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Connie Yoshimura


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The Housing Crunch is Here

by Connie Yoshimura

     If you’ve been out looking for a home in the dark Alaskan skies and driving on slippery roads, you know the Alaskan housing crunch has finally come home to roost right smack in the middle of winter.   Last week’s current inventory of all types of residential units was an historic low of 491 units.  According to the cumulative permit activity through October 2013, single family permits are down by 73; duplex permits down from 80 last year to 37 and multi-family units down from 299 to 221.  All this downturn in activity is occurring while overall sales volume is up 19% in Anchorage and the average time on the market has dropped to 46 days.  Heading to the Valley for more choice? Think again. Wasilla/Palmer sales volume has increased even more to 30%.

     There is some good housing news and that is sale prices have only increased by 2.27% and only slightly more at 3% in the Valley.  However, what these modest increases do not project is the increasing cost of new construction, both in land values and vertical construction.  It’s going to be hard to find a new home for less than $400,000 next year and for a larger lot on the hillside, think $750,000.  Resale homes offer lower purchase prices but these thirty year old plus homes require remodeling, both functional and cosmetic.  Most remodeling costs are paid for either with cash out of pocket or financed at a higher rate of interest than the first mortgage.  A buyer may be lucky enough to find a pre-owned home which has already been remodeled but it may not be to the specificity of their taste and lifestyle. 
     In 2014 you will see a lot more three story condominiums and townhomes to make up for expensive land costs and more three and four plexfamily.   For single family homes under $400,000 the narrow lot and narrow home with a garage front will come back with a vengeance despite the Title 21 rewrite which takes effect next year and will require the narrow home  to be a few feet wider with more windows other bells and whistles and, thus, more expensive.     

     Affordability versus aesthetics is a very complex dynamic. The new Title 21 which regulates our local land use took ten years to get approved and its first year of implementation is 2014.  Think back to 2004 and our market was radically different with more inventory and a robust economy.  If shoppers are thinking and buying essentials like towels at Wal-Mart for Christmas what is our city thinking about with new ‘enhanced’ requirements?  Not all shelter needs to be created equally.    Subsidized low income and affordable housing is frequently held up as an example of what ‘attractive’ housing can and should look like but that housing is subsidized with federal, state and local grants and even tax abatement.   Private developers can only dream about exterior flower boxes below windows.   With one or two exceptions who are no longer building homes, I can’t think of any builder or developer who does not want to make his homes more attractive and on a meandering curvilinear street.  However, with an average Anchorage sales price of $345,000 that is a financial impossibility in 2014. 

     So buyers are going to be left with a very difficult choice.  Pay nearly $100,000 more for a brand new home built to a mandatory five star energy rating or buy an existing home and face the prospect of out of pocket remodeling and repairs.  And many of those repairs will also have new guidelines and be subject to new Title 21 regulations as well, particularly if a buyer chooses to add square footage to an already existing structure which will require a building permit. 

Defining Luxury

by Connie Yoshimura

     Webster defines luxury as a condition or situation of great comfort, ease, and wealth; something that is expensive and not necessary; something that is helpful or welcome and that is not usually or always available.  For residential real estate, luxury homes are usually defined as the top 10% of a market.  In Anchorage, that would be homes over $750,000 which represent 12% of the active market.  Living in luxury usually includes a bathroom for every bedroom.  Bathrooms and kitchen countertops are solid surfaces (maybe granite, quartz or concrete) and cabinets are more like furniture than utilitarian boxes with doors.  Flooring is hardwood or stone with radiant heat.  Heated driveways and sidewalks are definitely a luxury in Alaska.

    A broader definition of luxury may be an indulgence in something that provides pleasure, satisfaction, or ease.  A kitchen faucet can be a luxury; so can a bathroom tub with feet rather than one that is set in the wall.  Luxury can also be an outstanding view or an expansive home site or, alternatively, carefree condo living where there is no yard maintenance but perhaps an elevator.  A luxury home is one that is well thought out.  It’s not based on size alone but rather the ‘right size’ with appropriate spatial dimensions.  It’s a home that doesn’t feel awkward.  You intuitively recognize the feel of luxury when you walk thru a home.  It’s a home that doesn’t say ‘Why did they do this or what’s that for?’.  It’s a home that provides the warm feel of cashmere and silk.

