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Connie Yoshimura

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When Shopping for a New Home or Car

by Connie Yoshimura

Last weekend a friend and I went car shopping. Having been in sales for over thirty years and where my favorite place to meet buyers is at an open house, I was curious to compare selling techniques. We visited three dealerships and had three very different experiences. My friend and I walked the lot at the first dealership instead of going into the show room. It took 14 minutes for someone to come out of their air conditioned show room and approach us. (I suspect new sales people are assigned ‘lot duty’). “We’re just browsing,” was our response to his question of what were we looking for. Then he asked what was our budget. When I responded I wasn’t sure, he said, ‘Oh, a million dollars, huh?’ We had dressed down deliberately but that off-hand remark was a definite put-off if not a put-down. I assume when working an open house that everyone is qualified to buy the home or otherwise they would not be wasting their valuable weekend time. A dollars and cents discussion comes only after a buyers wants and needs and the benefits of a new home. When we finally made it into the show room, no one offered us any refreshments although they were in plain view. I have to confess I’ve been negligent at my opens by not offering refreshments this year but you can count on them the next time you visit me at an open.

My primary selling belief is that all buyers are attracted to knowledge. The young man assigned to the lot ‘walk abouts’ was smart enough to understand that very basic premise and handed us over to a person who had been selling cars for over ten years. He knew every make and model in the show room. My friend was interested in a sedan and I soon figured out I wanted to stick with an SUV. Once I confessed my current car was ten years old, he pointed out all the new benefits, including all the safety features. However, I have to confess I was more interested in style and color and whether or not my current custom wheels would fit on a new model (they will). We left with his card and I did give him my contact info. I returned with my husband later in the day and he explained the safety features to him while I admired the color which he said was the ‘rarest’ of the line. He gave us a price and I said I would think about it. I haven’t heard from him since.

We moved on to the next dealership and were promptly met just outside the show room door. The young man introduced himself and shook our hands. He treated us respectfully and asked ‘What were the three most important items we were looking for in a car?’ I knew it was a line but a good one. We were vague and he asked us again while showing us around the lot. I agree you can ask a question twice but not three times. He knew his product. Every make and model which was impressive. When we said we didn’t like how big the front end was and it looked like a truck, he told us how popular the model was and some of its benefits but he accepted our comments and wasn’t defensive. My friend liked his approach. I preferred the first sales person but I also liked the car which probably influenced my ‘like’ factor.   

We drove by the third dealership and decided not to go in. The lot was cluttered and there was no place to park. Now, I know how buyers feel when open house realtors park in the driveway or in the garage which I have been guilty of on a cold winter day.

I still don’t have a new car because no one has called me back. Politeness, product knowledge and follow-up are the three keys to successful sales whether buying a car or a new home.

 

New Mortgage Opportunities

by Connie Yoshimura

The Alaska Housing Financing Corporation (AHFC) has a little known new grant program for single family home buyers called the ‘Closing Cost Assistance Program’. Available only through First National Bank of Alaska and Mt. McKinley Bank in Fairbanks, it offers up to a 4% grant (yes, grant, not loan) to home buyers with a credit score of 660 and above. A slightly lower credit score reduces the grant to 3% of the mortgage amount. The catch is a modestly higher interest rate which changes daily. As of 7/11/2017, the published rate was 4.5% for a 30 year fixed rate. A 15 year mortgage is not available with the program.   

But despite the higher rate, for buyers, particularly millennials, who’ve had to sit on the sidelines of the housing market for lack of down payment and closing cost funds coupled with student loan debt, this program may just be the ticket to owning their first home. The program is also beneficial to older citizens with good credit but without having had the income available to save for a down payment. The AHFC website for this program tells the story of an out of state grandmother who moved to Alaska to be closer to her family. Only Alaskan residents are eligible for the grant. The program is also limited to VA and FHA loans, as well as the Rural Development loans through the Department of Agriculture.

