months). The market is changing.
How does the saying go for lies and statistics? The new census update reports that Hawaii has the fourth highest median household income, sixth highest median family income in the country, third for lowest percentage of people in poverty, and second lowest for percentage of uninsured people. So why are people leaving the islands? There are 2,000 fewer people in Honolulu in 2017 than in 2015 according to the latest census data. The main drivers of the migration out of the state are below averaged wage growth and the high cost of living in Hawaii driven mainly by high home prices and rents.
The University of Hawaii Economic Research Organization (UHERO) has updated its state forecast predicting lower overall economic activity in 2018, primarily due to the flooding on Kauai and the volcanic activity on the Big Island. The flooding on Kauai lowered visitor count growth from 22% in the first quarter to 8% while the Big Island saw a visitor counts drop 20% recently. Oahu and Maui did pick up some additional growth as some tourists changed their plans due to the problems on Kauai and the Big Island. A lack of job growth has constrained the economy with nonfarm payrolls creeping up 0.4% while inflation grew 1.9%. Wage growth has lagged the national average for the past three years and some people have moved to pursue better opportunities resulting in a 0.5% population loss in Honolulu since 2015. The resulting lower demand for housing has constrained inflation since housing costs make up 40% if the cost of living. Landlords on Oahu are starting to feel those constraints in the form of lower rents.
Deferred maintenance reared its ugly head again at the USS Arizona Memorial when the shore side concrete pier at the visitor center partially sank on September 30th putting a halt to the boat tours around the memorial. The memorial has been closed to foot traffic due from damage to the dock at the USS Arizona Memorial since May 10th. The World War II Valor in the Pacific National Monument has seen its fair share of controversy over the past few years with charges of favoritism and now is contending with the consequences of poor maintenance planning. The dock exceeded its designed life expectancy years ago and the park had failed to commence upgrades before last months sinking.
The Hawaii Supreme Court agreed to hear oral arguments by the four counties to remove the proposed constitutional amendment from the November ballots that would authorize the state to create a “surcharge” on property taxes on investment property after a 1st Circuit Court judge denied their earlier request. The legislature approved the ballot measure earlier this year and Governor David Ige signed the bill over the controversial measure. Many business groups in addition to the four counties have voiced their opposition to the bill and are actively encouraging voters to say “no.” The oral argument is scheduled for October 18th.
Don’t expect city officials to help solve the lack of available housing and the associated high costs. The mayor recently signed a bill that will raise the fines for building without a permit, making the fines non-negotiable, and could force an owner to tear down an entire building. The bill was passed in response to neighborhood complaints of unpermitted, nonconforming houses, nicknamed “monster houses,” that the Department of Planning and Permitting (DPP) failed to stop. The law will target these homes but could also ensnare owner builders that do not follow the letter of the law. Kymberly Pine, the councilwoman who introduced the bill, then promptly ducked for cover by demanding that the DPP be audited for permitting delays that have beleaguered developers, contractors, and homeowners for years. The DPP responded by saying that the recent attention to the “monster homes” as slowed down the process. Homeowners should review their permits even if they have hired contractors to do the work for them. Tim and Tracey recently discovered that a contractor that they hired filed an owner-builder permit for recent work done on their home. While the work did not involve any additional living space, they are monitoring the permitting process to avoid issues from improperly filed paperwork. Tim and Tracey also had to pay fees to address an unpermitted curb cut several years back for work done by a previous homeowner. These types of hassles are typical for Honolulu residents and the red tape is the main contributor to Hawaii’s high cost of housing.
A recent article described how the permitting delays are forcing contractors to lay off and idle staff as they wait as long as nine to twelve months for approved permits for remodels, additions, and new construction. Many contractors are organizing to push the city to address the delays. Even permits for the mayor’s signature affordable home initiative, accessory dwelling units (ADU), that are supposed to be issued in 60 days by law are taking twice that long.
