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Defining Mixed-Use

by Connie Yoshimura

In Anchorage, we’re hearing more and more about the opportunities for mixed-use developments but what exactly does it mean for consumers and tax payers? According to a recent report published by the Building Owners Managers Association (BOMA), mixed use is defined as ‘a real estate project with a planned integration of some combination of retail, office, residential, hotel, recreation or other functions. It is pedestrian-oriented and contains the elements of a live-work-play environment. It maximizes space usage, has amenities and architectural expression and tends to mitigate traffic and sprawl.” Anchorage has seen elements of these concepts in a handful of developments, dating back to the Petersen Towers, which to my memory is one of the first mixed-use buildings in Anchorage, and where I once owned a condominium. To my knowledge, Petersen Towers was a privately financed development but in today’s world a mixed-use project may need state and local real estate tax credits and funding may need to come from both private and institutional investors. Live-work-play sounds like a carefree environment but, in most cases, it is not without tax payer subsidies.   

In its simplest form, mixed-use has a single building ownership. A good example is first floor retail with three or four stories of rental housing above—all owned by the same entity. Mixed-use gets complicated when there is a variety of uses and ownerships. That type of structure may require easements that allows one party to lawfully use the land of another which may include drainage, utility, ingress, egress, elevators, foundations and structure of one section of the project to other sections, according to the BOMA report. After development issues, segregating common area maintenance and expenses is probably one of the most challenging aspects of mixed-use. How much should each individual owner pay for janitorial, snow plowing and removal, and utility costs to identify just a few. It becomes particularly difficult when residences, offices, retail are all residing in the same structure. Medical condos are fast growing developments but even the medical sub-specialties should require different allocation of expenses. When a retail condo ‘marries’ into a building of subsidized rental apartments how is the common exterior light bill pro-rated? And will that pro-ration affect the mortgage cost and interest rate of the condo owner?     

Anchorage’s lack of land and its high cost to develop due to wetlands, poor soils and drainage issues, to name a few of the issues facing both residential and commercial developers, makes mixed-use appear attractive. Unfortunately, any re-development usually costs more on a price per square foot than new. There is always the tear down cost, the issue of asbestos and whether or not the existing utilities are the right sized pipe. Like any ‘mix-up’, it is always complicated. But I can’t help but wonder if there are enough Anchorage residents who want to go home on an elevator when it comes to the residential portion of mixed use. It wasn’t my idea of home but with Anchorage’s housing shortage that may be a change whose time has arrived.

How is the Housing Market, Really?

by Connie Yoshimura

If you talk to an accountant, they’ll tell you numbers don’t lie. They’ll also tell you that numbers can be manipulated to present differing points of view, depending on the presenter or goal. So, here are some numbers that tell quite a different story than all the negative headlines and reports we’re being inundated with this year about our local recession and its aftershock on the local housing market. If there is an aftershock, it’s the reverberation of buyer frustration of not being able to find a home to purchase.  

For a comparison of our housing market, I prefer to use month to month statistics so let’s look at January 2017 compared to 2016.  Total sales volume increased 16%. Days on the market declined 26%. Number of sold homes increased by 23%. These statistics do not include condos or mobile homes. One of these statistics could be an anomaly but put it all together and we have a housing market that’s generating more activity than a year ago both in total volume and number of homes sold.

In my opinion, this rush of home buying is due to the expected interest rate increase hinted by the feds for March and two other increases before the end of the year. Anchorage has a lack of residential inventor, both resale and new, particularly under $500,000 which seems to be the pressure point for buyers.  In the past thirty days, we’ve had calls for both two-story and ranch style new homes under $500,000. What is particularly interesting in the resale market is the request for closing costs and the length negotiations to come to an agreed upon price. This is reflective in a one percent decline in the average sales price to $347,590 –a price point that is virtually impossible for single family home builders to meet.   

Eagle River is an interesting sub-market. Taking into consideration all price ranges, it has only a 2.18 supply of homes. It does, however, have a six month supply of homes priced between $500,000 and $749,000. It’s most popular price range is between $300,000 and $449,000. Last year, Eagle River had no sales over $1 million and only two sales above $750,000. 
 
Bottom line is lack of inventory continues to create stability in the market as anxious buyers rush to purchase before mortgage rate increases push them out of the market. That urgency, however, doesn’t prevent them from attempting to negotiate price and closing costs. Even with no or modest appreciation, what’s affordable today may not be affordable tomorrow because of interest rate hikes.