This AHFC program is part of a nationwide trend to attract more buyers into the housing market which has best been described as stable the past couple of years. Mortgage companies, who relied on refinance income for the past five to seven years, now have reduced profits as that market has dried up with higher interest rates. There is more and more competition from online mortgage lenders who have aggressive mixed media marketing campaigns.   

Mortgage giants, Fannie Mae and Freddie Mac, who are still in government conservatorship, have also jumped into the mortgage market by loosening their credit qualifications. The nation’s three major credit rating agencies will drop tax liens and civil judgments from buyer’s profiles if the information isn’t complete. If you’ve ever tried to correct your credit score as a result of an identity mix-up, you know how important that is. Both Freddie and Fannie will now allow income to debt ratios of 50%, up from the long-standing 45%.

All this comes at a time when lenders are competing for borrowers and buyers are hesitant. These steps to spur home ownership are modest and are not like the stated income debacle that helped propel the real estate crash of 2008.  

Borrowing for a Home Mortgage Just Got Easier

by Connie Yoshimura

Last week, two major lending changes suddenly made it easier to get a mortgage. And here in Alaska, the Alaska Housing Financing Corporation has jumped into the mortgage market with a new grant program. First, changes to that dreaded credit score that everyone worries about. Equifax, TransUnion and Esperian, the three major credit rating agencies, will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete. Now, in order for a tax lien or civil judgment to appear, it must include the person’s name, address and either date of birth or Social Security Number. According to a recent article from CNBC.com, about 7% of the 220 million Americans with a credit profile, have liens or civil judgments against them. This change could up a mortgage applicant’s credit score by as much as 20 points which could allow them to have a lower rate or a higher mortgage amount.

The second big news is mortgage giants, Fannie Mae and Freddie Mac, are now allowing borrowers to have higher levels of debit and still qualify for a mortgage. Previously at 45% debt to income ratios, that ratio is now 50% of pretax income. Specifically, this increase in debt to income ratio is designed to help the millennial buyers with significant student loan debt qualify for their first home. As the millennials (24 to 35 age group) mature, marry and start a family, their housing needs are rapidly changing from living with parents or renting to home ownership. In the U.S. and here in Alaska, millennials and baby boomers are the two largest home buying groups.

These two significant changes are as a result of lenders experiencing a pinch in profit margins as buyers have pulled back. However, higher interest rates and higher home prices have created fewer homebuyers, at least in the lower 48. Here in Alaska, sales for the first five months of 2017 are in a virtual dead heat when compared YTD 2016 but summer inventory is increasing, creating more competition amongst sellers.     

The Alaska Housing Finance Corporation has also jumped into the mortgage market with an aggressive new program called Closing Cost Assistance Program (CCAP). This program will provide closing cost assistance equal to 4% or 3% or the loan amount to qualified homebuyers. Alaskan residents with a minimum credit score of 660 or better may receive a 4% grant and borrowers with a minimum credit score of 640 to 659 may receive up to a 3% grant. Note the word ‘grant’. This grant is a gift.  It is not borrowed money and does not need to be paid back. The catch is a slightly higher interest rate on a 30-year fixed rate AHFC mortgage. 

All three of these changes are designed to bring more buyers into the market place with hopefully a minimum amount of additional risk of default. We all remember the crash of 2008 when anyone could get a mortgage with stated income. Hopefully, these changes will provide new opportunities for home ownership without putting undue pressure on the mortgage system.

 

 

The Right and Limitation to Homeownership in Alaska

by Connie Yoshimura

This Fourth of July weekend seems like the perfect time to reflect on our right to own property. The Declaration of Independence specifically recognized the inalienable right to life, liberty and the pursuit of happiness. However, as originally drafted by Thomas Jefferson, it was life, liberty and property. Today, the right to own property is the backbone of our democracy. For families and individuals, the first step towards financial independence and wealth building begins with the ownership of their first home. Sixty-two percent of U.S. citizens own their home. The Veterans Administration and the Federal Housing Authority (FHA) have mortgage programs that encourage entry level home ownership in support of our right to own property.

