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A Snail’s Pace for the Real Estate Market in 2019?

by Connie Yoshimura

The Anchorage real estate market is off to a slow start in 2019. Active listings for Jan/Feb fell by 3.2% from the same time as last year. More importantly, closed sales declined by 15.60%. Whether that is because of continued lack of inventory or the current concern over potential job losses as a result of the Governor’s proposed budget cuts is hard to determine. However, combined, those two factors have resulted in a negative 5.95% decline in the average sales price year to date of $350,968 compared to the 2018 average of $373,180.

 

New construction single family permits have also declined. If we thought 21 new single family permits was a slow start in 2018, this year is off to an even slower start with only 13 single family permits for Jan/Feb. Five duplexes were permitted compared to only one last year but multi-family units are only 7 compared to 36 YTD last year. Including commercial and government alterations, total new construction is down 32.43% for the first two months of this year. It is still too early to tell the impact earthquake damage will have on new construction but most of that bump up should come in commercial alterations and residential remodeling increases. It won’t affect our declining single family permits dilemma as few homes have actually been slated for demolition and replacement.  

 

But the good news for housing is the Feds have announced interest rates will remain the same for 2019 with the 30 year fixed rate mortgage now stable at 4.125. Although most buyers purchase homes because of personal changes relating to marriage, birth, death, divorce and job change, a low interest rate allows buyers to have better and more choices, assuming, of course, there is adequate inventory in the market to select from. 


The lower forty-eight is continuing to experience a single family renaissance with national builders scooping up hundreds of lots in various secondary markets. Here in Anchorage, we’re not so lucky. Our lot available is in the Valley. Until last weekend, it had been over a year since I had been to the Valley and the commercial and residential activity was eye opening. If you haven’t been to the Valley in a while, take a spring drive up the Glenn. The traffic, commercial and retail enterprises popping up will renew your economic faith in Alaska.


The Municipality of Anchorage needs to recognize its economic competitor knocking on its backdoor and it starts with acknowledging the need for more home ownership opportunities. The solution to more Anchorage home building needs to be varied and thoughtful.  More downtown multi-family units (yes, the MOA has already incentivized that with a 12 year tax abatement) but what about the fact that over 65% of buyers prefer a single family home which is why so many are willing to make that hour long drive to and from the Valley? Let’s take another look at the Title 21 guidebook and see what can be created with smaller single family lots and less infill restrictions on lower density multi-family lots.


A Snail’s Pace for the Real Estate Market in 2019?

by Connie Yoshimura

The Anchorage real estate market is off to a slow start in 2019. Active listings for Jan/Feb fell by 3.2% from the same time as last year. More importantly, closed sales declined by 15.60%. Whether that is because of continued lack of inventory or the current concern over potential job losses as a result of the Governor’s proposed budget cuts is hard to determine. However, combined, those two factors have resulted in a negative 5.95% decline in the average sales price year to date of $350,968 compared to the 2018 average of $373,180.

 

New construction single family permits have also declined. If we thought 21 new single family permits was a slow start in 2018, this year is off to an even slower start with only 13 single family permits for Jan/Feb. Five duplexes were permitted compared to only one last year but multi-family units are only 7 compared to 36 YTD last year. Including commercial and government alterations, total new construction is down 32.43% for the first two months of this year. It is still too early to tell the impact earthquake damage will have on new construction but most of that bump up should come in commercial alterations and residential remodeling increases. It won’t affect our declining single family permits dilemma as few homes have actually been slated for demolition and replacement.  

 

But the good news for housing is the Feds have announced interest rates will remain the same for 2019 with the 30 year fixed rate mortgage now stable at 4.125. Although most buyers purchase homes because of personal changes relating to marriage, birth, death, divorce and job change, a low interest rate allows buyers to have better and more choices, assuming, of course, there is adequate inventory in the market to select from. 


The lower forty-eight is continuing to experience a single family renaissance with national builders scooping up hundreds of lots in various secondary markets. Here in Anchorage, we’re not so lucky. Our lot available is in the Valley. Until last weekend, it had been over a year since I had been to the Valley and the commercial and residential activity was eye opening. If you haven’t been to the Valley in a while, take a spring drive up the Glenn. The traffic, commercial and retail enterprises popping up will renew your economic faith in Alaska.


