Hawaii Real Estate Blog

     Hawaii's economy is expected to maintain moderate growth for the rest of this year and into 2008 but at a slower rate than experienced over the last several years, according to the latest DBEDT economic forecast. The new forecast reflects only modest adjustments from the previous forecast in May. The current expectation for visitor activity in 2007 is down somewhat from the May forecast, while the outlook for jobs and income has actually improved. Most other elements of the forecast remain unchanged from May.

     Despite the slower pace of visitor activity, other sectors of the economy are still performing well, particularly construction. Private construction permit values posted an 8.9 percent increase in the first half of 2007. Government construction has also been strong, with contracts awarded up 5.6 percent in the first half of 2007. The long-term, multi-billion dollar military housing privatization initiative by the military is adding to the industry's strength. With this solid performance, construction investment has become an additional source of growth for the state's economy.

     Beyond the current growth in construction investment, the outlook for Hawaii's economy also depends on growth in the Mainland U.S. and Japanese economies. According to the August 2007 Blue Chip Economic Consensus Forecasts, real Gross Domestic Product (GDP) for the U.S. is expected to grow 2.0 percent in 2007 and 2.8 percent in 2008. The current 2007 forecast is down 0.2 of a percentage point from the May forecast. For Japan, real GDP growth is projected to be 2.5 percent in 2007 and 2.3 percent in 2008. The 2007 forecast for Japan has been raised 0.2 of a percentage point from the May forecast. The latest expectation for U.S. consumer price inflation is 2.8 percent for 2007 and 2.6 percent for 2008.

     Based on visitor data for the first half 2007 and the near-term outlook for the U.S. and Japan economies, total visitor arrivals to Hawaii are now expected to show a slight, 0.3 percent decline for 2007. The May forecast had projected a 1.0 percent increase for 2007.

     Growth in domestic visitor arrivals has remained positive but not enough to counter the weakness in international arrivals (mainly from Japan). Visitor days are now expected to decline 1.1 percent in 2007. Visitor expenditures in current dollars are expected to grow 2.6 percent for 2007. For 2008, visitor arrivals and visitor days are predicted to grow 1.5 percent and 1.6 percent, while visitor expenditures in 2008 are expected to increase 4.5 percent.

     Stronger than expected growth in wage and salary jobs for the first half of 2007 has raised the forecast for this indicator to a 2.0 percent gain in 2007. This is up 0.2 percentage point from the May forecast. The job growth forecast for 2008 is unchanged at 1.5 percent.

     The forecast for real (inflation-adjusted) personal income growth is unchanged from the previous forecast at 1.8 percent in 2007 percent and 1.9 percent in 2008.

     Hawaii's real GDP, the broadest indicator of economic activity, is expected to increase 2.9 percent for both 2007 and 2008, which is up slightly from the May forecast. The change is partly due to data revisions by the U.S. Bureau of Economic Analysis.

     Honolulu's Consumer Price Index (CPI) is expected to increase 4.5 percent for 2007 and 3.8 percent in 2008. This outlook is unchanged from the previous forecast. In the first half of 2007, the CPI showed a 5.0 percent year-over-year increase. This compares with a 5.9 percent increase in all of 2006. It is expected that the CPI will moderate further in the second half of 2007.

Economic Indicators	2005	2006	2007	2008	2009	2010
	(Actual)		(Forecast)
Total population (thousands)	1,273	1,285	1,299	1,313	1,326	1,340
Visitor arrivals (thousands)	7,494	7,561	7,540	7,656	7,809	7,962
Visitor days (thousands)	68,242	69,216	68,488	69,600	71,005	72,440
Visitor expenditures (million dollars)	11,904	12,381	12,697	13,274	13,941	14,639
Honolulu CPI-U (1982-84=100)	197.8	209.4	218.8	227.1	234.9	242.4
Personal income (million dollars)	43,913	46,583 ¹	49,565	52,439	55,271	58,145
Real personal income (millions of 2000$) ²	39,140	39,220 ¹	39,933	40,702	41,490	42,294
Total wage & salary jobs (thousands)	608.6	623.5	636.0	645.5	653.9	661.8
Gross domestic product (million dollars)	54,773	58,307 ¹	61,805	65,267	68,726	72,231
Real gross domestic product (millions of 2000$)	46,918	48,303 ³	49,710	51,163	52,561	53,894
Gross domestic product deflator (2000=100)	116.7	120.7 4	124.3	127.6	130.8	134.0
Annual Percentage Change
Total population	1.1	1.0	1.1	1.1	1.0	1.0
Visitor arrivals	7.2	0.9	-0.3	1.5	2.0	2.0
Visitor days	7.7	1.4	-1.1	1.6	2.0	2.0
Visitor expenditures	9.6	4.0	2.6	4.5	5.0	5.0
Honolulu CPI-U	3.8	5.9	4.5	3.8	3.4	3.2
Personal income	6.8	6.1 ¹	6.4	5.8	5.4	5.2
Real personal income ²	2.9	0.2 ¹	1.8	1.9	1.9	1.9
Total wage & salary jobs	3.0	2.4	2.0	1.5	1.3	1.2
Gross domestic product	7.9	6.5 ¹	6.0	5.6	5.3	5.1
Real gross domestic product	4.3	3.0 ³	2.9	2.9	2.7	2.5
Gross domestic product deflator	3.4	3.4 4	3.0	2.6	2.5	2.5