    True luxury homes have architectural style, such as modern or craftsman, with a consistency and discipline of style details throughout.  They have light with well thought out window placements that maximize southern exposure and views.  They fit nicely into the topography of the home site.   They look like they have always been there, even though the home may be brand new.

    Or maybe luxury is choosing from among several good options such as which home to purchase.  The very fact that a buyer has a choice of loan programs or an expanded price range may be a financial luxury that others cannot afford.  Some buyers have the luxury of a 15% or greater down payment to eliminate the cost of mortgage insurance; others can barely squeak into a home but to those who are renting or sleeping on a friend’s couch, even the $100,000 condo may be a ‘luxury’.  Others in the market place for a new home might say “We can’t afford the luxury of waiting any longer and risk having to pay a higher rate of interest.”

    Adequate food, clothing and shelter are the basic necessities of living.  A fine bar of Scharffenberger chocolate may be a luxury for some while a Mars bar is a luxury to others; the same holds true for the first time condo buyer and the $1 million home buyer.  There is always a home with more luxury as long as there is creativity and money to spend.  I have the luxury of living in Alaska and having a job I love. And for that luxury, I am very grateful this Thanksgiving.                 

What is a Property Reservation?

by Connie Yoshimura

    With today’s tight inventory of homes (only 584 homes on the market this past week) and lack of building sites due to recently delayed recording of plats, buyers and builders are resorting to reservations for future home sites and, in some cases, even for improved property.   A reservation is like a promise and like all promises, some are kept and some are not.  A reservation shows intent but it is a non-binding agreement, more like a verbal promise than a true commitment.  A ‘reservation’ is used when a developer is unable to enter into a contract with a prospective lot purchaser until the lots are legally created with an MOA  recorded plat and a public offering statement is provided to a buyer.  However, some buyers, who are anxious for a particular lot will enter into a ‘reservation’ that will allow them certain preferences upon the completion and marketing of the property.

    The reservation is accompanied by a deposit which may be withdrawn at any time until the developer and depositor (prospective purchaser) have entered into an actual purchase and sale agreement, and the potential buyer has had the required 15 days to review the public offering statement.  A reservation does not warrant or guarantee any time frame when the lot will be available for sale or that the lot will be of any particular size or configuration, although the reservation is usually accompanied by a preliminary plat which generally defines lot lines and square footage.   The depositor’s sole recourse is to withdraw the deposit by giving a written request to the developer. A reservation does not need to include a price but it may do so if the developer is willing to commit to an actual purchase price prior to receiving his final costs and MOA approval.  The developer and depositor may also put a time frame on the lot reservation.  It is not, under any circumstances, an agreement to purchase or convey real property. The money deposit is held by the developer or if a real estate broker has facilitated the transaction it can be held in the broker’s non-interest bearing trust account.  Regardless of where the deposit is held, it is refundable to the depositor.

    A reservation can also be accepted by a builder from a buyer who wishes to have a new home built on a legally recorded lot.  This scenario usually occurs when the builder and buyer agree on a specific lot but the home plan and features are not finalized.  This may occur when a buyer requests several revisions to a plan and specialty items that the builder will need to price out with subcontractors.  Under this scenario, a builder may accept a refundable reservation until he is able to present the buyer with a specific set of plans, allowances and a final price for the home.  However, once an agreed upon price has the approval of both buyer and seller, the reservation is abandoned and a purchase and sale agreement is consummated. 

    Reservations that go on for long periods of time can be disappointing for the depositor.  A lot line can get moved, a new easement created and a previously discussed price can turn into a promise not kept.  From a developer or builder’s perspective, it is a good vehicle to demonstrate interest to their lender and whether or not their product has market viability and potential absorption.  The benefit to the depositor allows him to do some long term planning for a new home or home site while at the same time keeping his options open for other opportunities.  It is rare for a major change to a preliminary plat to occur and so there is a certain amount of assurances that the depositor will likely get what he has been ‘promised’.       