The Municipality of Anchorage needs to recognize its economic competitor knocking on its backdoor and it starts with acknowledging the need for more home ownership opportunities. The solution to more Anchorage home building needs to be varied and thoughtful.  More downtown multi-family units (yes, the MOA has already incentivized that with a 12 year tax abatement) but what about the fact that over 65% of buyers prefer a single family home which is why so many are willing to make that hour long drive to and from the Valley? Let’s take another look at the Title 21 guidebook and see what can be created with smaller single family lots and less infill restrictions on lower density multi-family lots.


How Anchorage's Property Tax Compares to Other Communities

by Connie Yoshimura

According to the Alaska Department of Commerce, Anchorage’s mill rate of 16.4 is the second highest in Alaska. Only Fairbanks has a higher mill rate of 19.8. In Anchorage the tax on a $350,000 home is $5,740 and $8,200 on a $500,000 home, excluding any exemptions entitled to the property owner.   In Fairbanks, those same home values would be taxed at $6,930 and $9,900. Unlike most other Alaskan communities, neither Fairbanks nor Anchorage has a borough or sales tax which places the local tax burden squarely on property owners.     

When comparing Anchorage’s property taxes to Boise Idaho, its tax on a $350,000 home is $2,804 and $4,005 on a $500,000 home. In Aurora, Colorado, the tax is $2,464 and $3,520 respectively. In Mesa, Arizona, the tax is $2,807 on a $350,000 and $4,000 on $500,00. I’ve used those cities as comparison because all three have populations under $500,000. 

Anchorage’s l6.4 mill rate significantly contributes to the high monthly cost of our housing. Shaving $3,600 off a tax bill on a $350,000 home would create more buyers in the market who would have to earn $1,000 less per month in order to qualify for a mortgage. Home ownership creates social and economic stability for a community whether it’s here or in Arizona. I encourage Anchorage’s assembly to explore other opportunities for taxation to relieve the tax burden on home owners. The 12 year tax abatement for the development of residential properties in the downtown business district is a good first step but it doesn’t help the average home buyer who, according to national statistics, still wants to live in a single family home.

Notes from the International Builders’ Show

by Connie Yoshimura

Last week I attended the IBS Show in Las Vegas, along with Dwell Realty’s Marketing Director, Claire James. We came away with some new marketing ideas as well as design trends and a better understanding of the U.S. housing market. Like all conference attendees, and there were over 80,000, we had to figure out what was applicable to our particular market place. Although Alaska is the largest state, we are one of the smaller markets with only 85,000 housing units in the MOA and well below average new construction starts for a city our size with a 296,000+ population. In fact, in January 2019, there were only five new single family homes permitted.

What we did come away with is that 68% of all buyers still want a single family home, whether they are millennials or aging boomers. But, the single family home is shrinking. This is due to higher home prices and tightening affordability but also a mindset change and recognition that big is not always better. Since 2016, there has been a continued decline in the average home size and decreased demand for three car plus garages. Alaskans still love their big garages for all their outdoor toys but garage space is almost as expensive as bedroom and living space so for some buyers having the fourth bedroom or flex room becomes more important. According to the U.S. Census Bureau, the average new-construction home declined to 2,576 square feet from its peak at 2,689. Increased production in townhouses, which comprised 14% of all new home starts, contributed to the downsizing, and we will see that trend continuing for Anchorage  in 2019, due to our lack of developable residential land. 

But regardless of size, what all buyers want is a good-sized laundry room. This is particularly true here since many of the homes built in the 1970’s and 1980’s have closet size laundry areas off a hallway. Today’s laundry room can still be small due to the W/D stack but it needs upper shelving and poles as well as a countertop. If there’s not enough space and the W/D is side by side, consider putting a laminate top over the W/D. A laundry sink is the ultimate luxury as is a window.  

Design trends include a combination of white, gray and natural brown wood tones, similar to naturally stained cherry. Gray has not gone away but it’s now in combination with other colors.  And wallpaper is back, particularly on vanity bath walls and even as a substitute for kitchen backsplashes. The most popular kitchen in the entire show was RED!  And let’s rethink pet washing. There’s now a doggie shower.

As for new marketing  ideas, you’ll see Dwell Realty and our builders more online and social media as well as TV in various venues but we’ll still be here on the Sunday front page of the classified section, providing you with newly listed homes and market commentary.

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