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Alaska Has State wide Housing Needs

by Connie Yoshimura

The Department of Labor and Work Force Development has confirmed in their May report what real estate professionals have been saying all along “a reduced supply of housing has created stability in both the for sale and for rent housing market.” Statewide, only 2,120 new residential units were built in Alaska 2016 –one of the four lowest permit years since 1993. The report called out new housing construction as ‘tepid at best’ in 2016 and said it represented a 12.5 percent decline from the year before. Significant declines in new housing starts occurred in Anchorage in both the multi-family and single family category with less than 200 single family homes permitted. Only Juneau had an increase in housing units in 2016, thanks to several projects for special needs populations. That trend in multi-family development for special needs and subsidized low income housing is most likely to continue for the next few years as private developers hesitate to take large financial risks during a recessionary period. In Anchorage, new multi-family development was also stymied by the new Title 21 rules adopted in 2016 and, in some instances, community councils vocal objections to higher density.   

The lack of new residential units statewide has ‘plateaued’ rents with an average cost of $1,238 plus utilities. However, the Kenai Peninsula Borough had a 7% increase in rents and Valdez-Cordova 6%. Anchorage and Mat-Su rents were virtually stable at less than 1%. There are approximately 92,000 households in Alaska which are impacted by changes in rents and vacancies which overall has remained steady during the past ten years.  

Another factor creating stability in our market is the lack of foreclosures which at the end of 2016 was 0.60% compared to the 1980’s recession when foreclosures peaked at 10.57%. This comparison of foreclosure rates is probably the most startling of all statistics presented in the May report and should destroy any remaining myths or misrepresentations about Alaska’s housing market tanking in the near future. During the past decade, Alaska, for whatever its myriad of reasons, has failed to keep up with the need for additional new housing as a result of population growth. It would take a significant exit of population to recreate anything near the housing collapse of the late 1980’s. Just ask any friend or co-worker how their search for a new home is coming along and you’re bound to hear frustrating stories of hours of Zillow searches and drive-arounds. And missed opportunities with low ball offers or unnecessary home inspection ‘requests’. With the lack of new home inventory, buyers must understand they are most likely purchasing a home that is probably thirty years old, an age when not only cosmetic obsolescence has set in but functional and perhaps mechanical/structural as well. 

The Alaska housing market has also benefitted from historic low 30 year fixed rate mortgages which has over the past couple of years ranged from 3.75 to 4.0 percent. However, even with modest increases over the next few years, Alaska’s housing stability should continue. Homes for rent or sale should not decline in value or monthly cost. It will take a decade to fulfill our housing needs, even if we started today.

How's the Condo Market?

by Connie Yoshimura

By any indication, the Anchorage condo market continued on its path of stability for the first four months of this year. The average sales price of $214,000 has fluctuated less than $1,000 since 2015. The 94 reported closed sales in April were comparable to the 95 sales reported in 2015 for the same month. Currently, there are 371 condos for sale in Anchorage ranging from $99,000 or less to $500,000 and above. On average, 84 condos sell per month with the most active price range being between $225,000 and $300,000.  

In the past, the condo has frequently been referred to as the first step in home ownership. Smaller, more affordable and usually in a location close to employment centers, the two bedroom condo appealed to young singles, students and travelling professionals. However, as they married, partnered and planned for a family they moved up to a single family home. Those buyers still exist in our local condo market but a new buyer has also emerged. Alaskan downsizing boomers are following national trends and giving serious consideration to the ‘lock and leave’ condo lifestyle. What they want in a home, however, is somewhat different than the two bedroom stacked condo. Most don’t want to go home on an elevator or down a corridor to their front door. Instead, they want a double car garage, a deck large enough to BBQ on and a small yard for the family pet or to plant some herbs and peonies. They still like to cook and need a kitchen with a pantry and a five burner cook top stove and canopy hood. Although they may still be active, they worry about their knees and hips and prefer a ranch style rather than a two-story or reverse two-story. They prefer new rather than a resale because they don’t want any maintenance or repair hassles even if managed by an association. 

Unfortunately, there are not a lot of choices for this type of condo buyer in Anchorage. The vast majority of our condos were built in the early 1980’s and consist of two bedrooms, one or two baths and if they have covered car storage may have a shared single stall garage. Some associations have done an excellent job upkeeping grounds, replacing roofs and exterior painting and others have not. Boomers, living perhaps on current or future fixed incomes, are wary of older condos which may require substantial increases in dues.  

Multi-family building permits in Anchorage are at an all-time low.  The new title 21 regulations, affecting four-plex buildings and larger, will increase the cost of new condo development whether townhouse style or stacked units. Because of all the rules and regulations governing a common ownership community, the price per square foot for a condo, whether taxed or a duplex townhouse style, is actually more expensive than the price per square foot of a single family home. Future condo buyers, whether millennials or boomers, can expect to pay more for that lifestyle by year’s end. The best condo buys, whether new or resale, are the ones for sale today.

Spring Anchorage Housing Update

by Connie Yoshimura

The first four months of this year have demonstrated a remarkable stability in the Anchorage housing market due to a continued lack of single family inventory. The Multiple Listing Service tracks listing and sales data from thirteen geographical areas from Turnagain Arm to Peters Creek and each one has had a decline of single family homes for sale. Overall that decline measured 17% when compared to the same time in 2016. Days on the market were reduced by 23% and sales by 2%.  When compared to the 17% inventory decline, the 2% reduction in sales is meaningless and shows that buyers are continuing to be active in the market. The average sales price remains steady at $360,000 but there is definitely some compromise in value with homes now selling at 98% of list price compared to 99% last year.   

