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Another Slow Year in Anchorage Homebuilding

by Connie Yoshimura

For Anchorage homebuilders, 2014 is almost over and the home building statistics do not look good. Despite all the community meetings regarding the need for more housing and MOA’s promises of more efficient permitting, our 2014 single family permits will not even match the dismal 303 permits of 2013.  So far this year, there have been 274 single family permits issued through October.  Builders did drop eight more foundations in October than the prior year (most likely due to our unseasonably warm fall), but overall, builders try to avoid putting in foundations in November and December due to the additional $5,000 to $8,000 for heating and tenting.  The only good news is that duplex permits have doubled to 160 units and so have multi-family units which are up to 295 through October. This helps our rental market, but doesn’t ease the pain for the 65% of the population whose preference is for homeownership.

For 2014, Anchorage’s leading single family builders are Spinell with 31 permits; Hultquist Homes with 28; Merit Homes and Hagmeier Homes with 14 each.  The most popular subdivisions are WestPark with 29 permits; Resolution Pointe, 23; Powder Ridge, 15; the Terraces, 15 and Eagle Pointe with 12.  Unfortunately, all those subdivisions have higher new home costs than the average MLS sales price of $360,182 which leaves first-time home buyers seeking resale homes which have short and long-term hidden costs for maintenance and repair due to their average age of 30 years or more. Subcontractors and material suppliers seem oblivious to this conundrum and have continued to increase their prices.  With framers in short supply, it is now taking six or more months to complete a new home which adds to its cost due to extended interest carrying charges.  The only good news in homebuilding is the continuing low interest rates both for commercial lines of credit for builders and low interest rates for mortgages which allow buyers to qualify for higher mortgage amounts.  However, even those financial benefits will have ‘term limits’ when the predicted interest rate bumps up in late spring 2015.

Last week’s Multiple Listing report had only 474 active residential properties.  Overall, our MLS listed properties for the year is down 218 homes and sales are down a corresponding amount at 225.  It’s a balanced market with little inventory and is likely to continue into 2015, despite the jitters over the price of oil and the looming question of when the stock market bubble will begin to fizzle.  The last time the price of oil plummeted, we were overbuilt with thousands of units for sale.  That’s not our inventory situation going into 2015 and although we are not immune from national and world economic woes, Alaska and Anchorage, in particular, is well positioned this time around to ride out any fall-out.  2014 has had a residential appreciation rate of 3.8%.  It is unlikely that rate will fall below 3% in 2015 as the shortage of housing continues, despite the numerous community efforts to understand and advocate for changes in Title 21 and the MOA’s Design Criteria Manual which would allow for more affordable housing, but still meet health and safety standards.

Consider the Owner-Occupied Duplex as a Lifestyle Choice

by Connie Yoshimura

Eighteen years ago, I downsized from a single family home to an owner-occupied duplex.  Back then, it was an unusual housing choice for a realtor to make and even today, friends and colleagues still ask me why I made that move. But, personal reasons aside, an owner-occupied duplex is not only a good investment, but an increasingly acceptable lifestyle choice.  Year to date, 142 duplex sides have been permitted which is more than double from the 62 in 2013. Whether it’s sharing a common wall with a friend, family member or total stranger, the duplex home is the latest housing opportunity for affordability and a partial answer to Anchorage’s housing crunch.

An owner-occupied duplex has many advantages, not the least of which is financial.  Seventy-five percent of the rental income can be used to qualify for the mortgage as long as the buyer/owner has some previous property management experience as evidenced on a prior tax return. Loan limits have increased over time and you may be surprised to know that VA has a duplex loan limit of $625,000.   Fannie Mae and AHFC will loan up to $800,775.  These loan limits allow for an owner’s unit much like a luxury single family home with three and four bedrooms, triple car garage and a smaller tenant’s unit for that returning adult child, mother-in-law or corporate relocator. The two sides of a duplex do not need to be equally designed.   In fact, many may look like a single family home with a primary front entrance and a tenant entrance on the side or rear.  I live in south addition where duplexes are hard to distinguish from single family homes.  Across C Street to the east, is another emerging neighborhood where duplexes are gaining in popularity.

One caveat to high loan limits, however, is that if the buyer is qualifying based upon a contribution of the rental income to his overall debt ratio, he must have six months of reserves on hand, including principal, interest, taxes and insurance.  So, even for VA financing which can be up to 100% of appraised value, a buyer would need to have approximately $15,000 cash on hand to purchase a $550,000 duplex. Still, that amount is modest when considering you have assistance with your monthly mortgage payment.

Duplexes are expensive to build because they have more bathrooms and kitchens, the two most expensive rooms to construct, and so their value should never be analyzed on price per square foot alone, but rather rental income and your lifestyle choice.  And even though a brand new duplex should not have repairs for several years, an owner must be prepared to replace aging appliances, carpeting, and paint, and make other upgrades to remain competitive in the rental market.

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Dwell Realty
561 E. 36th Ave., Suite 200
Anchorage AK 99503