1/ U.S. Bureau of Economic Analysis (BEA) advance or preliminary estimate.
2/ DBEDT calculated using BEA estimate of nominal personal income deflated by U.S. Bureau of Labor Statistics Honolulu CPI-U http://www.bls.gov/cpi/home.htm.
3/ DBEDT-adjusted BEA advance estimate.
4/ DBEDT estimate.
Source: Hawaii State Department of Business, Economic Development & Tourism, August 15, 2007.

Released: Monday, July 16, 2007 The Honolulu Board of REALTORS® released resale figures for the second quarter of 2007. According to the analysis conducted by the Board, using data collected from its computerized Multiple Listing Service (MLS) system, the statistics are: 2007 Second Quarter Residential Resales Statistics for Oahu Single Family Home Resales Number of Sales This Quarter Compared To Median* Sales Price This Quarter Compared To 2nd Quarter, 2007 1,037 $665,000 1st Quarter, 2007 $620,000 up 7.3% 2nd Quarter, 2006 1,074 dn 3.4% $640,000 up 3.9% Condominium Resales Number of Sales This Quarter Compared To Median* Sales Price This Quarter Compared To 2nd Quarter, 2007 1,617 $328,000 1st Quarter, 2007 $320,000 up 2.5% 2nd Quarter, 2006 1,830 dn 11.6% $305,000 up 7.5% *Median price means half the prices were above and half below the given price. During the second quarter, the number of sales declined from last year, but the median prices increased. The total dollar volume of sales was $1.455 billion in the second quarter, a decrease of just $14 million, or 0.9%, from the $1.469 billion in sales achieved in the same quarter last year. The Median Prices shown in the chart below are the prices paid for existing residential properties reported sold through our Multiple Listing Service (MLS) system during the stated time period. The columns labeled Change indicate the direction of price change from the prior time period (NC is no change). The following table provides the quarterly median prices for the Oahu neighborhood groups.

GEOGRAPHIC AREA SINGLE FAMILY HOMES Change CONDOMINIUMS Change Entire Island $ 665,000 $ 328,000   Metro Oahu (Town) $ 736,500 $ 320,000 Diamond Head $ 1,025,000 $ 504,500 Hawaii Kai $ 910,000 $ 546,500 Kailua $ 850,000 $ 491,000 Kaneohe $ 735,000 $ 394,000 North Shore $ 902,500 $ 407,500 Central Oahu $ 595,000 $ 305,000 Leeward Coast $ 375,000 NC $ 191,000 Ewa Plain $ 510,000 $ 294,900 Makakilo $ 612,000 $ 305,000 Waipahu $ 575,000 $ 300,500 Pearl City $ 634,000 $ 299,000 *Median Sales Price means the midpoint of sales prices, where half of the sales were at prices above the given amount and half were below. Source Honolulu Board of Realtors

The United States Department of Veterans Affairs (VA) loan program assists eligible veterans finance the purchase of homes with favorable or competitive loan terms by, among other things, guaranteeing payment of loans up to specified amounts.

VA loans are made by private lenders. They are often used to purchase homes, and to refinance existing home loans.
The VA loan program regulates closing costs charged to a veteran in obtaining a loan. Your escrow officer will rely on lender to provide instructions regarding those loan related charges that may be charged to veteran borrower.
Certain amounts typically charged for escrow and title services cannot be paid by buyers using a VA loan and should be paid by the sellers. By advising sellers of these charges at the beginning of a transaction, you can help avoid unexpected disappointments and delays.

