Expert provides a crash course in economics and shares his forecast at Realtors Association of Maui luncheon. “It has been a wacky year.”As Bank of Hawai‘i Chief Economist Paul Brewbaker took the stage to address the members of the Realtors Association of Maui at the King Kamehameha Golf Club on Friday, July 18, the crowded room grew silent in anticipation of receiving “the bad news.”
Although he admitted “it has been a wacky year,” Brewbaker encouraged the audience of more than 300 real estate professionals to remember two key points: “Just because you don’t know it, doesn’t mean it isn’t true,” and “Expect the unexpected.”
As he delivered his latest economic forecast for Hawai‘i—particularly the stormy skies swirling above the residential real estate sector—Brewbaker provided a crash course in economics in his own distinctive, comic style.
He asked audience members if they ever would have predicted the shutdown of ATA and Aloha Airlines, the nationwide subprime mortgage calamity, or oil approaching $150 a barrel—a true example of his point, “expect the unexpected.” In the wake of the Fannie Mae and Freddie Mac crises, Brewbaker said the nation is in a financial stranglehold. But for Hawai‘i in particular, he said the past 12 months have brought about a “toxic combination” of events, impacting nearly every sector within the state’s economy.
Even worse, he said, the state has been encumbered with the ultimate “trifecta”: a simultaneous lineup of stagnant real estate sales, plummeting tourism rates and chart-topping fuel costs.
And for those in Hawai‘i’s real estate market, the impact has been significant.
But, he cautioned the anxious crowd, this is not the time to abandon all hope.
According to Brewbaker, since the 1950s, Maui’s real estate has progressed in a “stop and go” formation, with spurts of housing booms and recessions. In addition, Maui has demonstrated a pattern of falling in and out of synch with national trends.
As far as price distribution, housing costs have declined, but not as significantly as Brewbaker’s own stomping grounds on O‘ahu. However, Maui and the Big Island have more construction than O‘ahu, so he predicted “distribution should be stable for a little while.”
Brewbaker said the residential real estate market is close to the same place as it was in 1996, a phase he described as “a period of tranquility… also known as boredom.” One significant difference, however, is the contrast between single-family home sales and condominium sales; since the downturn, condominium sales have been surprisingly consistent—a glimmer of hope for real estate professionals.
So, what should real estate professionals do until the next “go” period? “Now may be the best time to take a vacation,” Brewbaker said with a sincere smile. “Think it through, but don’t take too long.” He said he anticipates housing to resume its advance to higher levels—but it could take some time, and there will likely be some speed bumps along the way.
For Maui’s economy as a whole, Brewbaker called for a period of abatement that he said should last well into 2009. With his trademark optimism, he assured it would also be a period of adjustment and housekeeping to pave the way for a new set of standards that will ease the transition into the next “stop and go” cycle. With the right incentives in place, he promised, “You should be good to go… just in time for the real estate market to come back.”
Remember, he said, “to expect the unexpected.” In all forecasts, there is always a degree of uncertainty; therefore, it is foolish to try and predict the outcome for the future. But in these tough financial times, Brewbaker said, “The bottom line is… don’t get caught sleeping.”