The Grass-Shack Money Machine

Our preoccupation with real estate dates back two generations, at least.

There’s never any good economic news.
The economy itself has bad times and better times. That’s obvious. It’s just that
the news about the economy is never good.

For example, this morning I
read a story in one of the dailies, headlined “Room Shortages Might Slow Japanese
Tourism.” This sounded dire. Japanese visitors were having a hard time booking
budget and middle-scost hotel rooms in Honolulu, and might not be able to come
when they wanted. Oh, no. Except when you realized that the “problem” was simple:
They couldn’t book rooms because Hawai’i hotels were full. Occupancy was way up.
Hotels, in fact, were having a great season. The worst that could happen was someone
in Japan would say to his or her neighbor, “Oh, we had to go to Guam this year,
because Hawai’i was booked. We’ll have to reserve early next year.”

No matter
which way the economy turns, the news always seems to take a negative spin. That’s
one of the conclusions I came to when I read the real estate coverage we put together
for this issue. As you probably know, unless you’ve been hiding in a cave for
the past year or two, Hawai’i homes have gone through one of those once-a-decade
dramatic price increases.

This bump in prices was good news for people who
owned homes, especially a group of people who bought homes in 1990 and 1991, at
the tail-end of the Japanese bubble. Many of these people found themselves upside
down, as they say. That is, they soon found they owed more on their properties
than they could sell them for. Many have, at long last, been restored to financial

It’s possible to take a negative spin, as well. Rising home prices
are inevitably unwelcome news for people who want a home, but don’t have one yet.
Any uptick in the real estate market always sets off a rash of news stories about
how homes are no longer affordable.

on the market for $1.3 million, this Manoa house sold for $18,750 in 1943.

do try to address that problem in a piece called, “How to buy a home when you
think you can’t afford one.”

If you take a snapshot of any moment in the
real estate market, there’s always good news and bad news. The bad news has always
received more attention over the years. To avoid that trap, we took a longer view
of our real estate market.

We’ve been preoccupied with real estate since
the end of World War II. When you look back, you see a cavalcade of bad news,
or at least what appeared to be bad news at the time. The bad news at the end
of the war was there was no housing to buy. The remedy: Development all over O’ahu.
Which turned into bad news, because we feared we were overdeveloping the Islands.
The remedy: Limiting development. Which turned into bad news because home prices
soared. The remedy: Affordable housing. Which turned into bad news when the Japanese
stopped buying and all housing got more affordable, meaning that everyone’s property
values started to sag.

In retrospect, of course, there was good news along
with the bad. Hawai’i’s burgeoning real estate market enriched two generations
of home owners. Even at the height of the Japanese boom, when the dailies were
filled with dire stories of increasingly unaffordable housing, there must have
been someone who went home and said, “Honey, break out the good Scotch. We just
sold the house for a million two and we’re retiring in style.”

We take a
look at O’ahu real estate in this issue from all angles, good and bad. As a shorthand
way of seeing change, we picked 10 representative houses currently on the market
and investigated their price histories. When you see how much real estate has
appreciated, even in constant dollars, you no longer wonder why it compels our