The following escrow and title related fees can be paid by the buyer at closing:
• Buyer’s share of title insurance premiums
• Recording fees and conveyance taxes
• Taxes and assessments attributable to the buyer

The following escrow and title related fees may not be paid by the buyer or borrower at closing, even if typically paid in whole or part by the buyer under the sales contract:
• Escrow fees
• Recording fees to clear seller’s title (e.g., lien releases) in a sale
• Notary fees

Frequently, the amount of a VA loan may exceed the purchase price of property. In that situation, title insurance premiums will be based on the greater amount because a lender will require a policy insuring the entire amount of the loan. For example, if the purchase price of the property is $200,000 and the VA guaranteed loan is for $210,000, the title insurance premium will be based on a policy insuring up to $210,000.

April, 2007

Page 7, correct [R]PRESENTATIONS: Community Projects for clarity of information:

“Ironwoods” Kailua Road Housing Development Update - Bob Bruhl, DR Horton/Shuler Homes

“Ironwoods” represents the apartment buildings from Michael’s Liquors, at Kailua Road to Aoloa Road. We bought Windward and Town and Country from Kaneohe Ranch Co but they are not currently under re-development planning. The Purchase was in January 2005 subject to certain ground-leases and an EPA Consent Decree requiring 74 large capacity cesspools servicing this project be closed starting in June and be completed by December. Closure of the cesspools will begin [done by] in June. The majority of the Residents still there will be out by September 30, 2007 (Remaining are approximately 7 residents in the Town and Country; 8 left in the Coral; about 38 in the Kailua Arms; at the end of May there will be about 20 left in the Town and Country[20 occupants]). The Transition for residents began 15 months ago. January 2008 the demolition will begin. Security will be on premise because no one will be living there. Matt Goyre stated t[T]here are currently 185 apartments in “Ironwoods” project area and ; we will build 153 total condominium units from 800 sq ft, for 1 BD, l BTH to 1800 sq ft for 3 BD, 2 BTH. The Project has met the LUO, it is A2 (medium density) no special variances or approvals are being sought. Atheistically there will be 312 parking stalls; parking under the building; screened with green vegetation, and 15 parking stalls will be visitor parking along with [and] 3 large courtyards. The courtyards are to open the space to the park across the street and a buffer to the public street (Kailua Road) and allow units to open onto the courtyards. A step up to the first floor (for the residential “look”) and given vegetation to shield the parking and units with exposed rafters tails, framed jalousie windows, horizontal siding, ironwood caps on the handrails. . Units have multiple lanais, from 200 to 400 sq ft openings onto the courtyards and are usable spaces. (There may be a 3^rd party (LEAD) grading system of environmental success of the project, however the owner has not yet agreed to the LEAD component of the project as it does entail economic considerations as well.) Bob Bruhl stated there will be m[M]ajor rehabilitation to the building area will be required because of lead-based[ed] paints and hazardous materials and [,] remediation of the cesspools, under grounding of the electrical lines, widening (improving Kailua Road) to install City’s drainage improvements in the 20 foot easement of the City with a 2412 requirement to “improve to standard” road. Rights-of-Way are 40 feet. 10 feet travel lane each way and 5 feet for the ironwood that are there and the 5 feet for the bike lane. The 40 ft ROW is to widen ½ of the roadway with an additional 20 feet (20+20=40) Hahani will be accessed by a median turn lane in the center of Kailua Road while maintaining 2 travel lanes, the bike lane on each side of the roadway. We will also build a 4 foot planter plus the oversized sidewalk of 8 feet on the project frontage and [C]coordination with Kaneohe Ranch Co. to continue the path in front of Michael’s Liquors. [in trying to]W[w]orking [out] with the City the Drainage Improvements (DEIS) all along Kailua Road to Wanaao, we will pick up the first half of that along our property’s frontage and pipe the storm water into the park with a perforated pipe in park’s parking lot from our property[from the parking lot]. The other choices not allowed were to route storm water down Aoloa or another nearby street that negatively impacted [Kaelepulu or to] Kawainui Channel [Stream] (Hamakua-Kaelepulu).

Page 7 correct Question & Responses concerning “Ironwoods” for clarity:

Questions and answers followed:

· Dudley asked if there are 74 large capacity cesspools were they to be closed and would they be demoed and removed. Response: yes to be cleaned out and closed, whether they would be removed or filled remains a decision between the City and Horton/Schuler. According to EPA requirements the consultant working with abatement may cap on the ground.

