Hawaii Economy Slows, Inflation Highest in Nation

The Star Bulletin has this sobering update:

Hawaii's projected inflation rate for 2006 was revised up to 4.8 percent from the 3.8 percent predicted in May's forecast to reflect higher oil prices -- which boost the costs of goods throughout the economy -- as well as increases in housing costs.

Even the builders are slowing down:

But growth in construction is expected to level off in the next few years, due to rising interest rates and a decline in demand for housing in recent months.

Job growth forecasts were revised upwards to 2.5 percent from 2.2 percent in the previous quarter's report. But this is expected to slow to 1.5 percent in 2007, and 1.2 percent in following years.

Glut of Houses on Big Island

The Hawaii Tribune Herald reports that there is "more supply, less demand" in East Hawaii:

The situation is most noticeable in places like Hawaiian Paradise Park, where numerous speculative houses line the red cinder roads, waiting for buyers. In a one-mile stretch on 15th Avenue, five "For Sale" signs can be seen along their respective properties.

After Susan Rosario put her family's two-house lot on the market "a few months" ago, they've had with just two visits and no offers.

"I'll just wait. When they want to buy, they buy," she said of the 25th Avenue property. "If you can find me a buyer, go right ahead."

"There's a lot more supply and a lot less demand. Economics 101," said real estate agent Henry "Hank" Correa Jr., owner of Hank Correa Realty. Asked whether he thought home prices have reached bottom, he said, "I think it's early."

This is confirmed by commenters on Ben Jone's incomparable Housing Bubble Blog. Commenter Kaneui says:

It’s been interesting to watch the bubble expand and now start to deflate here in Hawaii. I sold a property in the Puna district (east Hawaii Island) for someone three years ago, when things were just heating up–everyone was telling me we’d never get our asking price, but we did. And from then on, the market took off.

Well, I was recently talking to a friend who is still in Puna, and he tells me that there are over 40 new spec homes for sale in the Hawaiian Paradise Park subdivision, and not one has sold. My, how times have changed since 2003!

The market in Hawaii is unraveling there first, as Puna has some of the cheapest housing in the state–however, the initial signs of a deflating bubble are already here on O’ahu: YOY sales have declined, and price drops will soon follow. (Never mind the fact that an estate here on Kailua Beach just sold for $24M last month–but again, the very high-end is a separate world…)

I'm on Oahu as well and prices should stop dropping any day now....

Neighbor Island News: Sales Down

The Honolulu Advertiser reports that sales continue to slow on Kauai, Maui and the Big Island.

July's median price for previously owned single-family Maui homes tied the record set in May 2005 at $780,000, up from $750,000 in June and $642,600 in July 2005.

But there were 30 percent fewer single-family home sales on the Valley Isle: 88 in July compared with 125 a year earlier.

Maui condominium sales fell even further, dropping 66 percent to 78 in July from 228 a year earlier. The 78 July sales were the fewest in any month since January 2002, according to the Realtors Association of Maui.

The real shocker is this figure:

The median Maui condo price last month was $525,000, which was off the record $645,000 set in June but up from $380,000 in July 2005.

The median price of a Maui condo fell $120,000 in one month?! Hmm, what's that term I'm looking for....

"There's a correction going on," [broker Keone Ball] said, noting that he's witnessed deals where sellers accept offers $100,000 below asking price. "There's price reductions all over the place."