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Helpful Hints on How to Buy and Build on a Lot

by Connie Yoshimura

 

Spring time brings out buyers looking for lots to build their dream home on. Currently, there are 220 lots in all zoning districts for sale from $30,000 to $6,086,865. However, many buyers are looking for a larger R6 lot of which there are only 60 lots including Anchorage and Eagle River. In 2017 the average R6 lot sold for $183,000.

 

The R6 zone almost always requires an individual well and septic system. Many buyers, having lived in a home on a lot with public water and sewer and on a publicly dedicated street are unaware of the due diligence necessary before committing to a purchase. Not every lot is going to percolate sufficiently for a septic system. Check the surrounding lots to see if they have holding tanks or the more expensive Avantec system. There is also a significant difference in cost and installation between a four bedroom septic or a three bedroom. Water is still the source of all life. The depth and flow volume of the well will add to the cost of your lot. Check the neighbors well depth at the MOA or the State DNR which is a good, but not guaranteed, indication of what you will have to spend to develop your water source. The minimum standard for a four bedroom house is .42 gallons per minute or 600 gallons per day. However, underground water sources shift and wells do run dry so there is no guarantee you will have a continual water source. Then you have to verify the quality of your well water to make sure it’s ok to drink. 

The lot, if it is not accessible by a public road, may be part of a LRSA, a limited road service district. Find out how much it costs to maintain the road and who is in charge of the LRDSA. This is not always a static cost, depending on the winter snow fall and annual maintenance. The topography of the lot is going to determine its initial development cost. Extra excavation and haul off adds cost but do not add value. Haul off costs are calculated by the round trip in miles to and from the dump site so needless to say the location of the lot and dumpsite may significantly impact your cost. Poor, especially wet soils conditions will require often large excavation out and gravel haul in for a stable building pad. Most sellers will allow one or two test holes as part of due diligence as long as there is not unnecessary damage to the topography. You can also look at test holes required to build the access road if it has been recently constructed and approved by the MOA.

There may be easements or restrictions to the lot that are not visible to the human eye so please order a property profile which is a nominal cost from any title company. Although a full title report is not required to purchase a lot most real estate professionals will not participate in a sale without a title report. Some restrictions or easements that commonly pop up are gas and electric or perhaps even a public access easement. There may also be setback requirements more restrictive than required by the MOA. MOA driveway standards may not exceed 10% which may mean, on steep lots, one or two switchbacks which add to the cost of the driveway. Some lots may have buried fuel tanks, basement foundations or have been used for storage and repair of old vehicles. In that case, a Phase I environmental assessment should be done.

Finally, after you have gathered all of the information, I strongly suggest you hire a builder or an engineer to review your findings and walk the lot with you. This spring, wearing a pair of snow shoes or muck boots is also probably a good idea.

What Can You Buy For $650,000?

by Connie Yoshimura

So although we bemoan the high cost of housing in Anchorage, it sometimes helps to put it in a little bit of perspective. In Austin, Texas, near the University of Texas campus, you can buy a 1,200 square foot renovated l950’s home for $635,000.  Taxes are $9,588.  In Philadelphia, you can purchase a former carriage house built in l932 with three bedrooms and two bathrooms for $650,000. It has 1,755 square feet.  Taxes were $5,851 in 2017.  In West Stockbridge, Mass. you can purchase a 2,381 square foot home priced at $273 per square foot.  Taxes are $5,637.  In Anchorage, you can purchase a new $659,900 home with 2,887 square feet.   Taxes are estimated to be $9,748 per year which may or may not have a slight decrease in the $300 to $400 range depending on whether or not Proposition 11 passes.   Regardless of the passage, however, Anchorage does appear to have some of the highest residential property taxes in the nation.

Currently, twenty-six single family homes in Anchorage are available through the local MLS ranging in asking prices from $609,500 to $699,900.  Six of these listings are ‘to be built’. In other words, there is currently no building permit for any of these homes.  They are place holders on lots and are marketing as a home that can be customized to a buyer’s tastes.  The twenty remaining homes range from 2,300 square feet for new construction to over 5,600 square feet for a home usually  built in the 1980’s.  Lot sizes range from 6,000 square feet to over 65,000 feet.

There is probably no better area of the market that demonstrates the disconnect between an older home with more square footage  compared to a brand new home with 2 x 6 construction and built to five star energy standards.   Buyers have to decide between more living square footage and ‘room to roam’  versus the benefits of brand new with no unexpected maintenance and repair costs.  Regardless of the decision of new vs. pre-owned, homes in this price bracket remain relatively affordable on a price per square foot basis.  Financing in this price range is also attractive. VA  loans allow 100% financing of the purchase price and closing costs amount to $14,000.  Ask a seller to pay for closing costs and a veteran with good credit can purchase  a $650,000 home without any out of pocket expenses except the cost of the Uhaul.   Other loan programs with a modest down payment will waive the dreaded mortgage insurance monthly premium. 

