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What I Learned in 2016

by Connie Yoshimura

What I love most about selling real estate is that every property, every buyer, every seller is different so it is never boring! Putting all those variables together to complete a transaction gives you a uber high of satisfaction. Every year also has a different set of variables and circumstances that set it apart. 2016 was no exception. This is what I learned in 2016.

Despite the strangulation in the state legislature as to how to manage the state budget shortfall, the Anchorage residential market held its values with less than a 1% decline in sales price. Year to date MLS sales are 2645 compared to 2750 in 2015 and 2619 in 2014 so despite everyone’s dire predictions, the market remained stable. Cartus and Brookfield relocation homes, priced below market for a quick sale, came and went with little impact on the market.  Builder permits limped along at historic lows. For the first eleven months of this year, only 182 single family homes were permitted.

Every week online and in print, I read about residential fires many of which are a result of our aging housing stock which is reaching functional and economic obsolescence. In many ways, our housing stock is just like an aging baby boomer. It requires a lot of maintenance to keep it going. Remodelers should rejoice as they are in high demand. What I also learned in 2016 is that low interest rates don’t last forever. Just this week, we had another bump up to 4.25 % for a 30-year fixed rate. A couple of months ago that rate was almost one point less, making any home purchase today considerably more expensive on a monthly basis.

At my open houses, I welcomed a lot of Hispanic and Asian visitors. Our home buying demographic is dramatically changing with multi-generational and blended families as well as minorities. New to America and Anchorage, these families crave the American dream of homeownership which was not available to them in a distant land. I also discovered the love for the return of the ranch home. And it’s just not for boomers. I saw many millennials at my open ranches because it was something different in the market and was easy living. I saw new smaller home sites due to the high cost of streets, water, sewer. Just less landscaping to maintain is my favorite response. More time for fun!

I listened to potential buyers talk about how they were tired of the drive in from the Valley. Some even wanted to move from Eagle River to Anchorage as they were tired of the pile-ups on the Glenn Highway. Being close to work became more of a priority in 2016. Also, close to family and familiarity with schools and shopping. Although we’re all connected online and with social media, physical neighborhoods seemed to take on more importance.  Buyers wanted to know who their neighbors were and not in a negative way but a positive. It was as if they were reaching out for a sense of community and belonging that only home ownership could provide.

At Dwell Realty, we’re taking a break from open houses to enjoy this holiday season with family and friends. But, like we all know, real estate is 24/7 so if you need some relief from all that holiday cheer, call, text or email. We’re here. And thank you to all our buyers and sellers for their trust and belief in what we do.

Cost Versus the Value of Remodeling

by Connie Yoshimura

According to the cost vs. value report published by Hanley Wood, LLC. in 2014, mid-range remodeling projects vary greatly when comparing actual job cost to resale value. One project where owners can expect a 100% return, particularly in Alaska’s cold climate, is the addition of a garage. That job cost is estimated at $55,120 and has a resale value of $57,500 which, interestingly enough, is significantly more than an appraisal gives for a garage.  Other remodeling projects which come close to recouping their job cost, according to the report, available online at www.costvsvalue.com. Include an attic bedroom remodel, basement remodel, bathroom addition and wood deck additions. Costs recouped tend to best occur when useable square footage is added or completed, such as finishing a basement or attic.

However, the kitchen remodel, which is ever so popular as it is the heart of every home, does not recoup job cost. A major kitchen remodel, including cabinets, countertops, lighting and flooring, has an estimated cost of $62,069 while only increasing the resale value by $20,000 or returning only 32.2% of its job cost. Minor kitchen remodel at $21,398 only increases resale value by $5,000 or 23.4%. Upscale remodeling has even less return on all jobs. That’s when personal preference takes over and owners order Italian marble, Miele appliances.  custom wall paint with multiple applications and made to order light fixtures. It’s hard to say ‘no’ to that $500 kitchen faucet but just don’t think you will receive any value for it when it’s time to sell. Although considered part of remodeling, window, roof, garage door replacement are really maintenance issues and have less than 50% return on job cost.     

So why does remodeling costs not return dollar for dollar value? Demolition and inconvenience can add 20 to 25% to the cost of any job. The tear out or tear down has labor and permitting costs. Plus, there is the unknown and unexpected as to what’s behind that sheetrock.  Frequently, plumbing and electrical have to be moved which requires the hiring and coordination with subcontractors. Most owners continue to live in their home while being remodeled which frequently creates confusion and delays over scheduling. A day lost is also a day’s worth of costs. Licensed, bonded and insured remodelers have the same overhead and administrative costs as homebuilders with a residential endorsement. By state law, subcontractors are only allowed to work in their licensed field. They should not be used as a general contractor. Nor should your friendly handy man be used for any significant remodeling.

