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Connie Yoshimura

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Well, according to the July issue of Alaska Economic Trends, the Juneau quarter pounder with cheese at $5.29 is the fourth most expensive burger in the U.S. The Anchorage burger at $5.02 fell out of the top ten and now ranks 11th. Mimicking the burger, Anchorage is also no longer Alaska’s most expensive place to live. It’s Juneau. According to the report for the first quarter 2018, Anchorage’s consumer price index is 134 compared to Juneau’s 145.4. That may not be much consolation for Anchorage’s residents who spend an average of 40.5% of their income on housing. However, there are now sixteen cities that have higher costs of living than anywhere in Alaska, including Seattle, which now ranks sixth in the nation. Anchorage is most comparable in cost of living to Portland, Oregon, a city that is frequently mentioned by local planners as the place to model our future planning after.

So has the Anchorage housing market cooled as a result of Alaska’s recession? That’s what the report says, along with stating the average home price hasn’t changed much at $367,743 and the rental market has softened with increased vacancies. What I would say, however, is that the local housing market has weathered the recession remarkably well with only a 3.2% decline from original list price to closed price. But when the home’s price is adjusted, the home sells for 1.3% of listed price. This adjustment indicates that sellers may still be holding on to an unrealistic expectation of appreciation which has not occurred during the past three years. Prior to that time, however, from 2012 to 2015, appreciation was a cumulative 13.3%. If you purchased during that time, you have equity and can afford to sell. If you’ve bought in the past three years, wait for future appreciation before selling or if you are in a newer condo or home, that area of the rental market is still very desirable.

I would attribute the majority of our decline in value to the thirty-five year plus age of our housing inventory that is now requiring new roofs, mechanical and electrical systems as they reach the end of their life expectancy. Plus, the traditional two-story floor home with both a living and family room on the first floor is not attractive to the millennials’ more casual lifestyle. So in answer to the question ‘has the Anchorage market cooled’? I’d say no more than five degrees with mild temperatures continuing until late fall.

COMING SOON!

Dwell Realty is proud to announce it is sponsoring a weekly radio show devoted to real estate. The show airs live every Thursday from 2 to 2:30 pm on KENI-AM (650) beginning on July 26th. Call in your questions to Connie each week.

The Myth about Where Millennials Want to Live

by Connie Yoshimura

Millennials, those born from 1981 to 1996, have been slow in embracing home ownership but much of that hesitation is now changing as they begin to marry and start families. Burdened by massive amounts of student loan debt, $1.5 trillion, according to national statistics, many millennials postponed home buying and marriage and rented in urban downtown areas. However, as they have aged they are moving to the suburbs, back tracking in the footsteps of their parents and seeking out and buying the type of homes where they were raised. In other words, they are moving to the suburbs.

The National Association of Realtors data for 2017 showed an increased share of buyers 36 and younger who purchased in a suburb location and bought a single family home. They also reported that 49% of those buyers have children under the age of 18, 66% are married and 13% are unmarried couples which is the largest share of all generations. Of these groups, 66% were first time homebuyers.

Here in Anchorage we see this trend emerging with a few Alaskan quirks. I like to say I’ve seen more babies in my office in the past year than in the previous five years altogether. Dwell’s Marketing Director, who edits this column for me, is a millennial. She married last year, adopted two Alaskan style dogs and just purchased her first home. She searched online for six months and bought the first home she and her husband physically went to see. It has three bedrooms, two baths, a single car garage and was built in 1976. They sacrificed age for a square foot lot with a fenced yard for the dogs, a nice storage shed andtwo cords of wood for the wood stove. They are now remodeling and concerned they may need to replace the roof.  

I share this story with you because I hope Anchorage, as a community, doesn’t respond to the myth that all millennials are urbanites and want to live on top of parking garage or in a multi-story condo building in downtown Anchorage which seems to be the direction the municipality is encouraging. Yes, there are millennials, generation X and Ys and snow birds who want to lock and leave and/or be close to dining, entertainment and the Tony Knowles Coastal Trail but according to national statistics, the vast majority of home buyers still prefer living in a single family dwelling, whether it be a zero lot line, PUD (planned unit development), cluster home or simply a small lot community. Buyers, particularly those in Alaska, want to park their truck in a garage with direct access to their living space;have a back yard at least 20x20 square feet to BBQ on a warm summer day and a deck to view the Northern Lights in the winter. The irony of this urban advocacy is that almost all of our city planners and elected officials, regardless of their age and income, live in a single family community, while at the same time advocating for the urban lifestyle for others.