A Look Behind the Numbers

by Connie Yoshimura

    Despite the mild fall weather, the Anchorage building season is almost over and the permit numbers and valuations won’t budge upward much between now and the end of the year.  As of the end of October, new permits for single family homes, duplexes and multi-family are pretty much the same as last year—despite the local and national hype that the building business is in recovery.   Single family permits are only up a modest 11 homes; duplexes up by only 8 permits; and multi-family actually down by 19 units.  That’s pretty small potatoes for a community of almost 300,000 people.

    What is up is the total valuation of all permits, including commercial and residential alterations from $401,067,017 to $540,862,206.  That good news increase is what politicians like to quote about the strength of our building sector but behind all these numbers are some underlying needs and concerns that remain unaddressed.  The increase in valuations is due primarily to residential alteration permits which have increased from 1,066 to 1,243 as homeowners and remodelers try to address our aging housing stock.  Commercial alterations are also up from 775 to 998 which includes signage permits. A closer look at the residential permits shows a consistent increasing pattern of roofing permits which again speaks to our aging housing stock.  Functional obsolescence sets in at about 25 years and the majority of our housing stock was built in the early l980’s.  Thus, the need for major roof repairs consistent with new technologies such are peak vents.  Another area of permit growth is for elevators, which speaks to the need of our aging baby boomers.   But, the fact that these are alteration rather than new permits indicates that many homeowners are willingly or being forced to age in place because there are not enough new housing permits to accommodate the need of our modest growth in population.

    However, despite the pressure on our aging housing stock due to lack of new permits, the Anchorage marketplace has seen only modest increases in appreciation.  Year to date, the Municipal sales data from multiple listing service shows only a 2.68% increase with an average sales price of $346,332.  That 2.68% increase barely covers the cost of new carpeting and vinyl of an average priced home that is 25 years old.  Appreciation is being offset by the seller’s cost for cosmetic and health/safety repairs required by buyers, appraisers, home inspectors and lenders in order for the home to be sold.  The appreciation rate of 2012 was a healthier 4.76% but it was offset by the previous year’s loss of value by 2.16%.

    Statistics don’t always tell the real story but they are good indicators.  It’s clear that Anchorage has a demand for more housing of all types with the exception of the custom $1 million home market where there is  a 36 month supply with less than one home per month selling in that price point.  Anchorage doesn’t need to worry about that million dollar home buyer. They have resources and opportunities that the $350,000 buyer doesn’t even know how to dream about.  The real need now and in the immediate future is for homes under $500,000.   Those homes can be single family, duplexes, affordable and luxury multi-family for sale or rent.  Anchorage, which includes Eagle River, has only a two month supply of homes between $300,000 and $350,000.  That price point has an average of 42 sales per month and yet we have only 88 homes for sale in that category.   

    When Anchorage loses an economic opportunity for job and population growth like just recently occurred at JBER because of ‘lack of housing’, it is time for us as a community to take a hard look at our municipal development and building policies.  Residential building permits are now far more expensive and what used to take 12 to 18 months for a new subdivision can now take as long as two to three years. The demand is there.  We need new internal policies and procedures that recognize our diminishing land base and that encourage growth and creativity.  Otherwise, our stealth neighbor to the north, the Mat-Su Valley, will take not only our population but jobs as well.

How Big is Your Garage?

by Connie Yoshimura

    Probably not big enough if you’re an Alaskan whose penchant for big trucks ranks them at the top of truck ownership on a per capita basis amongst our 50 states. After 5 pm, you can see trucks parked in driveways and along every residential street in Anchorage. Twenty-two feet long with double cabs, four doors and extended beds with heavy duty trailer hauling systems, they don’t fit in most garages.

    Over the years, Anchorage has evolved from its tent city roots and small ranch homes with no garages to the covered carport of the 1960's, the single car garage of the 1970's, to the double car garage of the 1980's, the triple car garage in the 1990's to the mega garage of today. A single car garage is a minimum 10 x 18 and a double car 20 x 20. However, some of that square footage is almost always taken up with one or two steps into the main living area as well as space for the hot water heater, furnace and in older homes even the washer/dryer. And so, the truck gets parked in the drive-way.

