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Business :: Real Estate :: Understanding the Hawaii Real Estate Market :: Your Real Estate Taxes Ar...

Your Real Estate Taxes Are About To Go Through The Roof…

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 Good Grief
© John S. Pritchett

“Good Grief” is the infamous explicative heard around the world by readers of Charlie Brown cartoons and the same words will be soon heard from all around Oahu as the City & County prepares to tax us to death over the Rail as well as the sewers and the price of fresh water through our property taxes.

On the national scene concerning home values across the country and Property Taxes, this May 31, 2011 article from below describes what is typically happening:

Falling Home Prices Erode Nest Eggs, Local Government Budgets

 For sale property 

Startling new reports show the U.S. housing market is taking a turn for the worse, putting added pressure on families saving for retirement and on local governments that rely on property tax revenue to stay afloat. The trend is sure to squeeze local communities already faced with the prospect of declining federal aid, as they struggle to pay for basics ranging from schools to roads to public safety.

The latest bad news came Tuesday from the Standard & Poor's/Case-Shiller 20-city index. The round-up of home prices in large metropolitan areas showed prices in a dozen regions hit their lowest level in March since the housing market collapsed in 2006.

Nationally, prices fell by more than 4 percent in the first quarter of 2011 and have roughly returned to 2002 levels. David Blitzer, chairman of the Index Committee, claimed the numbers confirmed a "double-dip in home prices" in many U.S. markets.

"Home prices continue on their downward spiral with no relief in sight," Blitzer said.

The economic developments pose a political challenge for President Obama, by the economic complications for families and local governments -- both of which view property as a nest egg. For homeowners, their property value is a factor in retirement planning, and the movement in the market has already changed the way Americans think about their retirement. A Gallup poll released last year showed just 20 percent of non-retired Americans viewed their home equity as a major source of retirement income -- compared with 30 percent in 2007.

For local governments, those home values feed a significant portion of annual tax revenue and only recently have those revenues started to decline.

Though the housing bubble burst in 2006, assessments didn't start to catch up until last year, when local governments first logged a decline in property tax revenue.

With assessments going down, some governments have responded by raising tax rates.
According to the National Association of Counties, 15 percent of counties raised rates last year; according to the National League of Cities, 23 percent of cities did the same.

In an anti-tax climate, many jurisdictions instead favored cuts to personnel and capital projects to balance their budgets in 2010. But the League of Cities warned in a report last fall that "the full weight of the decline in housing values has yet to hit the budgets of many cities."

Maureen Maitland, vice president for index services at S&P, said the falling values will make it "very hard" for local governments to expect higher revenue based on assessments.

"They're going to either have to cut costs somewhere else or raise revenues," she said. "That's going to be a big challenge for a lot of localities." "We haven't quite hit that bottom yet," Maitland told

Walter Molony, spokesman with the National Association of Realtors, acknowledged that some governments are looking at raising rates to make up the difference in their budgets. But he advised against "unnecessary tax burdens on homeowners."

Molony also took issue with Blitzer's bleak characterization of the market. He said foreclosures and short sales are creating a "downward skew" in prices nationally, but predicted the number of foreclosures would start to decline next year, gradually balancing out the rest of the market. He urged lenders to loosen up credit requirements to ease the recovery along.


If we consider what is happening in Hawaii with home values we can see that between the year June 2010 and June 18th. 2011 we have lost -19% in the Average Sold Price of a Single Family Home.


For Condos:


Condos have dropped even more and we are going to have to see what the rest of June brings. The Honolulu Board of Realtors tracks Median Sold Prices primarily and so do the National and Local Real Estate reporting outlets. I do not believe medians accurately reflect the market, especially in Hawaii since we have so many Multi-Million Dollar properties. By using medians these Multi-Million Dollar properties become much less meaningful to the whole picture when looking at medians. I tend to look at medians as an attempt to be ‘Politically Correct’ instead of reporting the ‘Real Picture.’

Of course, with property values dropping all across the country, many states and municipalities are in a quandary concerning what to do about declining Property Tax Revenues.

I recently ran across a very interesting article which I will share with you below some of the statistics they found.