Garage Space Versus Living Square Footage

by Connie Yoshimura

In Alaska, everybody wants a garage and the bigger the better for that summer sports car, the motor home, the fishing boat, the wood working shop, gym, fishing gear, et cetera. But garages are expensive. On a price per square foot the sheet rocker, framer, painter, the foundation layer, all charge the same for garage space as the dwelling square footage. However, the appraiser gives it only a fraction of the value. One recent new construction appraisal identified the dwelling value at $165 per square foot (excluding land) but appraised the garage which was textured and painted the same as the dwelling walls at only $65 per square foot.

 

Historically, garages have been 20 x 20 or 400 square feet which barely provides enough space for two medium sized vehicles. That’s about what you can expect in an older single family or townhouse style condo. However, once you take away the steps from the garage to the living area and subtract the area for the water heater and furnace, most homeowners end up parking at least one car/truck in the driveway which is why you see so many vehicles parked outside in Anchorage neighborhoods. If you’re considering buying a home, don’t hesitate to ask if you can try parking your vehicles in the garage. Sometimes, spatial dimensions are deceiving.

 

In the last decade, due to buyer demand, builders have enlarged their garages so that the popular F-150 truck can fit inside and developers have limited outside vehicle storage in their covenants, codes and restrictions to improve streetscapes. Some covenants even go so far as to identify the minimum dimensions required for a garage and limit driveway and street parking to certain hours. If you’re negotiating to have a garage built attached to a new home, there are several options you will want to consider. One of the most popular is textured and painted walls, particularly if you plan on spending a lot of time in the garage. A less expensive option is to just put a primer on the walls which doesn’t smooth out the tape on the sheetrock but does eliminate the gray. Adding some tall windows provides extra light; so does adding windows in the garage door, although security has become an increasing concern for new home buyers. Some builders charge extra for a personnel door but for most buyers having an exit without opening the garage door is a necessity. All garages should have floor drains and triple car garages should have two. Hot and cold hook-ups are standard in most new garages but the sink and/or dog wash area is an extra charge. There are frequent requests for painted floors but that’s difficult for a builder to warrant and so the homeowner should do that after closing.

 

There are more and more requests for four car garages and motor home storage attached to the home. It’s a significant added cost for both the builder and the homeowner and on a price per square foot basis, the true cost is not reflected in today’s appraisals. Buyers should think twice about how much garage space is really needed. Simply taking some of that garage space and making it a mud room in the home will increase its value.

Garage Space Versus Living Square Footage

by Connie Yoshimura

In Alaska, everybody wants a garage and the bigger the better for that summer sports car, the motor home, the fishing boat, the wood working shop, gym, fishing gear, et cetera. But garages are expensive. On a price per square foot the sheet rocker, framer, painter, the foundation layer, all charge the same for garage space as the dwelling square footage. However, the appraiser gives it only a fraction of the value. One recent new construction appraisal identified the dwelling value at $165 per square foot (excluding land) but appraised the garage which was textured and painted the same as the dwelling walls at only $65 per square foot.

 

Historically, garages have been 20 x 20 or 400 square feet which barely provides enough space for two medium sized vehicles. That’s about what you can expect in an older single family or townhouse style condo. However, once you take away the steps from the garage to the living area and subtract the area for the water heater and furnace, most homeowners end up parking at least one car/truck in the driveway which is why you see so many vehicles parked outside in Anchorage neighborhoods. If you’re considering buying a home, don’t hesitate to ask if you can try parking your vehicles in the garage. Sometimes, spatial dimensions are deceiving.   

 

In the last decade, due to buyer demand, builders have enlarged their garages so that the popular F-150 truck can fit inside and developers have limited outside vehicle storage in their covenants, codes and restrictions to improve streetscapes. Some covenants even go so far as to identify the minimum dimensions required for a garage and limit driveway and street parking to certain hours. If you’re negotiating to have a garage built attached to a new home, there are several options you will want to consider. One of the most popular is textured and painted walls, particularly if you plan on spending a lot of time in the garage. A less expensive option is to just put a primer on the walls which doesn’t smooth out the tape on the sheetrock but does eliminate the gray. Adding some tall windows provides extra light; so does adding windows in the garage door, although security has become an increasing concern for new home buyers. Some builders charge extra for a personnel door but for most buyers having an exit without opening the garage door is a necessity. All garages should have floor drains and triple car garages should have two. Hot and cold hook-ups are standard in most new garages but the sink and/or dog wash area is an extra charge. There are frequent requests for painted floors but that’s difficult for a builder to warrant and so the homeowner should do that after closing.