· Prentiss: as the Sewer project is from May to the End of the Year is a DDC project for Enchanted Lakes to the Beach is that in conjunction with the Design of the 3 lanes for the roadway and will they parallel the full length of the property matching the current configuration as [? T]the Liquor Store tapers out to the roadway to a width surface-ability as this greatly affects the left turn into the Ironwoods property. Last time there was no agreement with the City; is that done yet? Response: City refused to extend the center land both ways and will taper the left turn lane at the end of the Ironwoods property it with striping to deter a hard left turn at the Liquor Store until the Hahani Plaza area is improved. The City has not yet agreed to this proposal by the Ironwoods project. Prentiss stated in conversations wit the City it refused to continue the 3 lanes from Hahani to Wanaao thereby creating a hodgepodge of the roadway. A center lane that ends short of Hahani and Wanaao will create a traffic problem for the community. Should the City be listening now, it is advisable that they consider connecting the lanes up now for the good of the community.[City’s 3 connecting lanes are for good of the county].

· Wong asked for the affordable number of units. Response: none. Price range? Response: 1-3 BD Apartments -- $400,000 to 800,000 consistent at market in Kailua. Wong stated that a[A]s we are looking at a loss of 217 units of affordable housing, where are they going? Response: Military were transferred or redeployed [or] and other have left the island. What is the setback to edge of property? Response: 10 foot on the back of the property; 12-15 short side; 12 foot front. Is the City doing the EIS- drainage? Response: the City’s EIS covers our portion (it is mentioned in the EIS), City is the only [in] EIS drainage project; the 2412 does not require an EIS[:]. Wong asked what are the Simi-Private spaces for? Response: the Private Units with Common Areas for the units only, not the public.

· Glanstein: property owners on opposite side of roadway not to be assessed for the improvement[s] district on Kailua Road? It has been ponding a long time. Response: 3 areas from the Ironwoods project will percolate to park and are not City CIP projects; however the water will be taken to the parking lot in the park and will then be perculated into the park as the City’s solution to the storm water runoff rather than channel it to Aoloa to Kawainui Channel.[ \]Chair Bryant-Hunter: Planning, Zoning and Environment will be looking into the Drainage DEIS at committee.

· Tomasa asked if any of the units would be affordable Response: No.

· Best asked if the project to start mid-2008? Response: civil site work only prior to that. Completed? Response: 2 years—2011. Sale date[Start date]? Response: 1^st or 2^nd quarter of ’09. Retail In the complex? Response: Economic zoning is not allowed. Can you see the courtyards from the road? Response: Primary feature from roadway—principally to soften the face of the project. Courtyards, Semi-private, not locked up? Response: Designed for residents, but still securely. The courtyards will have about a 3 foot wrought iron fence.

· Lee Cranbury requested clarification.[ ]Response: Height is 40 feet, density was 185, after it will be 153[2] units in the 5 acres, no zone changes, breaking up the mass by using a U shape with 40 foot vertical with four faces break that up with step back or offsets. Cranbury requested the corners and long sides of the building be setback or altered to breakup the long box-like faces. Bruhl suggested all the design elevations are not yet complete and may reflect and accomplish more changes to the 40 foot faces.

· Ann McCoy: Security? Response: Yes. Entrance to Garage location? Response: 2 entrances. Landscaped along the back? Elevators? Response: all buildings will have.

· Ken Adams: The void in the middle is my home. It is viable and attractive building. In the mind of Horton/Schuler how can we fit in? Response: that is an open-ended question. The land is owned by Kaneohe R[r]anch Co and the building is owned by a co-op. [has sold?] Horton/Schuler ownes the properties on both sides of the Kailuan[us], and re-development is only on the town side of the Kailua at this time. Later, when the other parcel on the Lanikai side of the Kaiuan is re-developed [I]it must be worked out so that[have] the Kailuan (Adam’s home) is done similar to the allowances for Michael’s Liquors which is also still owned by Kaneohe Ranch Co. along with consideration for the homes across the street in a effort to fit in. The strip of land behind the Kailuan, that is used for parking, did Horton/Schuler purchase that? Response: No, that strip behind the Kailuan was not purchased by Horton/Schuler. Adams restated that [I]it must be remembered this was the last vestige of affordable homes in Kailua on that street[?]. Adams said the Kailuan wants to be good neighbors and fit in with Horton/Schuler plans.

· Ursula Retherford [Audience:] questioned w[W]hy doesn’t development require a percentage to be affordable—to not do so is shameful[?]. There should be a requirement that when so many affordable units are taken down there be a requirement that a certain percentage be constructed as affordable housing. Response: It is re-development (and not required by Ordinance). [Is t]The complex is to have an underground garage which will take away a lot of open space. Replacing the open space with buildings begs the question of just how much open space will be left? [Response: yes.] How much space to the roadway? Response: Road to the Building is 22 feet to the face of the building and 150 to the interior of the courtyard rear wall, [a) curb to building = 40 feet, b) curb to back of courtyard 150 feet.] Ms. Retherford stated the renderings look like Hawaii Kai and bringing Hawaii Kai to Kailua is out of sync for Kailua.[Statement by audience: Hawaii Kai in Kailua is out of sync.]