Here in Alaska, approximately 8% of our land is privately owned, the smallest percentage of any state. A significant portion of the 8% is owned by Alaska Native corporations, both regional and village, as a result of the Alaska Native Claims Settlement Act. The remaining 92% is in the hands of various federal, state, and local governmental entities. In 2010, the Municipality of Anchorage did a survey of buildable residential land. After subtracting ‘prohibitively constrained land’ they determined there was 5,824 acres of buildable residential land in the Anchorage Bowl and 14,189 acres in Chugiak-Eagle River. Based upon my experience in both selling and developing subdivisions and housing in Anchorage and Eagle River, I have to question the accuracy of those numbers. In my opinion, there is far less availability of developable residential land than acknowledged by the MOA. Recently, a seasoned and well respected developer asked me the definition of ‘prohibitively constrained land’ and although I couldn’t provide him with the MOA definition, my definition would include slopes greater than 30%;  wetlands (including Class C which are becoming prohibitively expensive to develop and require payment into a wetlands mitigation bank which was $70,000 per acre two years ago); adequate accessibility to undeveloped land via collector roads for which the MOA previously shared in the cost with private developers but terminated their participation over thirty years ago;  lack of public water and sewer extensions and main infrastructure which would allow for more affordable homes and slightly higher density; and lastly new and ever changing  rules and regulations required by the MOA Design Criteria Manual for roads that has no public review process, making private development roads significantly more costly than either state, federal or local road standards.    

So it is no wonder that for the first half of 2017, the Anchorage housing market remains stable, despite job losses in the oil industry and a 2,000 estimated population loss. There is a 13% reduction in overall inventory for single family homes compared to one year ago and the average sales price of $363,000 remains in a virtual dead heat with last year, depending upon age and condition of the property. So for those home buyers sitting on the fence, waiting for the market to collapse, lack of land and its high cost of development, will keep prices stable because as Mark Twain said, ’Buy Land because they don’t make any more of it.’ And without developable land, there can be no more housing.

Alaska Rental Vacancies Hit Five-Year High

by Connie Yoshimura

According to the annual Alaska Rental Market Survey, vacancy rates crept up in 2017 to 5.08% in Anchorage which is almost identical to the national average. Fairbanks, Kenai Peninsula Borough and Wrangell-Petersburg all have vacancy rates double Anchorage’s and have for the past several years. Valdez-Cordova and the Juneau Borough have the lowest vacancy rates with 4.55% and 5.68% respectively. According to one local property owner, Bethel has a vacancy factor of zero. Overall the state vacancy rate stands at 7.33%, the highest it’s been in the past five years—the low being 5.8% in 2016. The 2017 survey, conducted by the Department of Labor, surveyed 16,550 units out of the approximately 92,000 housing units in the state. It’s a reliable survey of the rental market with one exception and that is it does not differentiate the vacancy and rental income between units built since 2000 when building codes and energy ratings began being upgraded and the majority of those built during the early 1980’s housing boom. 

New multi-family units, whether subsidized or market, are few and far between, given the historic low of multi-family permits the past five years. In Anchorage, the handful of new multi-family units being built with five-star energy ratings and thus, lower utility costs, are renting for $1,500 to $1,600 per month, almost 30% more than the adjusted median rent of $1,200 per unit as reported in the survey. Increased utility costs add to the cost of housing either for the tenant or the property owner.  In Anchorage, you can expect the reported eight per cent increase in natural gas rates to be absorbed by the property owner. Heat is paid by 73% of the property owners surveyed. The exception is the Fairbanks-North Star Borough where only 2.8% of units have natural gas. In Anchorage, water and refuse are paid by 49% of owners and sewer by 94%. This is typical of three and four story multi-family structures whereas duplex condos and single family rental units are usually separately metered, at least for heat, and electric and paid for by the tenant. On a statewide basis, only 20% of landlords pay for lights. Depending on the type of structure, snow removal is included by 80% of all surveyed units.  The 20% exception most likely due to single family or duplex units. 

