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What Factors Influence a Move to a New Home?

by Connie Yoshimura

The construction quality is the most important factor in all price ranges, according to the National Association of Home Builders’ recent survey. However, entry-level and moderate income buyers are also significantly influenced by financing. Sellers and builders offering financial incentives can help generate a faster sale. Alaska is lucky in that regard because we have several mortgage programs that incentivize and assist buyers with closing costs and down payments. Builders, in particular, often offer closing costs with matching assistance from most local mortgage lenders. If you’re looking for significant financial assistance, a builder’s finished inventory is a good place to start or a private seller whose home has been on the market longer than 60 days.

Most of Anchorage’s housing stock is old, really old. Four-star quality construction built in the 1980’s doesn’t begin to compare to the five-star quality today. Older homes need new roofs, furnaces as well as cosmetic remodeling. There’s a reason why we have all those Home Depots and Lowe’s. So it is interesting that building permits remain at historic lows in Anchorage. That stagnation can only be attributed to lack of financing and over regulation and not to demand.

But not so surprising, next to construction quality and financing, the exterior design of the home is a major factor in both moderate and high income buyers’ home selection. As someone who regularly holds open houses, I often see the ‘drive-by’ buyer. They follow the open house signs and keep right on going. They reject the home based on the exterior design. It may be the color, lack of landscaping or the specific orientation of the house on the lot. It is unfortunate that some builders don’t pay as much attention to the exterior elevation of the home as they do their interior selections. What color to paint the home sometimes becomes just a worn out after thought. Heavy timbers, stone wainscoting, cedar shakes, elevated and differing roof lines, even the color of the front door can all contribute to making a sale. However, the responsibility for an attractive exterior elevation and, thus, street scape, begins with the developer of the community. Strong architectural control can make the difference between a successful new home community and one that languishes.  

Other factors influencing a move include proximity to highways and easy community to work. We’re lucky that Anchorage still has easy commutes except on Tudor Road between four and five pm. In my experience, however, what’s also interesting is that east Anchorage residents rarely make a move across town to the west but will go southeast. The same is true for Sand Lake residents. It seems familiarity for routes to work, stores, shopping and schools plays an important role in a move-up to a new home. Also, high on the list of move factors is proximity to extended family and this is certainly true for our population. Anchorage has two large buying groups—boomers and millennials and we are seeing more and more grandparents moving to be near their grandchildren. 

 

As can be expected, high income buyers place a greater emphasis on the prestige/cache of the neighborhood than do moderate income buyers. In Anchorage, higher end buyers tend to cluster on the hillside, Old Turnagain and the downtown area. They are also more interested in public school performance although neither group places significant importance on religion or proximity to places of worship.

When Shopping for a New Home or Car

by Connie Yoshimura

Last weekend a friend and I went car shopping. Having been in sales for over thirty years and where my favorite place to meet buyers is at an open house, I was curious to compare selling techniques. We visited three dealerships and had three very different experiences. My friend and I walked the lot at the first dealership instead of going into the show room. It took 14 minutes for someone to come out of their air conditioned show room and approach us. (I suspect new sales people are assigned ‘lot duty’). “We’re just browsing,” was our response to his question of what were we looking for. Then he asked what was our budget. When I responded I wasn’t sure, he said, ‘Oh, a million dollars, huh?’ We had dressed down deliberately but that off-hand remark was a definite put-off if not a put-down. I assume when working an open house that everyone is qualified to buy the home or otherwise they would not be wasting their valuable weekend time. A dollars and cents discussion comes only after a buyers wants and needs and the benefits of a new home. When we finally made it into the show room, no one offered us any refreshments although they were in plain view. I have to confess I’ve been negligent at my opens by not offering refreshments this year but you can count on them the next time you visit me at an open.

My primary selling belief is that all buyers are attracted to knowledge. The young man assigned to the lot ‘walk abouts’ was smart enough to understand that very basic premise and handed us over to a person who had been selling cars for over ten years. He knew every make and model in the show room. My friend was interested in a sedan and I soon figured out I wanted to stick with an SUV. Once I confessed my current car was ten years old, he pointed out all the new benefits, including all the safety features. However, I have to confess I was more interested in style and color and whether or not my current custom wheels would fit on a new model (they will). We left with his card and I did give him my contact info. I returned with my husband later in the day and he explained the safety features to him while I admired the color which he said was the ‘rarest’ of the line. He gave us a price and I said I would think about it. I haven’t heard from him since.