 

There are more and more requests for four car garages and motor home storage attached to the home. It’s a significant added cost for both the builder and the homeowner and on a price per square foot basis, the true cost is not reflected in today’s appraisals. Buyers should think twice about how much garage space is really needed. Simply taking some of that garage space and making it a mud room in the home will increase its value.   

Summer Is a Good Time to Shop for a New Home

by Connie Yoshimura

That’s because inventory always increases in the summer and this year is  no exception.  Plus, there are fewer buyers in the market during June and the first part of July because everyone is camping, fishing, kayaking, hiking, including entertaining friends and relatives from the lower 48. Plus, a lot of locals take that long awaited summer break outside to visit family, friends and maybe even Disneyland.  For whatever the reason, sales do take a dip in early summer. But inventory increases as sellers spruce up their landscaping and paint their front porch and back deck, having waited out the dreary spring days until there are three consecutive days of 52 degree weather so that painting can occur.   

 

It’s also time for buyers to be seriously thinking about committing to building a brand new home if you want to be in for the holidays.  New construction in Alaska takes about six months.  If you’re committing to a pre-approved builder plan, you can shave about four to five weeks off that process.   Still, it’s best to be all framed in before the late August rainy season.  There’s not much new construction inventory out there, although total new residential permits hit 54 through April, up eight from a year ago.  Builders are pumped for more new digs but lack of residential building lots is creating a scramble amongst builders.  The popular Residential Pointe subdivision is completely sold out of lots except for its new and exclusive Resolution Bluff community where these estate size lots begin at $249,000 and back up either to the Cook Inlet Bluff or Campbell Lake Estuary. Huffman Timbers, Anchorage’s most popular southeast subdivision,  still has lots available for building with either Hultquist Homes or John Hagmeier Homes.  Scattered hillside lots have had some price reductions with the average hillside sale in 2017 at $183,000—a very good buy for that move-up buyer looking for a little more land and perhaps less restrictive covenants, codes and restrictions found in most suburban communities.

 

But, perhaps the best opportunity for buyers right now are attractive resale properties that have been all spruced up.  Summer sellers are usually motivated because they want to move outside before the first snow falls or they may have already locally committed to a new home.  For whatever the reason, this summer seems a little more negotiable than the active late winter/spring market with relocation buyers and the local  fall rush of home buying.

New Construction Activity Down in 2018

by Connie Yoshimura

The MOA building safety report, which compiles all new construction activity requiring a building permit, was recently released for the first four months of 2018 and it is not good news for the construction industry. All construction activity is down 19.77 percent when compared to the same time span in 2017. The report categorizes all residential types as well as commercial activity, including alterations (remodeling) and change orders. The permits value the cost for vertical construction only according to a formula internal to the department and does not necessarily reflect market value. It also does not include any valuation for the land. Its purpose is to provide fee income to development services and to assure the public of its health and safety in both commercial and residential construction.

Most of the 19.77% decline has come from the commercial sector. Residential construction permits have actually stabilized with even a slight increase in activity. Unfortunately, this new bottom of ‘normal’ still doesn’t help Anchorage’s housing crisis. Eight new single family starts in 2018 have increased the number to 54 from 2017.  Duplex permits are down 50% and 67 new multi-family permits were obtained year to date, an identical number to 2017. A multi-family permit is categorized as any building with three or more units. Spinell and Hultquist Homes remain the largest builders in Anchorage, clearly outpacing all other builders with fourteen permits for Spinell and thirteen for Hultquist Homes. Combined they make up 50% of all residential activity for single family and duplexes. Spinell also builds in the Valley and Eagle River while Hultquist Homes has a division in the Seattle area. In single family, the owner/builder outpaces both of Anchorage’s leading builders with twelve permits. An owner/builder is usually someone from the trades who does not have a residential endorsement. An owner builder may also be someone who hires a general contractor to build their home but obtains the financing and permit in order to keep more control of the project.        

The permits also track elevator applications which are down from eighty-two to forty-three, an almost 50% drop. No mobile home permits have been issued so far this year which clearly indicates a lack of consumer confidence in the long term financial sustainability of trailer parks which are, ultimately, an interim land holding use. Structural, electrical and mechanical/plumbing permits have all increased substantially. Given the overall decline in permit valuations, perhaps that is an indication that now is a good time for owners to consider remodeling as general contractors try to keep their employees engaged and prices reasonable while waiting out the third year of Alaska’s real estate recession. 