Similar to the report in the May issue of Alaska Trends, Alaska is showing a stability and resiliency in the rental market as well as the for sale housing market despite the stalemate of the Alaska Legislature over the state’s budget woes.

What Are Home Buyers Looking For?

by Connie Yoshimura

The National Association of Home Builders recently published a book on Home Buyer Preferences based upon age, income and other factors. So whether you’re thinking about buying a new home or remodeling, here’s a quiz to keep you up to date on what buyers are looking for.

1. It’s all about the kitchen so rank these four features by their desirability.

A. Central Island    B. Granite/Natural Stone Countertop    C.  Walk-In Pantry    D. Table Space for Eating 

 

2. Kitchen features to avoid:

A. Laminate Countertops (in expensive kitchens)    B. Wine Coolers (in modest homes)    C. Glass Front Panel    D.  Trash Compactor

 

3. All buyers would like to have what features in their kitchen?

A. Double Sink    B. Walk-In Pantry    C. Drinking water filtration    D. Recessed cans

 

4. What type of cabinets do buyers prefer?

A. stained wood cabinets    B. Contemporary Styled Cabinets    C. Traditional Style Cabinets?

 

5. Next on any remodeler’s or builder list is the master bathroom. What are the ‘must-haves’ for master baths?

 

6. Moderate income buyers want the following—yes or no?

A. Both Shower Stall and Tub in Master Bath    B. Linen Closet    C. Double Vanity    D.  Ceramic Tile Walls   

 

7. High income home buyers (over $150,000 income) want the following—yes or no?

A. Whirlpool tub      B. Dressing/make-up area       C. color tub, toilet and sink        D. skylights

 

8. So now you’re finished with the kitchen and master bath. What are the other most essential decorative features?

A. Ceiling Fan    B. Exposed Beams    C. Window Seats

 

9. Do buyers prefer a wood burning or gas fireplace?

 

10. What room do 94% of all home buyers find most desirable?

A. Laundry Room    B. Breakfast Nook    C. Two Story Entry Foyer

 

11. What percentage of home buyers in all income levels prefer the following:

A. Dining Room    B. Great Room    C. Living Room    D. Home Office

According to the national survey, 48% of home buyers in all income ranges want a mud room. In Anchorage, I bet that number jumps up to 100%. Not all builders and remodelers can do everything identified in the survey.  Everybody has a budget to work with so my advice is to start with the kitchen countertops and replace them with quartz or granite, add a ceramic wainscot in the master bathroom and a cool haiku ceiling fan in the living/great room. 

 

 

 

 

 

 

The Evolution of the Laundry Room

by Connie Yoshimura

When I built my home on Campbell Lake, the architect and I forgot the laundry room. It eventually ended up in a tall crawl space—on a wooden platform surrounded by bare studs and insulation. When I downsized and moved to South Addition, the laundry room became a closet for a minimum sized stack washer/dryer in the master bathroom where the laundry basket sits in the unused Jacuzzi. Obviously, I never thought a laundry room was very important until I read ‘Home Buyer Preferences by Age, Income and Other Factors’ recently published by the National Association of Home Builders and discovered the laundry room is THE most wanted feature in a new home, regardless of income! 

You can usually tell the age of a home by its laundry room location. For years, the laundry room off the kitchen was preferred in two-story homes and was frequently part of a mud room off the garage.  Then, buyers and builders wised up and put it on the second floor where all the bedrooms are located so no more hauling laundry baskets up and down stairs.  Today, luxury homes may have a private stack washer/dryer in the master bedroom closet or bath area with a full-sized laundry room near where the secondary bedrooms are. 

