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Housing Market Consistencies and Affordability

by Connie Yoshimura

Despite job losses and Alaska’s mild recession, the Anchorage housing market has held steady in 2017. The number of residential sales has declined only three percent compared to 2016 sales. However, the average sales price has remained constant at $365,000+. Days on the market for active listings have declined by 17% while homes sold are only on the market for 49 days, the same as in 2016.  A shortage of single family homes has contributed to keeping values steady in 2017. So far, every month in 2017 has seen fewer homes on the market than in 2016. November and December should be no exception to this trend. 

The condo market is also stable with only a four percent decline in the number of units sold. The average sales price has remained constant but with a $1,000 uptick in price to $212,517. Days on the market have increased to 65, a 12% jump from 2016. However, the percent of list o sale price has remained virtually unchanged. Condos, like single family homes, that are priced right, are a quick sale in today’s market, due to lack of inventory.

New home building remains at historic lows with only three more permits issued for the first ten months of this year compared to last year. Few digs actually occur in November and December and so Anchorage will continue to be faced with a new home shortage for the first six months of 2018.

Behind all these statistics, however, is a back story of buyer frustrations. New home sites are small, expensive and hard to find. Sellers wanting to move up or downsize can’t find a place to build. Ranches have become the go to housing plan for boomers and seniors with an average requested size of 1,800 square feet. That’s almost impossible to fit on a 6,000 square foot lot when adding a triple car garage to the foot print with a lot coverage ratio of 40% as dictated by the MOA. Move-up buyers want larger lots but if the acre lot costs nearly $200,000 plus well and septic that puts most move-up buyers with families out of the $800,000 price point. Most move-up buyers are willing to spend about $200,000 more than their existing home value to move up but with the average price point of $366,000 or even $400,000 in southeast Anchorage, that’s still out of reach of many buyers. Currently, there is over a 10 month supply of homes for sale over $750,000. For buyers who can afford that price point, now is a good time to do some negotiating before interest rates creep up in 2018 which for now is a sure thing.

Changes Coming to the Accessory Dwelling Unit Ordinance

by Connie Yoshimura

Still awaiting a hearing before the local Planning and Zoning Commission is an amendment to the Anchorage Municipal Code, Title 21, modifying Accessory Dwelling Unit (ADU) Regulations. Originally scheduled for Oct. 2 and rescheduled for Nov. 13th, it was postponed again due to a lack of a quorum which is not an unusual occurrence during the holiday season. However, this most recent postpone provides an opportunity for further comment from concerned citizens, of which I am one.

The proposed changes to the ADU existing ordinance is well intended to ‘expand the supply of residential rental units, make homeownership easier to attain and sustain, and encourage the development of this type of alternative housing.’ Anchorage needs more housing units and this is, indeed, a good step forward. However, the devil is always in the details and the interpretation of the code at the permit counter. So here are some of the details that I find perplexing. The landowner must submit an affidavit on a form provided by the MOA affirming that at least one landowner will occupy the principal dwelling or the accessory unit. That seems well-intended but who is going to enforce this requirement? Certainly, not the Zoning Enforcement Department which currently is understaffed and has more important infractions, such as health and safety, to deal with than whether or not a landowner is absent from their owner-occupied premises for more than six months.     

One positive change is the ability to have an ADU in the R1 single family zone as long as it is within or attached to the primary dwelling. Homebuilders have struggled with the ‘mother-in-law’ request from new home buyers for the past ten years. This ordinance will clear up the in and out installation for stoves and other appliances in family rooms. However, I’m not sure how the community will respond to the ability of a homeowner to now add an ADU on a 10,000 single family zoned lot. Many of our older subdivisions have lots that are 10,000 square feet or slightly more and they are highly prized for their privacy, particularly if they are on a cul-de-sac. Unless the covenants, codes and restrictions for the subdivision particularly restrict ADUs, there may be some unhappy homeowners when their next door neighbor begins construction of an ADU.

One yet to be determined factor is how mortgage lenders will view accessory dwelling units for the purposes of financing. Will rental income from the ADU be allocated to the owner’s income ratios at 75% of the gross rental income or at all? I can see this as a particular sticky issue if the ADU is detached. One other concern is the required deed recording identifying the property as having an ADU and the requirement if and when it is converted back to only a single family to make another recorded change.   

I live in a neighborhood where several ADUs have popped up over the past ten years, some legal and some obviously non-conforming. I welcome additional housing units in my neighborhood and in the community as a whole. However, the ADU ordinance as proposed is overburdened with unnecessary regulation. And, as we all know, over-regulation is a contributing factor to Anchorage’s high housing costs.     

 

Foreign Home Buyers in Alaska?

by Connie Yoshimura

As can be expected top destinations for foreign buyers are the sunshine states of Florida, California, Texas and Arizona. However, in a little heralded survey in 2015, published by the National Association of Realtors, Alaska ranked number #6 as a destination for foreign home buyers. More recent surveys have dropped Anchorage and Alaska out of the top 20 but the survey reminded me of my first encounter with a foreign home buyer back in 1984.  