Attorney General Russell Suzuki filed a request with the Circuit Court to allow the state Department of Taxation to subpoena Airbnb Inc. records for the past ten years to determine if transient vacation rental operators have been paying General Excise Tax and the Transient Accommodations Tax. The subpoena would demand all invoices, receipts, statements and names, tax IDs, and Social Security numbers of the hosts. A 2016 study conducted by the Hawaiian Tourism Authority concluded that the state should receive $136 million in tax revenue from the vacation rental sector but it only collects a fraction of that amount. The state has struggled to pass legislation to authorize platforms like Airbnb to collect tax proceeds because of the perception that the state would be collecting taxes on illegal vacation rental activity.
Hawaii Volcanoes National Park reopened on Saturday, September 22nd, for the first time since the volcanic activity at the East Rift Zone and Halemaumau crater shut down the park on May 11th. The Jaggar Museum is closed indefinitely and the Thurston Lava Tube is closed pending further assessments for possible damage. Visitors flocked to the rock wall at the rear of the Volcano House and hiked to a crater overlook to view the dramatically different Halemaumau crater. The floor of the crater was about 280 feet deep prior to the latest eruption and is now as much as 1,700 feet deep. Crater Rim Drive developed huge sinkholes that are still growing despite little new seismic activity and cracks have opened on Chain of Craters Road even though it is still passable. The park attracted an average of 5,500 people per day last year and it appeared that the number of visitors topped that figure on the first day back.
Leilani Estates residents were allowed to return to their homes in early September, about two months after lava flows and volcanic gases forced them to evacuate. Entry into the neighborhood is restricted to residents and authorized personnel. The entire lava flow field plus fifty yards remains off-limits and anyone who has property within the fifty-yard perimeter must obtain a waiver before they can enter. Some people don’t have electricity and Hawaii Electric Light Company has been removing damaged equipment and making assessments and repairs in order to restore power. A front-page photo shows the Pohoiki Boat Ramp is now cutoff from the ocean by a new black sand beach that was formed during the eruptions. State officials are evaluating whether the boat ramp can be extended to the ocean or if another location must be found to build a boat ramp along the lower Puna coast.
A University of Hawaii Cancer Center research study just celebrated its 25th anniversary. The study, started in 1993, involved 215,000 Hawaii and Los Angeles residents between the ages of 45 and 75 covering five ethnic groups. More than 70% of the male and female participants are still involved in the study with a goal of correcting cancer health disparities and preventing cancer across the population. The findings include a link between processed and grilled meat and cancer, and drinking a cup of coffee a day can lead to a twelve percent decrease in the risk of death from cancer and other chronic diseases. A finding across all the ethnicities was that breast cancer survival rates were lower among obese women. The study has also learned that African-American and Native Hawaiian smokers are at a greater risk of developing lung cancer while Japanese Americans have high rates of colorectal cancer. The participants initially filled out a 26-page questionnaire covering diet, lifestyle, and medical history and they were sent follow-up questionnaires every five years. The National Cancer Institute has funded the study from the beginning.
The Honolulu Authority for Rapid Transportation (HART) decided it would solicit partners to help finish, operate, and maintain the elevated 20-mile rail system. City officials have started referring to a public-private partnership as the “P3” idea and Mayor Kirk Caldwell supports the plan to establish a contract that won’t result in the city absorbing any more costs than have already been forecast. The city pledged in 2012 to complete the elevated guide way and 21 stations for $5.26 billion and complete the project in 2019. The cost of building the rail system has ballooned to $9 billion and some doubt the city will complete the project by the new completion date late in 2025. The Federal Transit Administration is withholding the remaining $745 million in federal funding until HART submits an acceptable recover plan. HART has spent almost a year studying the possibility of using a public-private partnership to complete the rail line and HART’s board has authorized $8.5 million to hire consultants to prepare a proposal. The P3 process will be complex because HART is responsible for the construction of the rail line and the city is responsible for operating and maintaining the completed system. Further complicating the implantation of a P3 contract is that the city rewarded Ansaldo, the manufacturer of the trains, a five-year contract to operate and maintain the system with an option to renew the contract for another five years. Ansaldo recently submitted a request for funds under this contract due to the delays in construction.