So what makes a good laundry room? A window. Laundry takes time and natural light is a big plus in any room. Paint it a fun color or give it a theme. Add a laundry sink for delicates or spotting stains.  Build a shelf or cabinets for detergents, fabric softeners, stain remover, et cetera. Add a closet or rod to hang damp clothes on and a countertop for folding. Cabinets don’t need to be expensive and not necessarily the same brand or color as in the kitchen or master bathroom. Better yet maybe an open shelf for easy dispensing of soap and softeners. Although popular, particularly with buyers coming from the south, tile floors are generally cold in Alaska and a sheet vinyl, the same color as the hall carpet, works just fine, particularly if you are trying to stay in budget. If you are working in a small space, stack the washer/dryer so that you at least have room for folding and hanging. And don’t forget a space for laundry hampers.

Some new home plans continue to minimize the laundry room by placing it in a hall closet with bi-fold doors opening into a hallway. According to NAHB that’s not going to help sell new homes. If you are thinking of remodeling, start with the laundry room. It’s an inexpensive room to remodel and will help sell your home in the future.  

Home Buying Preferences Based on Age, Income and Other Factors

by Connie Yoshimura

If home builders are wondering what type of housing they should build in 2017 and beyond, all they have to do is read the recently published book by the National Association of Home Builders. The 124 pages with 156 pages of addendums is a blue print of home buyers’ wants and needs in all age groups and income categories. So let’s get started with breaking some myths. Despite planners and developers love of higher density, single family homes remain the preferred choice for buyers of all incomes. Nearly 70 percent of moderate-income buyers like suburban communities. At least 70 percent of high-income buyers also like suburbs that are near trails, parks and retail space. In Anchorage that destination is southeast and southwest areas for new homes. 

Higher income buyers prefer new over existing homes. They understand and are more readily able to pay the higher price per square foot for new so that they don’t have maintenance and repair expenses in the future. This is particularly true of the baby boomers who are reaching retirement age and looking for their final ‘destination’ home. More moderate and lower income buyers are still seeking more square footage at a lower price. 

Here’s another myth. Lot size is not an issue for more than 20 percent of buyers, irrespective of income. That’s good news for Anchorage where single family lot sizes are getting smaller and smaller due to high development costs. Whether it creates an attractive streetscape or not, larger homes on smaller lots are here to stay. Unless, of course, you can afford to move up to the hillside. Otherwise, developers need to work harder to control architectural details on the front elevation of homes and landscaping to make a cohesive and attractive small lot community. 

Moderate income buyers do not care about the popular two story elements seen in many Alaskan new homes. They’d prefer more square footage. As an alternative to the two-story great room or entry hall, buyers want 9 foot ceilings, even on the second floor. The powder room no longer exists in most new homes. Instead, it is replaced with a full bath on the main level. This is a preferred choice for both moderate and high-income earners.  

Everyone talks about technology in the home. We have programmable refrigerators, fans, et cetera. But what are buyers willing to pay for? Moderate income buyers want a wireless security system and a programmable thermostat like ‘Nest’. Technology pretty much stops there unless you are a high-end buyer. Finally, the dilemma faced by all home builders is size versus amenities. So, here is the answer. Most buyers prefer high quality amenities such as solid surface countertops. If new means smaller square footage, it needs to be accompanied by luxury finishes. Smart builders understand the differences between new and old and build accordingly.

Stability Factors in our Housing Market

by Connie Yoshimura

Anchorage isn’t the only city that’s suffering from a lack of housing.  According to the Department of Labor’s ‘Market Trends’ report published in May, the 2,100 new housing units built stateside represented a 12.5% decline from the year before.  Anchorage’s new units declined more than in other areas.  Only 423 new units were built in 2016 compared to 850 the year before.  These numbers represent single family, duplexes and multi-family units.  The increase and decrease of these numbers can be attributed to multi-family starts which are generally low income and subsided housing units.