That was when Alaska was just beginning to establish relationships with the Russian Far East. As a listing agent, the foreign buyers I met had obtained a loan from a local bank to purchase a home in a southeast Anchorage subdivision. After closing they wanted to put up a satellite dish on the front of the home but the covenants, codes and restrictions for the subdivision required it to be attached to the rear of the home. Their first response was “Well, we’ll just give the keys back to the bank if we can’t put it where we want to.” That seems like an amusing anecdote now but in 1984 Russians were not allowed to own property in their native country. The closest they could come to property ownership was a leased plot for their ‘deshka’, the equivalent of a summer cabin here in Alaska.  

Today, it is not unusual for realtors to do business with foreign home buyers. Although there is no specific state survey, Alaska is an attractive second home destination for foreigners, particularly in recreational communities like Homer and Sitka. An international buyer refers to two types of non-U.S. citizens. Type A is a non-U.S. citizen who primarily resides outside the U.S. and who doesn’t stay in the U.S. year round. The Type B buyer is a non-U.S. citizen who is temporarily residing in the U.S on non-immigrant visa, such as diplomats, foreign students, and foreign workers or recent immigrants who have been in the U.S. for less than two years as of the time of their purchase.

According to the National Association of Realtors, foreign buyers purchased $102.6 billion in residential real estate in 2016, down slightly from a high of $103.9 billion in 2015. Nationally, about 34% of foreign buyers come from Asia. Latin American and the Caribbean buyers make up about 21% and Europeans, 18%. China has been the top country of origin for foreign buyers since 2015 as far as number of transactions. China includes the People’s Republic of China, Hong Kong and Taiwan for these statistics. Buyers from Alaska’s neighbor, Canada, are also considered foreign buyers, and according to the NAR survey, make up 12% of all foreign buyers in 2016. What is also interesting is that, on average, foreigners purchase more expensive homes, with an average sales price of $477,500 in 2016, compared to U.S. citizens’ average purchase price for existing homes at $266.700. As Alaska’s diverse ethnic population continues to grow, we can expect more and more foreign citizens to purchase homes in our communities which will be a stabilizing factor in the residential market as Alaska works its way through its fiscal dilemma.

Proposed Changes to the Mortgage Interest Deduction

by Connie Yoshimura

The Anchorage real estate market will take a hit if changes to the beloved mortgage interest deduction includes a reduction from $1,000,000 to $500,000, as currently being proposed by Congress. Although still up for debate in the U.S. House and Senate, there’s probably at least a 50/50 chance that homeowners with a mortgage over $500,000 will lose their interest expense deduction beyond the proposed new cap. Particularly hard hit will be the real estate markets in California, New York and Seattle which have had record high inflation in double digits the past couple of years. But Anchorage is also going to share in the pain. Over 25% of the active listings in MLS are over $500,000. So far in 2017, there have been 20 homes sold over $1 million and 4 are pending. There are also currently 20 single family homes for sale over $1 million. I guess you can say ‘So what? Buyers who can afford a million dollar home can afford to pay a little bit more. That doesn’t affect me.’ But, in reality, it will have a dampening affect on the entire market. Buyers who were previously considering moving up, may elect to take a step back and choose to remodel rather than move. Any time the tax rules change or mortgage rates increase, the market slows and takes three to four months to adjust. Anchorage has a lot of higher end relocation buyers due to its oil based economy. The medical and aviation professions are also some of our higher end buyers over $500,000.    

Jerry Howard, CEO of the National Association of Home Builders was quoted last week as saying, “There are 7 million homes on the market right now that are over $500,000 and that the cap would devalue the homes. When housing values start to go down in one market, it spreads to the next and the next…. and the first thing you know you have a housing recession.” During the past ten years, home ownership rates in the U.S. have plummeted to just over 63%, down from 68%. Here in Alaska, rates are hovering around 65% but down from 70% in 2004. The last thing the housing industry needs right now, locally or nationally, is a change in the mortgage interest deduction. Soon the housing industry is going to have to cope with a rising interest rate. I know I have predicted mortgage rate increases for the past four years but with a new Fed chairman, I’m not alone in believing it is inevitable before the end of the year. Construction costs are also rising due to lack of material and labor shortage. The graying of America is not just in the suburbs but amongst the construction trades. Generation X and Y’s wanted to be lawyers instead of plumbers. If you want to buy a newly constructed home in Anchorage next year, expect to pay over $500,000.

One big fear is that this is just the beginning of the end of the mortgage interest deduction for all homeowners. And, if that happens, the American dream of home ownership will be in real peril. Homeownership provides an opportunity for the accumulation of wealth for the working and middle class. It promotes civic participation and community responsibility as well as social stability. And it also serves as an engine for economic growth. 