    In Anchorage, a larger garage has risen to the top of the new home buyer’s move-up list of ‘must haves’. Today’s garages are heated, sheet rocked and even have textured and painted walls, the same as the interior of the home. They have windows, a plethora of electrical outlets and space for the freezer full of salmon/moose/caribou, the dog washing sink, the workshop for wood working, the Harley Davidson and the 1960 Chevy. For some home owners, the garage is as important as the kitchen and has become for others its own ‘great room’ or ‘man cave’ and well furnished with large screen TVs and theater surround sound, a small frig for beer and even a bar.

    And therein lies the problem. The contemporary garage has all of the amenities of the finished interior of a new home but lacks in valuation. The cost to build the garage is now almost identical to the cost of the interior of the home. It has a roof, walls, foundation, mechanical, electrical, built-ins, et cetera. It lacks only hardwood or carpet flooring. However, appraisers value it far less on a per square foot basis than the rest of the home. Today’s garage can be as large as 700 to 1,000 square feet and fully finished. If the average price of new construction is now $200 per square foot, that’s a lot of missed value, even if the builder gives it to the buyer at his cost. In most lower ’48 communities, the garage area is calculated as part of the square footage of the home. However, in Alaska we only give full value to the interior living areas and our local Multiple Listing Service (MLS) and appraisers separate the two areas. MLS will list the price per square foot of the home without regard to the size of the garage. Potential buyers and realtors use price per square foot as a moniker of value and rank homes using this method. With the increasing importance of an Alaskan size garage, that’s a strategic error in establishing value, particularly since the garage level is almost always on the first floor which is the most expensive to construct and is given the greatest value.


    There are many factors that contribute to the overall value of a home but in Alaska the garage stands out as being the most under-valued and very often the most sought after item in today’s market. It’s size and dimensions will have a significant impact on your home value today and tomorrow. There’s no doubt that the mega garage is here to stay, along with Alaskans’ love affair with their trucks and toys.

New Homes on Parade

by Connie Yoshimura

    Last weekend the Anchorage Home Builders sponsored their annual Parade of Homes, showcasing Anchorage and Eagle River builders’ new homes. Out of the fifteen entries (one of the lowest on record for the event), some definite residential trends have emerged. First, there aren’t many single family homes on lots over 5,000 square feet and under $400,000. If you can find one, buy it while interest rates are still low. In the future, they’re going to be almost impossible to find in that price point due to the growing high cost of vertical construction and increased regulatory requirements for the development of residential subdivisions. Any new single family home under $500,000 is going to look like a smart buy in another 18 months. In its place, is the new condo which is definitely going vertical and by that I don’t mean three and four story buildings with interior corridors but rather three stories of stacked living within one unit. Out of 15 entries, more than a third were condos. Anchorage and downtown Eagle River are being urbanized. Interesting to note is that Spinell Homes has a four bedroom condo with a great room on the first floor and four bedrooms upstairs plus a laundry room. It functions like a small single family home but has an attached wall. You’ll see more of these types of dwelling units in the future.

    Of the fifteen entries, six were in the Eagle River area, where residential land is still available for development. Two other popular areas was WestPark with two entries in the Sand Lake area and, as always, southeast Anchorage with four entries . There were no million dollar homes this year which may be one of the reasons attendance appeared to be down. The most expensive home was $784,500 by Crown Pointe, Inc., on an acre plus lot on the lower Hillside. If you want a larger home on the hillside, that’s just about the minimum price point in the future. Don’t expect anything on the hillside under $700,000 in the coming months for new construction.

    Our local builders have begun to pay attention to details and designs. Most new homes are the great room concept with a flex room (office/den/extra bedroom) on the first floor. Four beds on the second floor seems to be the ‘must have’. The peninsula island is out and the walk-around kitchen is the only way to go with granite now the standard countertop above $350,000 and quartz making an expensive comeback in the upper price point. Quartz counters provide more consistency in color, allowing additional color for backsplashes which are definitely going to the cabinet level for a clean look. Knobs, pulls, crown molding complete the new kitchen look which includes painted white cabinets, a refreshing look for our upcoming dark winter nights.

