Maui economy headed for slowdown
Economist Leroy Laney attributes the cooling to the real estate market
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The economic outlook for the Valley Isle is cloudier than it was a few years ago.
Leroy Laney, First Hawaiian Bank's economics consultant, painted picture of slowing growth at an economic outlook forum at the Maui Beach Hotel yesterday, citing a cooling residential real estate market, lower tourism numbers and harbor overcrowding.
The good news is that construction on Maui is still booming, and the unemployment rate is still low, he said.
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The Maui economy is headed for a slowdown, given the downturn in the housing market after years of phenomenal price increases, a softening in tourism numbers and harbor overcrowding.
First Hawaiian Bank economics consultant Leroy Laney painted the cloudy forecast yesterday at an economic outlook forum at the Maui Beach Hotel.
The downturn is driven mostly by the cooling off of the Maui real estate market, which Laney called inevitable after the dramatic escalation of home prices -- almost 26 percent in 2004 and almost 23 percent in 2005.
The market began to soften last year, and for the first half of this year, prices are off about 10 percent.
It's not going to reverse itself in just one year, he said, nor should there be sharp declines in price -- just a plateau with mild oscillations.
"Thus, the Maui economic picture is somewhat more downbeat in 2007 and 2008 than in recent times," said Laney. "However, remember that any economic cycle inevitably contains periods of cooling down; it's required for infrastructure to catch up and for slowly rising incomes to help bring affordability back."
The silver lining is a continued construction boom and low unemployment rate.
Maui construction is still booming, reported Laney, with several Valley Isle builders reporting that they will be busy for at least several more years, although there are signs of this cooling off further down the pipeline.
Laney did note a slowdown in building permit growth beginning in late 2006 and continuing this year, however.
He attributed this to a more difficult permitting process involving more agencies, an underlying antigrowth sentiment on Maui, as well as a new county ordinance passed last year which requires new projects to make 50 percent of their units affordable.
Because builders must profit from a smaller percentage of market-priced homes, Laney said the new ordinance could have the unintended result of reducing the total supply for new housing for Maui residents.
Kahului Harbor is also a problem because it lacks room to expand, is in worse shape than any other harbor and has been outstripped by the isle's population growth of 32.6 percent in the last 15 years, he said.