Making the Case for the ‘Rancher’

by Connie Yoshimura

Over the past few weekends at open houses, I’ve visited with several ‘boomers’ who are considering downsizing to a ranch style home. They’ve told me stories of friends falling on stairs and breaking bones and are concerned it might happen to them. However, boomers with potential mobility issues are not the only buyers considering a move to a ranch. In a recent survey published by Builder online magazine, 65% of Americans actually prefer a ‘rancher’ as they are called in the lower 48. In Anchorage, MLS reported 384 ranch homes sold in 2016. That’s 13.05% of the total reported sales of 2016. That was a surprise to us and we had to check those stats twice. 

So if you’re a fitness fanatic and love to climb stairs either at the gym or home, why buy a ‘rancher’? According to an HVAC system source, heating a ranch is less expensive. That makes sense since there is less open air and vertical space to heat. If you’re concerned about quiet, there’s no noise from above. The best ranch style home separates the master bedroom from the secondary bedrooms either by the great room or bathrooms. A ranch is also easier for exterior maintenance. No ladders necessary when cleaning gutters!

Finding lots in Anchorage to build ranches on is a challenge for buyers and builders.  Many newly developed lots are only fifty feet wide and the handful of wider lots that are available require homes that are 2,000 to 2,400 square feet. Plus, new ranches are more expensive on a price per square foot than two-story homes. Even the older ranch homes that sold in 2016 had an average price per square foot of $214. Only 13 new ranches sold with an average price per square foot of $263, a 20% bump up for brand new.   

It’s a given that two story homes are more cost-effective and can fit on a lot with a smaller footprint. The MOA allows a 40% lot coverage ratio for ranches versus the 30% lot coverage for two-story homes but even that 10% increase is not enough to accommodate most ranches on small lots, let alone one with a triple car garage —the #1 wish list item for almost all new home buyers.

Dwell Realty has six new ranch homes either under construction or coming out of the ground in the next few weeks. They range in price from $339,900 to over $750,000. Check them out at www.dwellrealty.com or give us a call at 646-3600. 

Continued Housing Market Stability in 2017

by Connie Yoshimura

According to the Anchorage Economic Development Corporation report, Anchorage lost an estimated 2,700 jobs. People are motivated to buy and sell homes primarily as a result of marriage, birth, death, divorce and job change. You would think that the reported 2,700 job loss would have resulted in a significant decline in the housing market. Think again. It barely made a dent. Depending on what statistic you want to reference, the average sales price of $366,000, as reported in MLS, didn’t move one square foot. The decline in sales was miniscule—under 50 units. The number of sales and the amount of inventory varies by month so let’s compare January 2017 to January 2016.  Last week, there were a reported 45 pending sales. In 2016, there were 46. Current active inventory, after pending and solds in 2016 was 456. Last week, the reported inventory was 410. And therein lies why, at least the real estate market, is not in a recession. Lack of inventory is the major contributing factor to the stability of our local housing market. Between $200,000 and $500,000, there is less than a two month supply. Assume for a minute, you want a home built since 2000 so that it has higher energy efficiency and your price range is $400,000 to $450,000. There are exactly 6 with 4 bedrooms and double car garage built since 2000 for buyers to select from. 

Lack of inventory and the threat of rising interest rates have propelled buyers and sellers to make a housing decision. The threat of three quarter per cent prime interest rate hikes in 2017 and its effect on mortgage rates is more of a concern to buyers than the local economy. After all, the long term cost of a home is not the purchase price but the amount of interest paid. If there is a damp down in values in 2017, it will come not from job loss because despite someone else’s financial hardship, the market needs the inventory, but from the devaluation of our aging housing stock which has gone beyond cosmetic obsolescence to hard dollar functional obsolescence.  

If inventory remains low, prices will remain stable and the Anchorage market will absorb any supplemental inventory which is in modestly good condition. Although the AEDC report doesn’t report the type of jobs to be eliminated in each category, I suspect small business employers will keep key employees and let entry level jobs go unfilled. Major employers, like oil companies, have already shed higher paid seniority employees and replaced them with lower paying and younger transferees who have been encouraged to buy below their income qualifications. Alaska has the highest population growth rate of any state of ‘boomers’. They will continue to need health care, the bright spot in our local economy. Most have amassed, through savings and wise investments, a comfortable nest egg. Their evolving housing needs will be a stabilizing factor in our residential market in 2017.

