|by Ray Tsuchiyama|
Host Dailynn Yanagida, an expert in business organizations, interviewed me in January 2019 for 2019 Hawaii Real Estate trends.
I recalled my first phase in Hawaii real estate – in the 1980s — a turbulent period characterized by stagflation (residential mortgage rates skyrocketed to 18 percent) with high employment. During this time Hawaii realtors were first exposed to the many facets of “agency” (fiduciary duties to the Client – Seller, Buyer, or Dual). After the tsunami of Japanese real estate investment in the 1980s, the Japanese “Bubble Economy” collapsed by the early 1990s, along with the first Iraq War – the U.S. bombing of Baghdad in January 1991 led to a prolonged tourism dip, and the 1997 Asian Financial Crisis poured gasoline on the fire – resulting in a real estate recession, which was mitigated by the West Coast Internet economic boom of the early 2000s and higher Mainland visitor numbers and spending.
Dailynn asked me about 2019 annual trends – and I responded simply, according to the Hawaii Board of Realtors, in December 2018 there was a 30% year-on-year drop in residential closings compared to December 2017. In other words, more inventory, with longer “sales cycles”, with an ever-slight advantage going to Buyers. With an April 2019 view, that trend is continuing – and there has been lower listing prices, especially with many Kakaako condos competing now with older Waikiki, Makiki, Ala Moana, and even Hawaii-Kai properties. We have to see if there will be more volatile price adjustments by summer.
In terms of global macro-trends, the low U.S. Fed interest rates continue, but there was a slight increase from 2.25 – 2.5% in January 2019 to 2.7 – 2.8% in March 2019 – heading into 2.9% territory by the end of 2019. U.S. unemployment rates continue to be low.
Of my macro-currency prediction, I was wrong – usually with higher U.S. Fed interest rates, the U.S. dollar gains – and so it did – hovering at the 112 yen vis-à-vis the U.S. dollar in mid-April. I had expected the Japanese yen will increase in value to <110 to a dollar – but the Japanese economy has been hurt by slowing sales to China.
I was on-the-mark for the Chinese renminbi/yuan – hitting nearly 7 to a U.S. dollar this spring, and now at 6.7 – a far cry from 8.5 that I enjoyed in the early 2000s. The resurgent U.S. dollar has impacted PRC/Mainland real estate development projects in North America (and helped the Hong Kong economy stabilize a bit – since the Hong Kong currency is pegged to the U.S. dollar).
I received many comments from Hawaii realtors on my overview of the “changes” in residential real estate, especially on the rise of “teams” like Myron Kiriu or the “Ihara Team”, plus Preview Agents at Coldwell increasing transactions share. Names like Keller Williams, Hawaii Life and Better Homes & Gardens are new entrants, and older brands like Kahala Associates are gone.
Finally, I commented on economic macro-trends for the State, including the continuing crisis in housing Inventory – highlighted by economist Paul Brewbaker again and again – there just not been new housing units Hawaii compared to the 1970s – that’s four decades ago! Firms still grabble with the State/City permits and zoning process. As Hawaii young people leave for greener pastures (yes, Nevada has >80,000 former Hawaii residents now), this is the demographic that pays taxes. Paradoxically, I said that the main factor for mass transit is a growing population (so they can explore transit options earlier than later) – with a “declining” population, there evaporates the reason for a mass transit line! So population, jobs, mass transit, and real estate/housing all are intertwined – one is impacted by the other.
Like I said, I remain an optimist: the last 4 – 5 transit stations (Downtown – Waikiki) offer the best opportunity for a Private-Public Partnership (P3) in developing mixed-use development on top/adjacent the rail stations (residential, office, commercial, even museums, sports centers, tourist destinations)– and so it is again about real estate. It is not Transportation-Oriented Development but the other way around: Development-Oriented Transit – and revive the Honolulu inner core for “Work, Live, Play”. See my Civil Beat Op-Ed for a more in-depth analysis on P3:
My closing comments on tech and real estate – VR, AR, platform disruptors – I hope to address more fully in a future Interview Show. Thanks for watching!