America's Most Overpriced Cities
by Erin Carlyle, Forbes, February 26, 2014
Mention Hawaii, and most Americans will think of clear blue water and sandy beaches, flower leis, Hawaiian shirts and fruity drinks. People who actually live there may have a more jaundiced perspective.
The median sales price for a single-family home in Honolulu was $430,000 in the fourth quarter of 2013, according to the National Association of Homebuilders. While that’s not the highest in the nation, it still puts the majority of homes on the market financially beyond the reach of families bringing home the median household income in the Honolulu metro area, $86,300. That doesn’t look likely to change. Because developable land is limited, the pace of new residential construction—some 3,000 per units in the entire state per year–is only about half of what the population needs to match its growth rate, says Eugene Tian, chief economist for the research arm of the state’s Dept. of Business, Economics and Tourism.
Lots of places have high housing costs, but add in the outrageous cost of daily necessities in Hawaii and it makes the beautiful island look like a less-than-idyllic place to live. Groceries in Honolulu cost 55.6% more than the national average; utilities 67.9% more, according to Sperling’s BestPlaces. “Eighty percent of our food is imported from the mainland,” notes Tian. “Oil is 100% imported. And we are the most oil-dependent state in the U.S., with 87% of our energy depending on oil.”
Add to that the fact that the island is 2,400 miles away from the next land mass, and just try to get a supplier to deliver goods cheaply. The result is few suppliers and monopolies at every level: there’s only one Toyota dealer in Honolulu, and Chevron is the big gorilla oil company (in 1998, the state of Hawaii sued the oil companies for price fixing; oil prevailed noting that federal law outlaws monopolies, not oligopolies.) Local business owners (and home builders) pass on the high import costs, and residents pay through the nose for everything from milk to gasoline. For all these reasons, Honolulu tops our list of America’s Most Overpriced Cities, tying with New York for the No. 1 spot.
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