This excerpt from the February 2011 Federal Reserve Board of Governors:

State and local government tax revenues dropped steeply following the most severe housing market contraction since the Great Depression. We identify five main channels through which the housing market affects state and local tax revenues: property tax revenues, transfer tax revenues, sales tax revenues (including a direct effect through construction materials and an indirect effect through the link between housing wealth and consumption), and personal income tax revenues. We find that property tax revenues do not tend to decrease following house price declines. We conclude that the resilience of property tax receipts is due to significant lags between market values and assessed values of housing and the tendency of policy makers to offset declines in the tax base with higher tax rates. The other four channels have had a relatively modest effect on state tax revenues. We calculate that these channels jointly reduced tax revenues by $22 billion from 2006 to 2009, which is about 3 percent of total state own-source revenues in 2006. We conclude that the recent contraction in state and local tax revenues has been driven primarily by the general economic recession, rather than the housing market per se.




This full report is available on my website:

As you can see from the graphs above many States have been dramatically increasing Property Taxes in a declining Real Estate Market primarily by increasing the Millage Rate.

The millage rate (also known as the tax rate) is a figure applied to the value of your property to calculate your property tax liability. One “mill” equals one dollar of tax on every thousand dollars of taxable value. Your tax dollars are used to fund the cost of your government each year.

Hawaii 2011 Property Tax Rates

PROPERTY TAX (County Ordinances) - On real property, land and improvements. Assessments at 100% of "fair market value." Owner-occupied homeowner exemption amounts may vary by county. Personal property, e.g. cars or boats, not subject to property tax.

Tax rates per $1,000 net assessed value on land, building (improvements) and by property classification for Fiscal Year 2007:



Also on the web we can find feature articles describing what is happening with Property Taxes across the Nation which is what is similarly happening here in Hawaii but remember, in Hawaii we are also building a Multi-Billion Dollar Train to nowhere as well trying to fix the entire collapsing sewer on the entire Island. All of which will be charged to Tax Payers in New Taxes. I will not even go into what our State Utilities Commission is doing to us in rate increases given to Hawaiian Electric Company in the name of “Green” and our wonderful Governor’s manipulation of the G.E. Tax Exemptions causing Matson once again to raise our rates and pass onto the Consumer the Fuel Surcharge now at 47.5% which is the highest level for this charge in 10 years, all as a result of our Governor’s actions.

Attribution: National Association of Home Builders


Following are charts of how much Federal Tax Dollars are collected by state, per capita, ranking, etc:

Federal tax revenue by state


I find it surprising that Hawaii is ranked 42nd. in Gross Revenue of Federal Taxes collected from the State and that the collections are well below the Average Per Capita figure of $8,528.22. Why is this?

Home Ownership and Average Income of Hawaii Residents is probably the most logical answer.

From Bloomberg News last year: High-income residents of New York City and Hawaii would have the highest marginal tax rates in the U.S. if Congress adopts the president's proposal to increase taxes for top earners, according to a study by the Tax Foundation.

State, local and federal levies would result in a top 50.8 percent rate on high-income New York City residents, the study says. Wealthy Hawaii residents would pay 49.7 percent. And residents of California, Vermont, Maryland and New York would face top federal- state rates of 49.4 percent, 48.8 percent, 48.6 percent and 48.4 percent, respectively.

Lower tax rates on income and investments enacted in 2001 and 2003 expire Dec. 31. President Barak Obama and most Democrats want to retain those that target individuals earning less than $200,000 and married couples earning under $250,000 and allow policies that benefited those with higher incomes to expire. Republicans generally back extending all of the tax cuts.

Obama's proposal would allow the top marginal tax rates of 33 percent and 35 percent to revert to 36 percent and 39.6 percent next year. Phase-outs for deductions and exemptions would also be reinstated, pushing the rate higher. Tax rates on dividends and capital gains would increase to 20 percent from 15 percent.

Under current law, the top federal tax rate applies only to taxable income that exceeds about $375,000; amounts below that are taxed at lower rates.

The marginal tax rate rankings of states would be little changed if all tax cuts are extended, the study found. In that case, the top marginal rate in New York City would be 45.3 percent; Hawaii, 44.3 percent; California, 44.1 percent; Vermont, 43.3 percent; Maryland, 43.1 percent; New Jersey and New York, 43 percent.

