Bank of Hawaii Chief Economist Paul Brewbaker has issued the first of his quarterly reports on the Hawaiian economy. Here are his key findings:

-Real growth in Hawaii neared zero in 2006 due to capacity constraints on tourism, high local inflation and housing prices going sideways;

-Domestic tourism continues to crowd out foreign tourism. Japanese tourism fell nearly 10%;

-Residential construction will soften in 2007;

-Local unemployment rate is now around 2%;

-National economy will grow at 3% for 2007; and

-Hawaii will grow modestly in 2007 as local inflation eases.

Real Estate Commentary includes:

-Compression in values as unit sales have fallen will not be material. Valuations look "secure;"

-Maui and Kauai values are near comparable levels for Southern California, that is, not overvalued on a relative basis; and

-Federal Reserve will not ease unit the second half of 2007.

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