A Hawaii economist offered continued optimism for Hawaii’s economic recovery, according to a report First Hawaiian Bank released Wednesday morning.
Leroy Laney, the bank’s economic adviser said the recovery, while slow, has been steady, and he’s seeing positive signs in several areas.
“The key word is patience,” Laney said. “Those bright spots — in a housing market that shows signs of turning, in retailing, in auto sales, and in some other areas — are cause for cautious optimism as we head into 2013.”
Job growth has been uneven, Laney said, and until the previous job peaks from several years ago are reached, the economy is in a recovery period, not an expansion.
Construction, particularly in the residential home market, continues to lag, Laney said. Construction jobs are still about 30 percent below the 2007 peak, he said. Oahu will see some increase, with a recent surge in private building permits, mostly related to high-rise condos in Kakaako, shopping development and resort activity.
According to Hawaii County’s statistics for July, the most recent month for which the figures are available, the number of permits the county issued in 2012 was up 31 percent compared with 2011, with 2,355 permits for the first seven months of this year, compared with 1,744 for the first seven months of last year. The value of the permits was up 28 percent this year compared with last year.
The median price of homes in Honolulu has bounced up and down the last couple of years, although it remains more stable than in many mainland markets, Laney said. So far this year, the median price is up about 9 percent, the biggest increase since 2005.
“Honolulu median price growth tends to move in steps, a price boom followed by several years of much milder decline, then another boom,” he said. “We may be on the verge of the next upswing. … By 2013, it’s quite possible the old record high for median prices will be broken, thanks to low inventory, the famine of new residential construction, and low interest rates. That’s all the better news for the overall economy, because real estate upswings usually coincide with better economic performance generally.”
Honolulu is also leading the neighbor islands when it comes to home sales and prices, Laney said.
“I suspect the same factors that are leading to some revival in Honolulu will eventually be felt on the neighbor islands,” he said, noting that foreclosure filings have dropped somewhat. That change, he added, may be more related to changes in state laws regarding how lenders may proceed with foreclosures than a lack of properties to foreclose on.
If that’s the case, the number of foreclosure filings may go back up a bit, he added.
West Hawaii Realtor Gretchen Lambeth, in her October newsletter, said Kona had eight more sales through Oct. 21 than during the same time period in 2011, despite slow sales the last few months. Home and condo sales were down slightly, she said, but land sales were up.
Laney said visitor arrivals, which are up more than 9 percent this year compared with last year, will continue to grow through next year, although the rate of growth will likely be lower. He predicted a 3.5 percent increase in arrivals next year. A few things also limit just how much arrivals can grow, he added.
“Hotel occupancies have been running so high this year in many places that there doesn’t remain much room for expansion close to what we have seen this year,” he said.
Job creation in 2012 may end up being 1 percent, and Laney predicted it could increase to 2 percent in 2013. Jobs may increase in the visitor, health care, wholesale and retail sectors, but not in government careers. The state’s unemployment rate could end up between 5 percent and 6 percent, he said.
Hawaii County’s unemployment rate, in July, was 9.3 percent, down from 10.2 percent in July 2011, according to Hawaii County statistics.
The Federal Reserve said American households’ median net worth dropped almost 40 percent from 2007 to 2010, Laney said.
“Such a reduction put that median household back to 1992 and it takes time to recover from that,” Laney said. “That, plus job uncertainties, have taken a toll on consumer and business confidence, especially smaller businesses.”
But some consumer measures are showing improvements. Car sales are up, Laney said. Sales peaked in 2005 at more than 70,000 vehicle sales, and hit their low in 2009, at below 34,000. Projections for 2013 are sales of 47,000.