The one good caveat for the mortgage interest reduction plan is that homeowners with existing mortgages over $500,000 will be grandfathered in. So, if you are contemplating a move-up, now is the time to act.

Dwell Realty is on the Move

by Connie Yoshimura

You have probably heard from me on Facebook that we’re moving our offices to the Tatitlek building on Dec. 1st. Negotiating the lease terms, planning the TI’s has been quite a challenge and I have learned a lot about commercial real estate in the process. Selecting the space was pretty easy. We wanted to stay in mid-town to be close to our lenders, title companies and other real estate brokerages. There is a lot of interaction and synergy between all of us in the residential market place and so that narrowed our selection down.  We also wanted to do a modest expansion, thanks to all the support and acceptance Dwell Realty has received from our buyers and sellers. In particular, we’d like to thank Hultquist Homes and the John Hagmeier Company for their commitment to us when we first opened our doors over four and a half years ago.   

     

Dwell’s new office will be 7,700 square feet and will have room for seven more experienced realtors, making our total number approximately forty. In my many years of experience, that’s a manageable size for quality control and excellent customer service. Many of our realtors have been with us from the first year and I want to thank them for having faith in me and my team in a start-up brokerage. Our goal is not to be the biggest brokerage but one that buyers and sellers can count on to receive accurate real estate information, aggressive marketing, both online and in print, and true to the principles of honest representation and full disclosure.

     

In January 2018, we’ll be having a series of open houses so that you can see what we’re all about. Willodell Construction is our general contractor and I’ve probably driven him a little crazy with all my requests, including a barn door, living edge, farm sink, quartz countertops and stacked rock wall (not the kind you climb). We’ve also got some new art from V Rae, for our expanded lobby area. We want to continue to support Alaska’s contemporary artists.

 

Our physical move begins Thanksgiving weekend. Desks, copiers, data cabling, color coded boxes, furniture placement, computer hook-ups, WIFIs. —it’s a challenge but there is a Dwell team in place to make it happen.

 

November is the month we all give thanks for where we are in life, family  and work. So Thank You, Alaska!

 

 

Let's Talk About Lots

by Connie Yoshimura

Mark Twain said it best, “Buy land because they don’ t make any more of it.” That still rings true to this day except for Dubai where they are creating islands in the ocean for high rise development. But, back here in Anchorage, Alaska, buyers are frustrated even trying to find a lot on which to build a new home. Our residential land shortage is becoming acute. Lots are getting smaller due to higher regulatory and construction costs while the vertically built footprint increases. Local builders and buyers continue to grapple with the 30% lot coverage ratio required by the MOA for a maximum building footprint for two story homes while ranches have a 40% lot coverage ratio requirement. Probably, the greatest frustration home buyers have today is finding a lot wide or large enough to build their new home on. Aside from the lot coverage ratio, lot width dictates the type of home that can be built.  The MOA requires a minimum of a five foot side yard setback. On a fifty food wide lot that leaves only forty feet for the width of a new home. Most move-up buyers want a triple car garage which is thirty feet wide. That leaves only ten feet for an entry plus a small flex room if that. New Title 21 dictates a 10% front window elevation. And buyers and the community wonder why all homes begin to look like. Plus, covenants, codes and restrictions for a new home community may dictate exterior elevations and landscaping requirements. Streetscapes take ten years to develop with Alaska’s slow growing season for trees and shrubs.   

Trying to find a house plan and a lot that it will  fit on is the number one  buyer frustration in Anchorage. It is no longer about price or location but finding the right combination. Today’s buyer would rather sacrifice yard size for more vertical space. The boomer will accept minimum yard space and so will families without children. Anchorage is not alone in lot shortages. According to the National Association of Home Builders, the United States has record lot shortages. Lot prices are increasing while lot sizes are decreasing. Western states including, California and Washington, have an average lot price of $78,000 but I bet those published prices are for lots only 4,000 square feet. Add another $50,000 for an Anchorage lot with public water, sewer and a publicly maintained street. Currently, the only opportunity developers have for small lot development is through the cluster housing ordinance. However, that ordinance requires 30% open space which usually means you have to run water, sewer and a road through the open space without having the opportunity for a driveway/lot to pay for those extensions. These construction costs then have to be pro-rated to the overall cost of development resulting in minimum benefit in reducing costs to the new home buyer. 

Anchorage doesn’t have national and publicly traded home builders or wealthy land developers with access to wealth investment funds to hire lobbyists or outside consultants to advocate for single family or small lot development. Without our community coming together in an advocacy for single family development, which starts always with the land, we will continue to lose more and more of its citizens to the Valley. I have even heard some planners say that is an inevitable transition. I’m not willing to give up quite so easily on the American dream of single family home ownership.    

Displaying blog entries 1-6 of 6

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Dwell Realty
3230 C Street Suite 100
Anchorage AK 99503
907-646-3600