Evaluating Your Property Tax Assessment

by Connie Yoshimura

Every year on January 15th, the Municipality of Anchorage is required to mail assessment notices to property owners for all taxable property. That date begins a 30-day appeal period. Feb. 29th is the last day to submit evidence for appeals and during Mid-March to June, the Board of Equalization, consisting of private citizens, hears the appeals. Very few property owners actually file a formal appeal and most minor appeals are handled at the counter which is efficient and friendly, given all the circumstances.

Perhaps, what is most important is how the valuation occurs in the first place. The MOA is required to physically inspect every property at least once every six years which becomes a year round re-inspection process for the staff. September through December is when they do new construction inspections and valuations. An interesting anecdote is that some land developers actually wait to file plats for completed subdivisions until after the first of the year in order to pay taxes on undeveloped land instead of fully improved lots. Sixty-five percent of the property tax base is residential. Twenty-seven percent is commercial and eight percent is personal property. The geographical area taxed includes south of Portage, north to Eklutna, the Anchorage Bowl and parts of Cook Inlet and Turnagain Arm. Within that jurisdiction, the commercial definition includes fourplexes, hotels, apartments, retail, industrial and office. Although there is no actual data on what type of properties receive the most appeals, either informally or through the appeal process, one can surmise that higher dollar properties, like commercial, would be most likely to make a formal appeal. 

What you might be surprised to know is that there are mandatory exemptions from property taxes required by Federal and State Governments. Those exemptions include cemetery, charitable, educational, hospital, religious, disabled veterans, senior citizens, housing authorities, native claim, veteran organizations and fire protection systems. Optional exemptions enacted at local levels may include business personal property, disabled veterans, widow/widower of active military service connected death, charter schools, community purpose, economic development and residential owner occupants. The most controversial, however, is a tax free abatement on deteriorated properties. Why a property that is an eye sore to the community should pay no property tax is a mystery most likely to everyone except a few politicians who approved the tax free status.

Senior citizens have 24% of the total exemptions followed by the municipality with 19%. Residential has 12% and the state and federal has a total of 15%. Just keep in mind that any new state, federal or MOA building does not contribute to the tax base and in some cases takes away current tax revenue when previously taxed land or buildings are put to a new tax free use. Most real estate professionals have acknowledged that the 2016 market was flat, at best, with small pockets of de-valuation in certain categories. Hopefully, the MOA tax assessor’s office views the market the same way with no increase in property taxes.   

Why the Housing Market Is Not What You Think

by Connie Yoshimura

There’s a lot of discussion about the down turn in the Anchorage housing market but how much of it is based on facts? Here are twelve facts that will let you be the judge of our local market.

  1. The average sales price of a single family home that sold in December 2016 was $366,328. This was the highest average sales price in 14 years.  
  2. The 250 reported sales in November 2016 was the highest since 2005. The 246 sales for December was identical to 2015 and the highest since 2005.
  3. There is less than a two month supply of single family homes priced under $500,000.
  4. The number of condo sales in December was 105, the highest reported condo sales of any month in 2016.
  5. Single family building permits hit an historic low of 190 in 2016. 
  6. The number of duplex units built either for sale or rent was only 56. This is a popular and affordable building type for duplex condos.
  7. Only 2 Anchorage builders, Spinell Homes and Hultquist Homes, built 15 or more homes. 
  8. The average permit value of a new home is $399,195 and does not include a lot value.
  9. Multi-unit residential building permits plummeted to 96 from a high of 369 in 2015. 95 units is a five year low.
  10. There are 18 Anchorage homes for sale priced over $1 million. Less than one of these homes sell per month. Current absorption rate is 21.27 months.
  11. In the last six months homes sold for 98.70% of the adjusted list price.
  12. From the original list price to the final sales price there was a 5% decline.  

Some conclusions are obvious from the above ‘facts’. The majority of Anchorage’s buyers are buying under $500,000. That seems to be a breaking point for home buyers even if they can afford more. Today’s buyers are financially cautious and also like to negotiate as seen by the increase in discounts from original list price. New homes are hard to find and in 2017 most will be sold from a piece of paper, i.e. schematic and features list. New home buyers will need to have patience as the wait for new construction will be five to six months from an agreement and notice to proceed. These buyers need to shop for a long term lock on interest rates as uncertainty takes hold in the mortgage market. The growing disconnect between a 30 year old resale home and buying new will continue in 2017 as inflation for goods and transportation costs increase.

Displaying blog entries 1-6 of 6

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