A Perspective on Our Current Housing Market

by Connie Yoshimura

There was a time long ago between 1980 and 1984 when Anchorage had a record of 18,168 new housing starts. The real estate crash of the late 1980’s followed shortly thereafter and between 1985-89, permits dwindled to less than a thousand per year. During another up tick in activity between 2000-04, 7,062 more housing units were built. These numbers included single family, duplexes and multi-family.  Fast forward to 2015-2017 and there were only 888 units built, according to Susan Fison who prepared the data from the MOA Building Property Appraisal Records.  

 

The recently published Building Safety Activity Report for the first quarter of 2018, continues to show Anchorage on a trajectory of historic low residential permits, although single family increases can be counted on one hand with an increase from 27 to 32. Duplex units actually decreased by 5 from 12 to 7 for the first quarter. There are, however, 54 multi-family units permitted so far this year, an indication that Anchorage’s dwindling land base is forcing higher density development. Nevertheless, it is unheard of for a city with a population of over 198,000 to continue to have such a shortage of new homes.

 

The difference in value between a resale home and a brand new home has reached an epic spread according to Multiple Listing Statistics. In 1998, the difference was $43,630. In 2010, MLS reported a difference of $110,995 and in 2016, the reported average price of a home sold was $360,000 while MLS reported new construction well above $600,000. 

 

Obviously, I like numbers and as some people will argue, you can make them do whatever you want but the best use of numbers is to look at trends through an historical prism and so the numbers are pretty compelling if Anchorage, and Alaska, has any sort of positive economic bump, our shortage of housing will reach a critical status, if it has not already. Today’s buyers are faced with the dilemma of buying a home that was built in the 1980’s which is now more than thirty-five years old or buy new and pay more for the security of energy efficiency, lower maintenance and no major or unexpected repairs or replacement costs.

Congratulations are in order to Cook Inlet Housing Authority and Weidner Apartments for their joint effort to provide housing and support for some of Anchorage’s homeless. It’s a small but important step forward between public and private partnership that perhaps other landlords in Anchorage will take to heart. It’s similar in intent to the Section 8 housing voucher system that allows qualified renters to integrate into market housing through a federal subsidy program managed by the Alaska Housing Finance Corporation. The integration of lower income and homeless into market housing allows for many social benefits and creates an opportunity for upward social mobility not available in ‘projects’. This new program also recognizes the need for other than monetary assistance when it comes to socially integrating mixed income tenants, including job training and internship opportunities. It’s a significant partnership and should be applauded for its commitment to the community to help take some homeless out of camps and off street corners.

Fair Market Rent (FMR), as determined by HUD in 2018, ranks Anchorage as 98% more expensive than other U.S. cities which is a contributing factor to Anchorage’s homeless, many of whom have some limited income but not enough to have a permanent residence. Fair Market Rent for a two bedroom apartment, according to HUD, is currently $1,337 per month in Anchorage. Efficiencies and studio apartments are $944. One bedrooms have an average rent of $1,081 and three bedrooms’ rate is $2,000.   

Most of Anchorage’s rental housing stock was built between 1980 and 1984 when over 18,168 total units were built. Compare that to the years 2015-17 when only 888 units were constructed. Today’s landlords continue to struggle with aging properties requiring significant structural and mechanical repairs and more maintenance while at the same time, both landlords and tenants face increasing costs for gas and electricity as well as recently increased taxes on rental properties.       

Although there is no data for 2018 available from the Dept. of Labor or AHFC, other online data sources show that Anchorage has slowly seen a rising vacancy factor due to the Alaska’s three year recession. Vacancy rates have slowly crept up from 2.6% in 2012 to 5% 2017, although nationally a healthy vacancy rate is considered 5%. However, just to keep vacancy rates in perspective, during the real estate recession of 1988, Anchorage vacancy rates were over 25%. During the recession of 2006-2008, vacancy rates hovered around 8%.

Lack of newly built multi-family units over the past ten years has kept Anchorage’s vacancies low or average with the nation. Anecdotally, 2018 has brought some minor rent concessions such as one month’s free rent or a longer time on the market, particularly with older properties that may have not been kept up by the small investor. Anchorage needs more housing of all types. Most apartments built over the past thirty years have been two bedrooms. Our changing demographics points to a need for new efficiency and three bedroom units. 

