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Economist Paul Brewbaker: Maui’s economic expansion has begun

By Staff | Jul 22, 2010

Economist Paul Brewbaker believes the recession has ended and economic expansion has begun. While residents’ perception is different from what the economic data shows, he believes, “We are right at the moment of breakout.” Photo by Tom Blackburn-Rodriguez.

WAIKAPU — Economist Paul Brewbaker of TZ Economics told a meeting of the Realtors Association of Maui this past Friday that the great recession is over and the economic expansion has begun.

He marked the turnaround as beginning in the second or third quarter of 2009.

While Brewbaker conceded that the popular perception is different from what the economic data shows, he believes, “We are right at the moment of breakout.”

Why is the public’s perception different from the statistics? One reason is the nature of the recovery and what economists like to call lagging indicators.

One of those lagging indicators is an increase in employment, which generally occurs in the latter stages of an expansion.

“The last thing you do when things get better is you hire somebody. First you work them (your employees) to death, and then you realize your buddy is going to hire them and pay more money,” Brewbaker said.

He called on the audience to help get people over “this idea of waiting” for the best deal on a home. “2012 is not a year worth waiting for,” he said. “Prices may not go up, but financing may be more costly.”

“The U.S. recovery is unfolding, with the Neighbor Islands not as good as Oahu, but no worse than the Mainland,” Brewbaker said in remarks to more than 100 people attending the RAM meeting at King Kamehameha Golf Club in Waikapu.

He pointed out that the Neighbor Islands are more vulnerable to tourism and housing downturns. When the economy rebounds, it comes back faster on the Neighbor Islands, which are dependent on those two economic drivers.

“Tourism occupancy is coming back on Maui, because room rates have fallen so much it is actually a deal,” Brewbaker noted. “On average, room rates fell to 2005 rates, adjusted for inflation.”

Brewbaker discounted concerns over a double-dip recession, where the first recessionary period is followed by a weak recovery, a pause and then another economic decline.

“Double dip? I think we are beyond that,” Brewbaker said. “It’s much more of an issue for European countries, although we are all connected, so it does matter.”



Brewbaker sees the Maui housing market moving into a discovery period, looking for the flat spot in housing prices.

“We are just past the moment when the bottom fishers have left the market,” he said.

While the market downturn was faster than in past recessions, it may have overshot the mark. Housing sales on Maui have begun to recover.

First comes increased sales volume, and second comes rising prices.

“We are waiting to find when the single-family recession is over,” Brewbaker said. “It did happen elsewhere; it might have just happened on Maui.”

“Foreclosures are a problem and will remain a problem,” he said, “but as a general trend, it will not result in glut. Three-thousand units are not that much in historical terms.”

The number of new homes being added in Hawaii has been declining for decades, and with only 400 housing units authorized on Maui in the past 4-6 quarters (it used to be five times that much), Brewbaker sees the odds of a glut as "very very low.”


What about the housing market in West Maui? According to Brewbaker, the resort developments from Lahaina up to Kapalua, with everything in between such as North Kaanapali and Napili, are close to the completion of their original vision.

“However, the housing solution has not worked itself out completely, and that’s why so many people commute from Central Maui,” Brewbaker said in an interview following his remarks at the RAM meeting.

He compared the congestion that commute creates on a two-lane road to “having a dial-up Internet connection in a high-speed universe.”

For Brewbaker, when it comes to building affordable housing in West Maui, you can’t plausibly go mauka everywhere along that corridor and build affordable housing.

As the high-end market comes back, Brewbaker describes the future of West Maui housing as being pockets of more affordable resident housing interspersed with nonresident, part-time resident and transient housing/accommodations in what he called a “patchwork quilt configuration.”


Brewbaker has moved beyond the economic concerns of today and is asking about the next recession: “The thing to worry about is the next recession… what will cause it… what structural problems will we carry into it?”

He called on the audience to start thinking outside the box to get to deficit reduction. He even asked them to challenge long-held, cherished beliefs.

He asked, “Why do we have an interest rate deduction (for mortgages), and why are there 30-year mortgages?”