Hawaii construction forecast dim


POSTED: Friday, March 06, 2009

The construction outlook for Hawaii is full of gloom, with a significant decline in new projects, and more job losses to come.

The University of Hawaii Economic Research Organization has revised its latest construction forecast downward even further due to the global credit crisis and deepening recession.

“;Commercial and resort building are in retreat, hampered by a bleak national outlook and financing constraints,”; says the report co-authored by a team of economists, including Carl Bonham and Paul Brewbaker. “;The residential construction downturn will continue as income and wealth losses undermine housing demand.”;

The second half of last year proved to be worse than expected, says UHERO, with a sharp downturn in building permits. Residential permits for new home construction are expected to decline 34 percent this year, on top of the 30 percent decline last year.

Non-residential permits, meanwhile, will drop nearly 30 percent this year, on top of a nearly 17 percent drop last year, with no significant rebound in sight until 2011.

The value of permits is expected to bottom out at about $1 billion in 2011, more than 40 percent lower than UHERO forecasted six months ago.

While Hawaii home prices have not suffered as badly as the mainland, they are expected to drop further through 2011.

UHERO expects a larger-than-anticipated drop in the median Oahu home price with the median this year expected to be $563,820, which is about $20,000 less than it originally forecasted. Next year, UHERO is forecasting the median to be $536,160, about $33,000 lower than its earlier forecast.

UHERO expects prices to slip even further in 2011 to $533,000.

In its September 2008 report, UHERO had previously said the median Oahu home price would remain above $560,000.

The positive side is that Oahu homes will become more affordable.

Last year resulted in 37,000 construction job losses, 8 percent lower than in December 2007. But the trend is expected to continue - with construction jobs forecasted to drop 10.5 percent this year, and another 7.6 percent in 2010.

Overall construction spending will decline by roughly a third over the two-year period ending in 2010.