But what these statistics don’t reveal is the buyer demands for home repairs due to our aging housing stock which is suffering from cosmetic and functional obsolescence. What you see on Houzz, Pinterest and HGTV is not what you’ll get in an Anchorage home that is thirty years old, even if it has been remodeled. Many of these demands stem from home inspectors who offer recommendations beyond health and safety requirements. These ‘recommendations’ can cost sellers several thousand dollars if they want to continue with the purchase and sale contract. Buyers, in particular, millennials, who generally lack funds for closing costs, are also asking for seller paid closing costs up to $10,000. Repairs, seller paid closing costs and the 1% decline in sales vs. asking price indicates a softening of values but not lack of sales. Buyers are actively looking and buying but want concessions. These concessions are hidden costs to sellers and are not reflective in the market data.     

One of the slower times of year for real estate sales is between now and the middle of July.  Buyers and sellers are busy with graduations, vacations, visiting family and friends, and enjoying the long summer days but the smart buyer will tear themselves away from all the sun filled outdoor activities and go home shopping. Mortgage interest rates bumped up an eighth of a percent last week and although it is anybody’s guess, I’m betting they will continue to creep up which increases the cost of any home financed purchase. Builders are expecting a 15% to 20% increase in lumber prices as a result of the tariff put on the import of Canadian soft lumber. Local residential building activity remains at record low permits and is likely to continue at that snail’s pace through the end of the year. However, lack of inventory is still the determining factor in the stability of the local housing market. As of last week, Anchorage had two hundred fewer single family homes for sale than a year ago at this same time.

What Is a Unit/Small Lot Subdivision?

by Connie Yoshimura

Working its way through the public process is a new land use concept which if passed by the Anchorage Assembly would allow for fee simple ownership of attached or detached homes on multi-family zoned land. Already vetted and passed by the Planning and Zoning Commission and the Platting Board, Assembly approval is the final step in what should help to by-pass the cumbersome financing requirements for condos. This new form of multi-family development on fee simple land should reduce financing costs for buyers and carrying costs for builders as they wait for sales in order to qualify for VA and FHA financing approval. Both VA and FHA approvals require a certain number of sales before project approval can be granted. FHA and VA financing is the most affordable mortgage financing for first time home buyers because they require minimum down payments.    

Shepherded through the public approval process by Seth Anderson, a local mechanical engineer and advocate for small multi-family development, this new land use ordinance is a good first step in creating more new housing opportunities, particularly for infill development in mid-town and downtown Anchorage. One concern and objection to the proposal harkens back to the 1980’s zero lot line ordinance which was allowed to sunset in the late 1980’s. At that time, most attached fee simple home communities had no covenants, codes and restrictions and even if they did no homeowner’s association to enforce them which is why you can still see these buildings where one side is painted green and their attached neighbor blue or any color of the owner’s choice. As a result, these homes have not maintained their value as well as communities where there is some attention paid to landscaping and covenants. The proposed small unit lot ordinance takes care of this concern by requiring a homeowner’s association. It is, therefore, like many condo communities which will require a board of directors. HOA fees will be similar but less, depending on shared or non-shared expenses for utilities, roads, driveways and common areas.  

In essence, the ordinance decreases minimum lot sizes and side yard setbacks to allow for creative townhome developments. It also maintains the underlying zoning density but a developer is not required to maintain that density. Parking requirements need to be met but not necessarily on the lot being developed. I applaud the efforts put forward by the AEDC and other organizations and individuals who have spent countless pro bono hours to bring the Unit/Small Lot Subdivision ordinance to its final step for approval. The Anchorage Assembly and the mayor should whole heartedly support this effort.  What should come next is a small lot ordinance for fee simple single family subdivisions. Current zoning requirements restrict the R1 zone to 6,000 square feet for a lot. Although that may seem small to some people, other innovative communities have allowed for a reduction in size to 4,000 square feet. If we truly want to create more affordable housing in Anchorage, that’s the next step.

How to Price Your Home in Today's Market

by Connie Yoshimura

When appraisers are asked to establish the value of a property, they primarily rely upon past sales data. When sellers try to determine the value of their home, they often refer to a price they find on a flyer they have picked up in the neighborhood. Homeowners also frequently refer to their current tax assessed value which may or may not have anything to do with market value but more to do with what the city needs to tax in order to pay its bills. And then, because of the online age we live in, sellers undoubtedly check out Zillow -- the behemoth of all things real estate with their multitude of algorithms which is undoubtedly the most inaccurate of all the methods mentioned above.

So when I am asked to price a home, I pretend to be a buyer and look at what other properties are on the market that might better catch a buyer’s interest. I don’t pay much attention to average MLS statistics even when I segregate those average sales prices within a $50,000 plus or minus price range of what my gut tells me may be the value.

I am also very interested in location and prefer to look within the subdivision or community because most of those homes will be built within a relatively short period of time — three to five years -- and most will have been built by only a handful of builders. They will all be time stamped with the same or similar amenity package. There are, however, nuances in every district. For example, in southeast Anchorage, homes east of Lake Otis in the Huffman area generally have higher values than those west of Lake Otis. That value may have to do with the streetscape or the subdivision layout or even the reputation of the primary builder in the subdivision. Homes north of Northern Lights have greater value than those on the south side. And then there is C street where homes to the west have far greater value than those located east of C. 

Pricing a home for sale is never an exact science. In today’s market, with the severe shortage of inventory, some homes may sell within a few days and have multiple offers while others may languish for weeks, with or without multiple showings. But remember, it is not the seller or the realtor who determines the final value of a home. It is always the willing and qualified buyer.

Displaying blog entries 1-5 of 5

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