Honolulu Housing: The Last Century
Educational presentation by Economist Paul Brewbaker at Ward Village
If you live in Hawaii and follow what’s going on in the local economy, chances are you have heard of Paul Brewbaker. He is one of the best economist on the island and is Principal of TZ Economics (a Hawaii economics consultancy) and former Senior Vice President and Chief Economist at Bank of Hawaii.
Now, while his presentation may seem like a flash-back to college economics 101, his delivery is truly amazing; he’s local, funny, and very insightful. Some of the more interesting items he went over was the prediction of how likely the U.S. would have a recession.
Another interesting aspect that focuses more on Hawaii Real Estate is how home sizes have dramatically changed. It was stated that people would choose the largest home among a neighborhood of smaller houses, rather than the smallest house in a neighborhood of larger houses, even though the second (the smallest house among larger houses) is larger than the first (the largest house among smaller houses) — This is an example of Behavioral Economics.
I thought it was an interesting that the average household size fell in size. Back in the 1930’s the average household size was 5 people, but now it is 3 or less people. Yet people still a vast majority of people want larger homes.
Oahu has been known to have a housing shortage as we technically need 3500+ homes per year, but have historically been only issuing approximately 1500 permits per year — meaning we have been falling short of 2000 homes per year. If you look at the graph below you will see that we are essentially building as many homes as we did back in the 1920’s. I know we are on an island and land is a commodity, but maybe we should lessen the “red-tape” on permits and make it easier to build. Otherwise we will continue to see locals moving away. I guess only time will tell.