The Federal Transit Administration is pushing HART to make a decision exactly how they are going to finish the project by October and wants the City of Honolulu to commit $44 million in city funds to the project. Up to this point, the construction has been funded by federal funds and the 0.5 percent General Excise Tax Surcharge. If the city fails to respond, then the FTA could cut off further funding for the rail project. The FTA has withheld $744 million of the $1.55 billion originally committed to the elevated rail system.
Tim and Tracey noticed that the supports for the elevated guide way have been erected along H-1 during their latest trip to the airport. As the project heads downtown, businesses are bracing for the disruptions in utilities and to traffic. The city must first relocate drainage systems, water, sewer, and electrical lines. The construction will cost $400 million and take about four years to complete. A number of businesses along the Waipahu and Pearl City segments of the construction were forced to shut down due to the disruptions.
The University of Hawaii (UH) at Manoa reversed its recent five-year slide in enrollment by welcoming a freshman class that is almost thirteen percent higher than last year. Lower UH tuition appears to be convincing more local students to stay home to pursue their degrees and avoid the large student loan balances that have made headlines across the country. The UH admissions office has also made a more concerted effort to reach and connect with prospective students over the past year.
The UH Warriors have gotten off to a great start this year. The Warriors are currently 6-1 this year after UH coach Nick Rolovich brought back the run-and-shoot offence that predecessor, June Jones, brought to Hawaii for several successful seasons.
The U.S. Navy’s underground fuel tanks at Red Hill are causing concerns after five of the ten steel plates that were sampled showed serious corrosion and parts of the tank’s original quarter-inch steel liner have become very thin. The risk of a major fuel leak is much greater than originally thought and the tanks sit only 100 feet above an aquifer that supplies drinking water to residents from Moanalua to Hawaii Kai. The Navy now must come up with plans for tank improvements that address the corrosion discovered in the study.
Hawaiian Airlines will add its longest route next April when is starts offering five non-stop flights per week between Honolulu and Boston. About 60,000 visitors come from Boston each year.
The Association of Volleyball Professionals (AVP) has given Hawaii beach volleyball fans something to look forward to. AVP recently completed the Hawaii Invitational, a three-day event at Fort DeRussy in Waikiki that consisted of a double-elimination tournament featuring 16 teams, eight men teams and eight women teams. It also hosted the King of the Court Series featuring a total of 30 teams. AVP plans to make Hawaii a regular stop every year and include the outer islands in its schedule.
WalletHub reported that Hawaii is the happiest state in America. Hawaii ranked first in emotional and physical wellbeing and fourth in community and environment. Hawaii also found itself in the top five in having the lowest divorce rate and lowest share of adult depression. However, when it comes to getting adequate sleep, Hawaii ranked dead last. Apparently you can be happy and sleepy at the same time.
Tropical Storm Olivia passed through the island chain causing some localized flooding in Maui and forcing the Board of Water Supply to pump water from a reservoir above Nuuanu. The effects were mild in comparison to the devastating wind and flooding North Carolina residents suffered from Hurricane Florence.
Maui Brewing Company expects to open its new restaurant in Kailua at Lau Hala Shops by the first week in December. The restaurant will seat about 250 people and will offer between 20 and 24 different beers on tap. The company also makes three types of soda (root beer, ginger beer, and cola) and plans to add whiskey and gin to their offerings by early 2019.
An article describing the Hawaiian spinner dolphins sleeping habits appeared in our newsletter several issues back. Tim & Tracey recently had the pleasure of observing a pod of sleeping dolphins during a recent swim off Electric Beach on the west coast of Oahu. They came across the dolphins during an ocean swim with two other friends and floated on the surface while the dolphins circled our small group apparently oblivious of our presence. The pod of about 20 dolphins kept to a group and only one dolphin appeared to be awake. A juvenile enthusiastically spun amongst the adults as they slowly swam in circles. The link below contains photos and a short video from the swim.