We moved on to the next dealership and were promptly met just outside the show room door. The young man introduced himself and shook our hands. He treated us respectfully and asked ‘What were the three most important items we were looking for in a car?’ I knew it was a line but a good one. We were vague and he asked us again while showing us around the lot. I agree you can ask a question twice but not three times. He knew his product. Every make and model which was impressive. When we said we didn’t like how big the front end was and it looked like a truck, he told us how popular the model was and some of its benefits but he accepted our comments and wasn’t defensive. My friend liked his approach. I preferred the first sales person but I also liked the car which probably influenced my ‘like’ factor.   

We drove by the third dealership and decided not to go in. The lot was cluttered and there was no place to park. Now, I know how buyers feel when open house realtors park in the driveway or in the garage which I have been guilty of on a cold winter day.

I still don’t have a new car because no one has called me back. Politeness, product knowledge and follow-up are the three keys to successful sales whether buying a car or a new home.

 

New Mortgage Opportunities

by Connie Yoshimura

The Alaska Housing Financing Corporation (AHFC) has a little known new grant program for single family home buyers called the ‘Closing Cost Assistance Program’. Available only through First National Bank of Alaska and Mt. McKinley Bank in Fairbanks, it offers up to a 4% grant (yes, grant, not loan) to home buyers with a credit score of 660 and above. A slightly lower credit score reduces the grant to 3% of the mortgage amount. The catch is a modestly higher interest rate which changes daily. As of 7/11/2017, the published rate was 4.5% for a 30 year fixed rate. A 15 year mortgage is not available with the program.   

But despite the higher rate, for buyers, particularly millennials, who’ve had to sit on the sidelines of the housing market for lack of down payment and closing cost funds coupled with student loan debt, this program may just be the ticket to owning their first home. The program is also beneficial to older citizens with good credit but without having had the income available to save for a down payment. The AHFC website for this program tells the story of an out of state grandmother who moved to Alaska to be closer to her family. Only Alaskan residents are eligible for the grant. The program is also limited to VA and FHA loans, as well as the Rural Development loans through the Department of Agriculture.

This AHFC program is part of a nationwide trend to attract more buyers into the housing market which has best been described as stable the past couple of years. Mortgage companies, who relied on refinance income for the past five to seven years, now have reduced profits as that market has dried up with higher interest rates. There is more and more competition from online mortgage lenders who have aggressive mixed media marketing campaigns.   

Mortgage giants, Fannie Mae and Freddie Mac, who are still in government conservatorship, have also jumped into the mortgage market by loosening their credit qualifications. The nation’s three major credit rating agencies will drop tax liens and civil judgments from buyer’s profiles if the information isn’t complete. If you’ve ever tried to correct your credit score as a result of an identity mix-up, you know how important that is. Both Freddie and Fannie will now allow income to debt ratios of 50%, up from the long-standing 45%.

All this comes at a time when lenders are competing for borrowers and buyers are hesitant. These steps to spur home ownership are modest and are not like the stated income debacle that helped propel the real estate crash of 2008.  

Borrowing for a Home Mortgage Just Got Easier

by Connie Yoshimura

Last week, two major lending changes suddenly made it easier to get a mortgage. And here in Alaska, the Alaska Housing Financing Corporation has jumped into the mortgage market with a new grant program. First, changes to that dreaded credit score that everyone worries about. Equifax, TransUnion and Esperian, the three major credit rating agencies, will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete. Now, in order for a tax lien or civil judgment to appear, it must include the person’s name, address and either date of birth or Social Security Number. According to a recent article from CNBC.com, about 7% of the 220 million Americans with a credit profile, have liens or civil judgments against them. This change could up a mortgage applicant’s credit score by as much as 20 points which could allow them to have a lower rate or a higher mortgage amount.