· Marie Samulo: Did the sellers or the re-developers [you] assist the relocation for tenants? Response: Tenants were notified, EPA in April 2005 notice provided at that time. The mandate EPA 2004 caused the building owners & Kaneohe Ranch Co. to require the closure of the cesspools and Kaneohe Ranch Co were successful in gaining an extension to that mandate to allow the closure of the cesspools and the termination [to terminate] of the ground leases to dovetail. The original ground leases were 50 year leases that began when the building were built in the late 1950s so the tenants were provided some where around a 1000 day notice. When we purchased the Coral tenants were allowed to move out without financial penalty and that arrangement was prorated over the remaining period of a month for the portion already paid on the month to month leases. Bruhl was told a letter was sent from Kaneohe Ranch Co to the tenants when the EPA Consent Decree was first signed that offered information for relocation services by Catholic Charities and Kaneohe Ranch Co received no response to those letters. [Statement by audience: But in early 1950 the notice was for 1000 days.

· For the Coral we provide NO financial penalty, unused rents were returned. Letters were sent to tenants by Kaneohe Ranch Co. Catholic Charities was available for relocation assistance.]

· James Severson[Audience] questioned how far below grade the basement parking will be and the floor to floor height of [ if] the [any] units[ were below grade]? Further, a question to the Board as to why there is no affordable housing requirement for this project. Response: the Parking is depressed below the grade about a foot and a half. Floor to floor height of a typical floor is 10 feet.

· Wong asked if the 74 cesspools were located below the existing buildings or in the parking lots and in courtyards. Response: In the parking lots and in the courtyards [yes]. Wong suggested that if the existing buildings were rehabilitated to meet EPA’s requirements then that could be done. Response: yes it could meet the EPA mandate.

· Chair Bryant-Hunter reiterated that the Kailua Neighborhood Board has taken a position wanted affordable housing in Kailua and had asked the City to consider affordable housing in the Ironwoods project. It was suggested the developer retool the project to include rentals and affordable units for sale. The recommendation was to incorporate both in creative ways. Are the units for renters or for sale? The Board tried from beginning to provide low income affordable options in the project. The response Kailua got has been a new structure near Cinnamons, at which time we reminded the City again that they had had the opportunity just a few months earlier to address affordable housing in Kailua at the Ironwoods project site. Redevelopment opportunities[y] for affordable housing was missed in this project[here]. The Board was criticized for not wanting affordable housing at the Cinnamon’s area which is unfortunate as the Board has been working diligently to retain its affordable housing in Kailua—which was lost during this project and its negotiations with the City. The City did not see it that way but rather asked the redeveloper to pay for infrastructure that this community had in the CIP process for many years.

· Wong restated that there was no requires in City Ordinances for redevelopment-- only in development to provide affordable housing.

Pacific Business News (Honolulu) - 9:42 AM HAST Wednesday, September 5, 2007

Sales of single-family homes on Oahu rose last month to the highest level so far this year, and prices of houses and condominiums also rose when compared with August 2006.

The median price of a single-family house on Oahu in August was $650,000, up 2.4 percent over the same month last year, when it was $635,000, the Honolulu Board of Realtors reported Wednesday.

The median price of a condo rose 6.6 percent year over year to $325,000, up from $305,000 in August 2006.

The 381 sales of single-family houses was the highest number in 2007 and the best showing since March 2006, when 392 houses sold, said Berton Hamamoto, president of the Honolulu Board of Realtors. Sales of condos, however, were down 14.7 percent in August, with 495 units sold, compared to 580 units sold in August 2006.

"The Oahu housing market has remained relatively stable," Hamamoto said in a statement. "Prices have been stable as well, with both single-family home and condominium pricing staying within a very narrow range."

Prices for the first eight months of the year are up compared to 2006. The median price of a single-family house through the end of August was $647,300, which was 1.9 percent over the 2006 price of $635,000, and the median condo price of $325,000 was a 4.8 increase over the 2006 price of $310,000.

"Mortgage rates dropped significantly over the last month, especially for the one-year adjustable rate mortgage, and this historically leads to increased demand in the housing market," said Harvey Shapiro, the board's research economist. "Additionally, there are expectations of a Federal Reserve rate cut at their Sept. 18 meeting, an event that could bolster demand for housing nationwide."

Janis L. Magin