Remodeling a home versus buying new is a personal lifestyle choice. Most homeowners simply pay cash for any remodeling whether it’s $18,000 for a midrange bathroom redo or a quarter middle for an upscale master suite addition. Just don’t think you will recoup those dollars when it comes time to sell.

The 2017 Question: Remodel or Buy New?

by Connie Yoshimura

It’s on the mind of most Anchorage homeowners who own a home built in the 1980’s and beyond. Anchorage’s housing aging stock is a boom for the big chain stores like Home Depot and Lowes who offer easy cosmetic remodeling for surface items like flooring, countertops and even cabinetry. But most serious remodeling goes much deeper than the ‘eye candy’ of a cosmetic remodel.

A substantial cost that most homeowners don’t think about is demolition. Not only are you buying and installing new replacements but there’s the demo cost. Demolition is one of the primary reasons that remodeling costs more on a price per square foot basis than buying new. That doesn’t seem reasonable but once you tear out those cabinets, add double ovens, maybe a new cooktop, fancy hood, there’s all that wiring that needs to be moved and replaced. The same holds true for plumbing. Then, there’s the sheetrock repair, the painting. Another big problem with remodeling that I personally have experienced is suddenly nothing else looks right. Those orange pendants hanging from the snake fixture suddenly look so 1990’s. Plus, because most owners continue to live in the home during the remodel, it frequently takes longer to complete as the contractor has to schedule around availability and the convenience of the owner.

There are lots of positives to staying put and remodeling. Friendly neighbors, familiarity with shopping, kids in the same schools. Stacey Dean and Cody Lee, owners of Grayling Construction, recently gave a presentation at the Dwell Sales Meeting. She stated that most homeowners pay cash for their remodeling and go into it knowing that cost does not equal value. Most remodels in Anchorage fall into the midrange value. Garage and family room additions offer a good return on value—almost 100% because it adds square footage to the home. However, a master suite addition only recoups about 29% of its job cost. Maintenance items such as garage or entry door replacement definitely do not recoup job cost. A favorite room to remodel is the kitchen. A major kitchen remodel which would include replacing cabinets, countertops, appliances, lighting and flooring returns only 32% of its job cost in resale value. But, as we all know living in Alaska, the kitchen is the heart of every home where family and guests gather on these cold winter nights. And that in itself may be worth the job cost.

Remodeled homes do sell faster than non and there is no denying there is some added value but statistically, both locally and nationally, the recouped cost averages only about 50 cents on the dollar. That’s the dilemma and question that homeowners will face in 2017 as our local housing stock continues to age and reaches cosmetic and functional obsolescence.

Interest Rate Jump Wakes Up Anchorage Buyers

by Connie Yoshimura

This month’s mortgage interest rate jump up to 4.125 % has sent buyers scampering to find a new home. The week before Thanksgiving forty-five homes pended in Anchorage compared to twenty-seven in 2015. That trend continued into Thanksgiving week when six additional sales were reported compared to 2015. These sales occurred in all price ranges but particularly noteworthy were five new sales between $650,000 to $750,000.

Mortgage rates have hovered in the mid- three percent range for so long that buyers have taken them for granted but not anymore. On a $400,000 mortgage, the rate increase amounts to $170.21 per month. Plus, a buyer needs to have approximately $680 in additional monthly income to qualify for the same mortgage. Rate increases are projected to continue in December and into 2017 as the economy adjusts to inflation and price increases for materials, goods and services. It’s a dual dilemma for buyers—less home for the money and a higher mortgage payment. Millennial first time home buyers, in particular, are going to be impacted by these increases. Already frustrated because of unrealistic expectations, they may opt out of the market and rent, even though rental rate increases are bound to occur. The second big bulge of buyers in the market are the boomers who may opt to just stay put in their aging home, particularly if they were smart and refinanced at the three percent plus mortgage rate. Already challenged by the price per square foot for new construction, more and more will opt to simply remodel.      

It is always hard to identify the bottom of any market. Usually, when it occurs we acknowledge it only in past tense. In Anchorage, I believe that bottom has just passed us by. Last week’s active inventory was only 575 homes. New construction building permits continue at historic lows. Only 175 single family building permits were issued for the first ten months of this year. Only eight Anchorage builders were issued permits for more than five single family homes. Despite the concerns over the state’s economy, buyers are motivated by personal housing needs related to marriage, birth, death, divorce and job change. The job loss we experienced in 2016 resulted in some good relocation buys in suburban areas of Anchorage which were readily absorbed into our market. 

If you’ve been waiting to buy a home, now is the time.             

Displaying blog entries 1-4 of 4

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Dwell Realty
561 E. 36th Ave., Suite 200
Anchorage AK 99503
907-646-3600