Jul
16
When our turgid economy began to calm down, and real estate prices stopped soaring, I began to get this question when giving speeches:
“Is there going to be another bubble?”
No, I said, there won’t be, because the last bubble was caused by the sudden exit of Japanese investors at a time when they were driving the market by themselves. This time the market has lots of driving forces and we’re more likely to see a leveling off of prices and then a little settling back.
I won’t claim to be right just because I’m right so far, since future developments could increase the decline in home prices. Heck, maybe prices will fall so much that would-be first-time homebuyers can afford to buy again. That would be a great thing for some young couples. But it does appear that whatever happens, a bubble it will not be.
The new question is whether we’re just lagging the mainland, and whatever is happening in California now will happen here. Some people just assume this is so, and all they want to know is how many months or years it will take before we have the same unemployment rate as Fresno.
Hawaii’s economy does not LAG the mainland economy. It simply behaves differently, buffeted by several different forces:
- It is affected by prosperity in the markets that send us visitors, especially Japan, the West Coast, and Canada. Right now both Japanese and mainland visitor arrivals are down, and we’re still doing okay so far.
- It is affected by the military economy, which is managed through central planning and driven by global unrest. The more unrest, the better for this economic sector, and right now there is unrest to spare.
- It is affected by demographics, and like Florida and Arizona we have an aging population with a lot of transplant retirees who tend to act as a stabilizing influence on the economy.
The thing is, whatever happens to us, it won’t be “california, but later,” it will be something unique to Hawaii.
Probably something not as bad. Even California has regional economies, and the coastal cities that send us our visitors aren’t doing as badly as the inland towns where we never get much visitor traffic anyway.
I’m not trying to paper over the very real slowdown of the Hawaii economy, only encourage you not to get a case of nerves beyond what’s actually called for.
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I would like to comment on Howards comments this morning about China. Yes, there are no direct flights to Hawaii right now, but what companies need to understand is that the China inbound market to Hawaii will be almost purely controlled by tour operators. Chinese do business with established relationships, and Hawaii needs to start connecting with these future tour operators now. There are six local Chinese transportation companies in Hawaii and there are ways to reach the China tour operators and airline companies. When the market starts direct flights you are too late.
Korea will be nice, but nothing like China, because its simply a numbers game, and China had 41 million outbound travelers in 2007. Sorry, the Canadians are not the right visitor for us, although you are right about the increase of travel from them. They spend less than any other travel market, and those in Waikiki’s retail and restaurant business knows it.