The second big news is mortgage giants, Fannie Mae and Freddie Mac, are now allowing borrowers to have higher levels of debit and still qualify for a mortgage. Previously at 45% debt to income ratios, that ratio is now 50% of pretax income. Specifically, this increase in debt to income ratio is designed to help the millennial buyers with significant student loan debt qualify for their first home. As the millennials (24 to 35 age group) mature, marry and start a family, their housing needs are rapidly changing from living with parents or renting to home ownership. In the U.S. and here in Alaska, millennials and baby boomers are the two largest home buying groups.

These two significant changes are as a result of lenders experiencing a pinch in profit margins as buyers have pulled back. However, higher interest rates and higher home prices have created fewer homebuyers, at least in the lower 48. Here in Alaska, sales for the first five months of 2017 are in a virtual dead heat when compared YTD 2016 but summer inventory is increasing, creating more competition amongst sellers.     

The Alaska Housing Finance Corporation has also jumped into the mortgage market with an aggressive new program called Closing Cost Assistance Program (CCAP). This program will provide closing cost assistance equal to 4% or 3% or the loan amount to qualified homebuyers. Alaskan residents with a minimum credit score of 660 or better may receive a 4% grant and borrowers with a minimum credit score of 640 to 659 may receive up to a 3% grant. Note the word ‘grant’. This grant is a gift.  It is not borrowed money and does not need to be paid back. The catch is a slightly higher interest rate on a 30-year fixed rate AHFC mortgage. 

All three of these changes are designed to bring more buyers into the market place with hopefully a minimum amount of additional risk of default. We all remember the crash of 2008 when anyone could get a mortgage with stated income. Hopefully, these changes will provide new opportunities for home ownership without putting undue pressure on the mortgage system.

 

 

The Right and Limitation to Homeownership in Alaska

by Connie Yoshimura

This Fourth of July weekend seems like the perfect time to reflect on our right to own property. The Declaration of Independence specifically recognized the inalienable right to life, liberty and the pursuit of happiness. However, as originally drafted by Thomas Jefferson, it was life, liberty and property. Today, the right to own property is the backbone of our democracy. For families and individuals, the first step towards financial independence and wealth building begins with the ownership of their first home. Sixty-two percent of U.S. citizens own their home. The Veterans Administration and the Federal Housing Authority (FHA) have mortgage programs that encourage entry level home ownership in support of our right to own property.

Here in Alaska, approximately 8% of our land is privately owned, the smallest percentage of any state. A significant portion of the 8% is owned by Alaska Native corporations, both regional and village, as a result of the Alaska Native Claims Settlement Act. The remaining 92% is in the hands of various federal, state, and local governmental entities. In 2010, the Municipality of Anchorage did a survey of buildable residential land. After subtracting ‘prohibitively constrained land’ they determined there was 5,824 acres of buildable residential land in the Anchorage Bowl and 14,189 acres in Chugiak-Eagle River. Based upon my experience in both selling and developing subdivisions and housing in Anchorage and Eagle River, I have to question the accuracy of those numbers. In my opinion, there is far less availability of developable residential land than acknowledged by the MOA. Recently, a seasoned and well respected developer asked me the definition of ‘prohibitively constrained land’ and although I couldn’t provide him with the MOA definition, my definition would include slopes greater than 30%;  wetlands (including Class C which are becoming prohibitively expensive to develop and require payment into a wetlands mitigation bank which was $70,000 per acre two years ago); adequate accessibility to undeveloped land via collector roads for which the MOA previously shared in the cost with private developers but terminated their participation over thirty years ago;  lack of public water and sewer extensions and main infrastructure which would allow for more affordable homes and slightly higher density; and lastly new and ever changing  rules and regulations required by the MOA Design Criteria Manual for roads that has no public review process, making private development roads significantly more costly than either state, federal or local road standards.    

So it is no wonder that for the first half of 2017, the Anchorage housing market remains stable, despite job losses in the oil industry and a 2,000 estimated population loss. There is a 13% reduction in overall inventory for single family homes compared to one year ago and the average sales price of $363,000 remains in a virtual dead heat with last year, depending upon age and condition of the property. So for those home buyers sitting on the fence, waiting for the market to collapse, lack of land and its high cost of development, will keep prices stable because as Mark Twain said, ’Buy Land because they don’t make any more of it.’ And without developable land, there can be no more housing.

Displaying blog entries 1-5 of 5

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Dwell Realty
3230 C Street Suite 100
Anchorage AK 99503
907-646-3600