Wow, I guess we do not have to worry too much about having to pay 44.3% of our entire livelihood in federal taxes in addition to the state taxes and our Cost of Living since most of us do not make anywhere near the $200,000 threshold.

The article above primarily dealt with the tax cuts extension that we all heard so much about last year.

We also need to consider who pays the most in taxes based upon personal income and the important thing to remember is when you're talking about tax "fairness," there are really only two stats that matter: the percentage of total taxes that each income group pays, and the percentage of total income that group receives.


O.K., just how much do our residents of Hawaii make?


Well, most of us do not make all that much money however I must also tell you that on average, Hawaii residents make a whole lot more money than our counterparts in the Mainland.



Median Household Income: Hawaii Towns 2009

Attribution: Civil Beat


What do know so far?

  1. We rank # 17 in the Nation in Average Income Per Capita
  2. We rank #42 in Federal Income Tax Collections
  3. We rank one of the lowest Property Tax rates in the Nation. However, we also have one of the largest Median Sales Prices in the Nation.

Median Price across the United States


What about percentage of Home Ownership in Hawaii?

Attribution: Hawai'i Free Press


What all this means is that Property Tax Rates in Hawaii are ridiculously low when YOU DO NOT CONSIDER the High Median Sales Prices and this is exactly what the City & County of Honolulu is banking upon. They are banking on your perception that property tax rates in Hawaii are low.

This is simply misdirection by the City & County and their minions at the Honolulu Star Advertiser to tote the same mantra. You should know this now after having read this article.

Be aware now, more than ever your Property Tax Rates are going to go way up! This is especially true since we have the Rail and the cost of the Sewers system to yet be taxed to us.

Simply, increasing property tax rates is going to be a “Train Wreck” for Home Ownership in Hawaii. But then again, we have the Second lowest home ownership rate in the Nation. I guess we are going to see home ownership rates drop even further for Hawaii residents.


I believe this is tragic for us all and a gross injustice and mismanagement by our City & County and State Representatives by ignoring the facts of Hawaii’s high tax burdens, horrible business climate, high cost of living, all without considering fully, the plight they have created for Hawaii Residents and Families.

It is bad enough our homes are no longer affordable to us but we are now a world-wide resort and retirement destination where the affluent can buy while our prices for homes continue to rise beyond our reach.

For Those Who Probably Do Not Own A Home
…or even if they do and use Food Stamps or need Government Assistance here is more interesting information on that:

Attribution: Michelle Malkin


The Last Column is Increase or Decrease of Year Usage:


It is not just about jobs in Hawaii. We have to stop and consider the long, far reaching effects of the bills our legislature continually pass to the detriment of our hard-working families. Be aware. Be vigilant and let your legislature know how you feel. Tell your neighbors, friends and anyone that will listen to get out there and vote!

Hawaii has one of the lowest voter turnout percentages in the nation. This does not bode well for a prideful state, especially when so many of Hawaii Residents speak so well of Hawaii’s Obama. What does this say about us?


I hope that you have enjoyed this report. Although this article is not statistically specific to what is really happening with Hawaii Real Estate, this data is available to you each month on my website:

I am here for you and I will give you the facts of Hawaii Real Estate and I will not ever tell you “Oh sure it is a Great Time to Buy” which you often hear from many Real Estate Agents who have not a clue what is happening in the marketplace and this includes the Honolulu Board of Realtors and especially the reporting from the Honolulu Star-Advertiser.

If you need help, please email or call me.

I wish you all much Aloha,
Mike Gallagher,Broker 808-384-9015

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arabold — Thursday, July 28, 2011
Great article! Exquisitely researched! But dumb as hell! We, the voters, pretty much ignore our government and let them do whatever they want. Even when they screw up we in Hawaii keep reelecting them. And, when they back something we like like the Oahu rail we jump on the band wagon. Unfortunately, we ignore things like infrastructure, public utilities, health care, education, etc until one of them degrades to crisis levels or we get the bill, then we write abundant articles likes yours.... AND GO BACK TO SLEEP UNTIL THE NEXT CRISIS! Wake up! Throw the bastards out! And hold government accountable! There is something grossly wrong with a community that has been so completely unbalanced (read Democrat) for nearly 60 years!!!!


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