The low new construction starts has created stability in our market with continued low inventory of available homes for sale or rent.  There are approximately 92,000 rental housing units statewide, or about one third of our housing inventory.  Rents have stabilized with only a one per cent increase in Anchorage.  The average two bedroom apartment rents for $1,238 plus utilities.  That’s a statewide average with a vacancy factor of 5.8 percent.  Single family homes can rent for as much as $4,800 in Anchorage.

Another factor contributing to our stable housing market is the lack of Alaska foreclosures which was less than one percent in 2016 (0.60) compared to the national average of 1.53, despite Alaska’s job losses the past two years.  Low interest rates are also contributing to the stability of our local and statewide housing market.  Although projected to increase in 2017, they have remained stable at 4% for a 30 year fixed rate.    Many buyers are putting 20% down to avoid mortgage insurance and there are a surprising number of cash buyers in the market. Due to the lack of rental housing, many move-up buyers are considering renting out their existing home rather than selling it.  

Every housing market has its nuances but this market is particularly steady in value and sales despite the gridlock over our state budget crisis and the pink slips filtering through  our work force.  From a housing perspective, it appears our citizens have more faith in Alaska’s economy than its elected state officials. 

Alaska Has State wide Housing Needs

by Connie Yoshimura

The Department of Labor and Work Force Development has confirmed in their May report what real estate professionals have been saying all along “a reduced supply of housing has created stability in both the for sale and for rent housing market.” Statewide, only 2,120 new residential units were built in Alaska 2016 –one of the four lowest permit years since 1993. The report called out new housing construction as ‘tepid at best’ in 2016 and said it represented a 12.5 percent decline from the year before. Significant declines in new housing starts occurred in Anchorage in both the multi-family and single family category with less than 200 single family homes permitted. Only Juneau had an increase in housing units in 2016, thanks to several projects for special needs populations. That trend in multi-family development for special needs and subsidized low income housing is most likely to continue for the next few years as private developers hesitate to take large financial risks during a recessionary period. In Anchorage, new multi-family development was also stymied by the new Title 21 rules adopted in 2016 and, in some instances, community councils vocal objections to higher density.   

The lack of new residential units statewide has ‘plateaued’ rents with an average cost of $1,238 plus utilities. However, the Kenai Peninsula Borough had a 7% increase in rents and Valdez-Cordova 6%. Anchorage and Mat-Su rents were virtually stable at less than 1%. There are approximately 92,000 households in Alaska which are impacted by changes in rents and vacancies which overall has remained steady during the past ten years.  

Another factor creating stability in our market is the lack of foreclosures which at the end of 2016 was 0.60% compared to the 1980’s recession when foreclosures peaked at 10.57%. This comparison of foreclosure rates is probably the most startling of all statistics presented in the May report and should destroy any remaining myths or misrepresentations about Alaska’s housing market tanking in the near future. During the past decade, Alaska, for whatever its myriad of reasons, has failed to keep up with the need for additional new housing as a result of population growth. It would take a significant exit of population to recreate anything near the housing collapse of the late 1980’s. Just ask any friend or co-worker how their search for a new home is coming along and you’re bound to hear frustrating stories of hours of Zillow searches and drive-arounds. And missed opportunities with low ball offers or unnecessary home inspection ‘requests’. With the lack of new home inventory, buyers must understand they are most likely purchasing a home that is probably thirty years old, an age when not only cosmetic obsolescence has set in but functional and perhaps mechanical/structural as well. 

The Alaska housing market has also benefitted from historic low 30 year fixed rate mortgages which has over the past couple of years ranged from 3.75 to 4.0 percent. However, even with modest increases over the next few years, Alaska’s housing stability should continue. Homes for rent or sale should not decline in value or monthly cost. It will take a decade to fulfill our housing needs, even if we started today.

Displaying blog entries 1-10 of 146