 

Thoughts on Our Local Housing Dilemma

by Connie Yoshimura

It’s hard to describe the current local housing market. Perhaps, the best way is a mixed bag of disappointments and opportunities. More inventory means more choices for last year’s frustrated buyers to move-up, move down or take that millennial first step toward home ownership. Comparing 2018 inventory to 2017, for the first three months of this year we saw 233 more homes for sale. Yet, time on the market shrank by 29% when compared to last year.

 

Three of the million dollar homes sold just last week. So did another brand new 4-plex for $775,000 with just sticks in the air. Foreclosures are way down. A quick look at the 17 short sales and foreclosed properties on the MLS market last week, reveals that 15 were built in the 1970’s which makes you wonder if homes built in the 1970’s aren’t beginning to lose their economic value. Yet, over 20% of our housing stock was built between 1970 and 1990 so listen up Anchorage! We need more housing yet the bureaucratic bungling of Title 21 continues to drive up our costs, making almost any new single family home out of reach for the average home buyer. The number of homes sold has declined by nine percent and total sold single family volume has decreased by 6%. In my service industry, 20% of our local realtors are earning less today than they did a year ago.

 

So what’s it all about, Alfie? - to use an old song phrase. Is what’s happening in Anchorage like what I read in the editorial pages of my favorite paper, the Sunday New York Times, that the rich are getting richer and the poor are struggling to find a home? On average, there is only a 2.5 month supply of homes between $300,000 and $400,000. Add to that mix the need for a well-built and maintained home built after 1990 and no wonder the average home buyer is frustrated with the Anchorage housing market. 

 

Rising interest rates are forcing buyers to make a move before the end of the year. Yet, keep in mind these interest rates are more than just about the cost of the monthly mortgage payment. These rates also propel an increased cost for land acquisition, development and the ultimate new home. Anchorage is a very small community of land developers and builders and we borrow money for development. Higher interest rates mean higher costs for the consumer. My advice to buyers in this mixed bag of opportunities is to buy now. And to sellers, if your home is thirty years or older sell now or face future disappointment.

Visiting an Open House? Here are Some Helpful Hints.

by Connie Yoshimura

Last weekend was the Spring Preview of Homes and hundreds of potential buyers turned out to see what Anchorage’s builders are creating in 2018. I started my real estate career by working open houses and I still do four or five a month because it helps me better understand the housing needs of buyers. I teach classes for new realtors on how to do opens but it occurred to me last weekend that visitors may also need some helpful hints in order to benefit more by attending. Most hosts have material on the home and community that is probably not available through the local MLS or Zillow so don’t hesitate to stock up on the information that is provided. You’ve taken time out of your personal schedule to visit the open so make the most of it. Walk the rooms. Maybe more than once. And don’t be afraid to ask questions. Spec homes are in short supply but most builders will have provided plans for future builds that may better suit your needs so ask what else is being planned by the builder or what new lots may be opening up.

Some visitors walk in and out of a home in less than five minutes. I think they’re afraid they’re going to be bombarded by the realtor. You do not need to sign a guest book. You do not need to give your name or your contact information unless you want to. Most realtors hosting are there to help buyers and although they are knowledgeable about the home they are sitting in, most do not represent the seller so they are there to assist buyers. If you want to know what the realtor’s relationship is to the property, just ask. You may take photos of the home and some visitors do FaceTime with an absent family member or friend.  

If you visit an open house and are interested in the home, take time to walk the lot. Yes, its muddy out there right now but it’s a good idea to understand the side yard setbacks and how big the backyard actually is. Almost all new homes are built with a four foot crawl space so don’t hesitate to open the door and step down.  

Some open houses will have information available about how the home can be financed. That information is generic and although accurate may not be applicable to your particular financial situation. The best source for qualifying for a mortgage is a mortgage originator. In today’s market, all offers should be accompanied by a 90% letter. If you’re seriously shopping for a new home, do get pre-qualified before seriously looking for a home. 

Today’s visitors have almostalways seen the property online before they come to an open. Like the celebrities on magazine covers, home photos can be deceiving and are sometimes Photoshopped or taken with wide angle lens to make the rooms look larger. If you’re interested in the home, visit the neighborhood during off hours. Time how long it takes you to go from work to home during rush hour. See what’s happening in the neighborhood on a Saturday morning. Are homeowners getting their yards ready for summer? 

Buyers need to educate themselves about the market and one way to do that is to visit homes that are below and above your designated purchase point. Open houses are a better way to get that knowledge about the market than online. Try not to reject a home online due to the poor quality of photos or because it doesn’t check all your boxes of wants and needs.

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