Gary's Blog

Sunday, August 8, 2010

Strong Economic News, Low Mortgage Rates

Despite what the newspapers and Rush would have you believe, there is good news out there.

A & B just had a strong quarter, with $28.9 million in earnings, compared with only $12.6 earned the same quarter a year ago. The first half's earnings rose by $13.9 million compared to the same period one year ago.

Hawaiian Airlines just reported $9 million in net income for the latest quarter, the ninth consecutive quarterly profit.

Initial jobless claims did drop by 11,000 last Thursday, according to the Labor department. Requests for unemployment insurance fell steadily last year from their peak in March of 2009. Yes, the unemployment rate is still 9.5%. Local governments are actually the biggest culprits in downsizing lately. Private enterprise is working hard and employment in those ranks is growing. The latest survey indicated that the jobless rate declined in 39 states last month. And Hawaii's jobless rate is actually pretty good, at 6.3%, the sixth lowest in the nation.

Some other good earnings reports have been keeping the Dow and S & P indexes high. UPS, 3M, Caterpillar, AT &T, Union Pacific railroad are all reporting strong profits and sales growth. Ford even reported great numbers, $2.6 billion in profit last quarter, its fifth straight quarterly profit. Ford predicts by the end of 2011 they will have more cash than debt.

The Institute for Supply Management's Index showed that job prospects are looking brighter, as the service sector, which makes up 80% of the economy, just grew for the seventh month in a row.

The manufacturing sector grew in July for the 12th straight month, according to the Institute for Supply Management. And in a second report, the Commerce Department announce that construction spending edged up 0.1% in June.

And consumers, although holding tight to their wallets, are still spending. The most recent retail sales figures show a 2.8% increase in July over a year earlier. And new home sales rose nearly 24% in June from the month earlier, according to the Commerce Department.

The recent AP Economy Survey shows the majority of economists believe the recovery remains on track. Economic growth is estimated at just under 3% for the year, even though it did grow at a 3.% pace for the first half of the year. Americans saved a higher percentage of their income last year, 4.2%, the highest level since 1998. That could explain the slower growth. But it also sets the stage for strong growth when the mood picks up.

And home builders showed strength by increasing spending earlier this year at the fastest pace in 27 years. They have since backed off though, with the expiration of the government tax credits.

The visitor count in Maui is up 7.1% so far this year, compared to the same period last year. Kathy Englert, resort rental agent in our Coldwell Banker Island Properties office, said that July was the best she has had in four years!

Hawaii real estate has some other bright spots too. Industrial real estate is seeing declines in vacancies according to CB Richard Ellis in Honolulu. Maui has by far the lowest vacancy rate in that category, at 1.4%. Statewide, the rate is down to 4.3%, as strong indicator that business is working here.

Bank of Hawaii is doing well, reporting its second-quarter profits jumped 50%. They say it is due to Hawaii's gradual improvement in the economy.

It seems the "smart money" is buying here on Maui. We recently closed two single family residences on Makena road for $17.5 million and $19.85 million. Condo closings include several homes at Wailea Beach villas which closed between $3,725,000 and $12.5 million; two units at Wailea Point for $3.7 million and $9,999,999; and a unit at Makena Surf sold for $3,375,000. And Steve Case, owner of AOL just increased his holdings of Maui Land and Pineapple Co, by purchasing 4.27 million shares for $16.5 million. This could actually give him majority ownership in the company.

Looking at the Maui condo real estate market, the number of listings in escrow is mind-boggling. As of this writing, island-wide, there are 1620 listings, of which 298 are Pending sales, meaning they are currently in escrow. That leaves on 1322 Active listings, or less than six months' inventory. That is a good indicator of market demand. What a great time to be a buyer of Maui real estate!

With mortgage rates at record lows, 15 year fixed rates are now below 4%! Unreal!

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