Laney advises caution
amid Big Island
real estate boom

KAILUA-KONA » The Big Island economy is booming, but housing costs pose a risk for the continuation of economic growth, economist Leroy Laney told two business audiences yesterday.

Laney, a professor at Hawaii Pacific University and a consultant to First Hawaiian Bank, made the bank's 31st annual assessment of the Big Island economy at a Kona-Kohala Chamber of Commerce event in the morning and again at a Hawaii Island Chamber of Commerce gathering in Hilo last night.

His short-term message was rosy: "Forecasts for the Big Island economy this year and next project continued economic strength, but with some cooling off from last year's heated pace."

"Both job growth and inflation-adjusted personal income will hover in the 2 to 3 percent range," he said.

But an economy cannot function without workers, and they need some place to live.

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The housing market on Kauai and Maui is "truly acute" and the Big Island is only slightly less of a problem, he said.

"One wonders about the long-term future of any economy in which those who make it run can't afford to relocate or stay here," he said.

The West Hawaii unemployment rate is just 1 percent, he said. The Big Island overall has a 3.3 percent rate, slightly higher than the state average of 2.8 percent.

The limited supply of workers has slowed Big Island job growth to 3 percent from last year's 3.7 percent, he said.

Laney raised the question of whether the island's housing market is in a bubble that eventually will burst. This is a time for caution, he answered.

In the 1990s, those who bought at the top of the market, pushed upward by Japanese money, were punished, he said.

"The fact that much of the demand for Hawaii real estate is now coming from the mainland U.S. won't save us," he said.

An end to the real estate boom would bring a downturn, but probably not a recession, he said.

Despite his housing concerns, Laney saw numerous reasons for optimism in the Big Island economy.

Big Island tourism is having a banner year, with visitor arrivals up 17 percent and spending up 23 percent, he said. The Pride of America, the largest U.S.-flagged cruise vessel ever, arrived in July and another 2,000-passenger ship, the Pride of Hawaii, is coming in May.

Construction is "hot as ever," with $565 million in residential construction, $245 million in commercial construction and $86 million in public construction in the fiscal year ended June 30, he said.

The University of Hawaii at Hilo is an economic contributor with a College of Pharmacy and the China-U.S. Center planned and the approaching opening of the Mauna Kea Astronomy Education Center.