Here’s Why You’re a Frustrated Home Buyer

by Connie Yoshimura

Chances are almost 100% that if you’re an Anchorage home buyer, you’re frustrated with your hunt for a new home—whether your choice is either pre-owned or brand new. But, if it is any consolation, you’re not alone. In July 2007, the United States had 4,040,000 homes for sale. Ten years later, that number had dropped to 1,900,000. Inventory has decreased on a year-over-year basis in each of the past 29 months, according to the National Association of Realtors.  


The national standard for inventory in a well-balanced market is six months. Anchorage’s current inventory is 2.52 months, inclusive of all price points. Of the 568 homes for sale on February 8, 2018, 44% were above $400,000 while the average price of a sold home for the last six months was only $363,000. So not only does Anchorage have a lack of inventory it also has a lack of affordable home inventory.


We all know the reasons why we’re faced with this shortage. On a national level that trickles down to the U.S.’s largest state, we’ve had the California wildfires, Hurricane Harvey in the Houston area and Irma in Florida which is absorbing workers and materials. More than 130,000 residential and commercial structures were damaged in the Houston area and the California fires damaged more than 7,000 structures.  Alaska has always been at the tail end of the supply chain and that crunch will continue well into 2018. Locally, the rewrite of Title 21 has increased regulations, costs and time for approval for builders and developers.


So what’s a frustrated home buyer to do? First, get off Zillow. I know that’s a radical statement but sign up instead for a portal on Alaskarealestate.com which is the statewide MLS. There’s more and accurate information on that site than you’ll ever get from Trulia and Zillow. I’m not going to put all photos you find online in the ‘fake news’ category, but our job in marketing is to make all homes look good. Second, drive around! Except for going east on Tudor at 4 pm, you can still get almost anywhere in 30 minutes. Even from the intersection of Potter Valley Road and New Seward to E. 36th is only 14 minutes with no stop signs. Finally, visit the neighborhood where you would like to live at different times of the day and week. After all, you’re not just buying a home but a community. Let your family and friends know you are shopping for a home. Occasionally, a home does sell by word of mouth but more than likely, stay in touch with your realtor who is probably your best source for new homes on the market. Finally, once you find a home don’t nickel and dime your offer. A few thousand dollars is hardly going to budge your mortgage payment and the inventory shortage is going to continue for the foreseeable future in Anchorage.

Time to Buy with Interest Rates Set to Keep Rising

by Connie Yoshimura

One year ago this month the VA 30 year fixed mortgage rate was 3.75. Today, that rate is 4.5%. Similar increases have occurred with all mortgage programs. A 15 year fixed conventional rate was 3.5% and today’s rate is 4.125. The popular FHA 30 year fixed rate has jumped from 3.75% to 4.5%. With less than 10% down, FHA loans now also require mortgage insurance for the entire 30 year life of the loan whereas previously it was cancelled after five years and 78% loan to value. Interestingly enough, conventional rates have not jumped up as high. One year ago, 30 year fixed conventional was 4.125% and today it is 4.5%. Without question, these interest rate jump ups hit the entry level and one step move-up market the hardest. I’ve never worried about the conventional mortgage rate as higher end buyers frequently have financial resources that allow them to buy down rates and avoid mortgage insurance by putting 20% down. On a $400,000 mortgage, avoiding mortgage insurance can save you $9,000 plus over ten years.

These rate increases will definitely make it more difficult for first time home buyers to enter the housing market. However, they better jump now rather than later in the year as more rate increases are inevitable with anticipated rates reaching 5% or higher by the end of the year. I recognize that our historically low rates couldn’t, and shouldn’t, last forever but I also believe that homeownership, which begins at the affordable level, is the backbone of any socially vibrant community. So my recommendation is buy now and lock your loan. There is more inventory in the market to select from. Anchorage has the highest number of single family homes listed in MLS than in the past five years. And the first 2018 reports from MLS show a 5.89 % drop in average sales price, the biggest drop reported since the real estate recession of 2008. But buyers should not be wary of Alaska’s mild recession. As Neal Freid from the Department of Labor has pointed out, recessions don’t last more than two to three years and ours is in its third year. It takes will power to buck the trend but with more inventory, lower prices and the continued real threat of increased interest rates, now is a good time to buy a home because of the cost of home ownership is not the purchase price but rather your mortgage interest rate over the life of the loan. 

There are some good buying opportunities out there, including entry level condominiums which have remained stable in value at $212,000 the past couple of years. Just make sure there are adequate reserves for maintenance and repair and no looming special assessments. Any home priced under $500,000 is also a good buy if it has been well-maintained and had some cosmetic renovation.  New home construction can’t begin to replace a $500,000 home for less than an additional $75,000 due to increased costs for labor and materials in 2018. Also, look for any new construction standing inventory in any price point. Builders want to get rid of any leftover 2017 inventory so they can get ready for spring digs.  

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