Hawaii Real Estate

Morgan Stanley(MS) published an analyst report on American Assets Trust (AAT) about their investor day last week saying that both retail and tourism in Hawaii has strongly improved.  American Assets Trust which owns Waikele (retail), Waikiki Beach Walk (Retail and Hotel) and the Shops at Kalakaua, has really increased revenue in 2011 and are taking aggressive steps to increase that in 2012.

The analyst at Morgan Stanley also points out that General Growth’s (GGP) Ala Moana Center is doing exceptionally well, with the two strong powerhouses being Forever 21 and the Apple store (AAPL).

The Morgan Stanley report points out strong Asian tourism gains especially from China and South Korea.

Tourism being the largest industry here drives many other industries.  With the influx of Asian tourists, we automatically see an uptick in Asian purchases of our local real estate.  They have come to buy throughout the economy downturn and recently we have seen an uptick in their purchase activity which helps support out local real estate market overall.

To learn more about our market or if you need help finding your own slice of paradise contact me, Malia Meenderman, R. Aloha!

The new FDIC proposal for outlining the rules for the new QRM requirements and risk retention rules was presented a couple of days ago.  As we previously announced, largely the focus was on the QRM requirements.  However, it may be the risk retention rules that may more damaging to the housing market.

It was generally thought that the 5% risk retention requirement would expire after a couple of years.  This is why many large banks such as Wells Fargo had actually pushed for a 30% down requirement for QRMs. The large banks had the capital to hold larger numbers of mortgages on their books and then be released of retention requirements after two years.  But, not so fast! With the FDICs proposal their would no expiration for the risk retention. That means any lender giving out a non-QRM will be required to hold onto 5% of the value of the loan for the life of the loan.

This will dramatically reduce the pool of lenders and with less lenders reduces options and will ultimately be a drag on housing, if this passes.

It is under review for 45 days and this could change.  In its current form it would be more challenging for a housing recovery here in Hawaii.

We are still seeing unattractive exotic loans such as interest only loans out there.  Many people with these mortgages would need to refinance in order to take advantage of these low rates and keep their homes.  These rules would make it more difficult for them to do so.  The rules favor the large banks and investors of mortgage backed securities and not homeowners. As a result, we could see an increase in the number of foreclosures in our islands.

The Hawaiian economy is rebounding faster than expected.  This is in large part to the better than expected numbers in the tourism industry.  The Department of Business, Economic Development and Tourism increased their forecasts for the tourism numbers.  They originally projected a 7.02% increase in visitor arrivals for 2010 compared with 2009, but now have increased that to 7.7% over last year.

The DBEDT all raised their forecast on visitor spending from 8.2% to 14.8%.  This huge increase is exciting local economists for the outlook for Hawaii.  It is a huge increase.  The DBEDT also raised their forecasted increase in the state’s domestic product to 1.4  percent.  In contrast 2009 saw a contraction in the state’s domestic product by 1.5%