Maui's economy expected to cool
By Sean Hao
Advertiser Staff Writer
Maui's economic growth will slow this year and next amid a downturn in housing and tourism, according to a new forecast.
The county will continue to benefit from a boom in construction and a low jobless rate, said First Hawaiian Bank consultant Leroy Laney, during an economic outlook forum Friday at the Maui Beach Hotel. However, a dampening in the real estate market will put the brakes on Maui's economy, which could lead to lower sales of furnishings, durable goods and retail spending.
"Thus, the Maui economic picture is somewhat more downbeat in 2007 and 2008 than in recent times," Laney said.
"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."
Maui's real estate market has experienced "phenomenal" price increases in recent years, when home prices rose 26 percent in 2004, followed by a 23 percent gain in 2005, Laney said. The market softened last year when prices rose just 2 percent, while prices during the first half of this year are off 10 percent.
"We've warned about an impending turn in the Maui real estate market for a couple of years. In 2007, it's happening. It's hard to overestimate the effect that a dampening of real estate has on the overall economy," Laney said.
Among the sectors that will feel the downward pressure are construction, home furnishings and general retail, he said.
"Once cooling starts, it usually doesn't reverse in just one year, though there usually aren't sharp decline, just a plateau with mild oscillations in price," Laney added.
The real estate slowdown comes amid a weakening in Maui visitor arrivals.
Total Maui arrivals increased 4.6 percent last year. However, during the first half of 2007, Maui lagged behind all but O'ahu in visitor arrival growth.
Regarding agriculture, Laney noted that Maui's lone sugar operation, HC&S, reported that production increased in 2007, although prices have softened.
Reach Sean Hao at shao@honoluluadvertiser.com.