    The next time you’re out looking at new homes, pay attention to the lighting which is the jewelry of a home. Whether it’s the restoration hardware look or the origami white cloud dining room fixture, there’s nothing like new and exciting lighting to make a modest home look special. Fireplace surrounds and mantles have become almost like custom cabinetry with varied height bookcases, sometimes as much as eight feet high which highlights the nine foot first floor ceilings, another ‘must have’. Accent walls are definitely something to pay attention to in the kitchen, family room and master bath. It’s an easy and inexpensive fix if a buyer doesn’t like the color but adds a bright spot of color to our upcoming dark days. If you don’t know what color to paint an accent wall, Google ‘pantone’, the color guru website which forecasts the latest in colors for home design and fashion

Why Not More Single Family Permits?

by Connie Yoshimura

     With local officials boasting stable economic growth and lowering unemployment rates, those of us in the housing industry have to wonder why single family building permits have hit a six-year low for July with only 22 permits. This number is lower than even the permits issued during the most recent recession years. Here's how it stacks up:

July Single Family Permits
2007 25
2008 40
2009 29
2010 34
2011 28
2012 30
2013 22

     These numbers also include land use permits for Eagle River, Chugiak and Girdwood. For a community of over 300,000 people, these permits don't even begin to replace homes destroyed by fire, abandonment or demotion. So why the low number of permits?

     It's easy to blame the lack of developable land. It's true that we have a shortage of R1 or R1A land which is the zoning for single family homes. It's also true that the remaining land in this zone is plagued by poor soils, high water table, wetlands, steep slopes and in some cases, required creek setbacks. But all these costs can be somewhat mitigated by innovative land use design. What can't be compensated for is the lack of cooperation between Anchorage Water and Waste Utility and the Municipality of Anchorage when it comes to the extension of water/sewer and roads. We have water/sewer extensions where we have no roads. We have roads where we have no utility extensions. The southern portion of C Street is a prime example where we lack utility infrastructure.

     Private developers can't be expected to pay the entire price for collector roads and major water/sewer infrastructure for this community. Part of that cost used to be shared with the MOA but that hasn't happened for over 20 years. And it has been 20 years since we've had a robust housing market. Instead, that market has gone to the Valley where home building has outpaced Anchorage for the last ten years. Federal officials have finally figured out that a robust housing market is the key to a strong economy. Unfortunately, our local officials have yet to realize that home building creates high paying skilled jobs and home buyers strengthen the local economy when they buy refrigerators, window coverings, et cetera.

     Subdivision delays are also a hidden underlying reason for lack of single family housing. In years past, developers could buy raw land in January and develop a subdivision in the summer. Good luck with that today. Instead, developers have to plan on a minimum of two to three years for a subdivision permit. The process of multiple reviews increases civil engineering costs and interest charges. The community spent ten years on the Title 21 rewrite which defines what our community looks like above the ground but almost no one, except a handful of engineers and developers, has heard of the Design Criteria Manual which dictates how our roads will be built and lighting, landscaping, drainage standards enforced which are frequently more onerous than state and federal standards with the same area of town.

     Variance requests from the Design Criteria Manual must be applied to the same MOA officials who create the manual in the first place and there is no appeal process. Although the MOA says that the manual is created with input from the development community, at the last DCM meeting there was only one representative from the private sector while a full round table of MOA officials attended. At the least, the DCM needs a public process and should become ordinance like Title 21.

     So if you want to know why Anchorage had only 22 single family permits in July for a community of 300,000, those are some of the reasons why.

The Condo Comeback

by Connie Yoshimura

    The comeback of the Anchorage condo market has pretty much kept pace with the single family market.  So far this year, the number of condos sold has increased by 17% with a total of 461 sold since January 2013.  That’s compared to a 17% increase in single family activity with a reported 1324 sales in Multiple Listing Service.  The Downtown area leads the  way with the greatest increase in sales at 81%.  Over 40 condos have sold in this area compared to 22 during the first six months of last year.  The idea of being able to walk to work, shopping and dining out continues to have the greatest appeal and also the biggest price tag.  The average downtown condo sold for $276,667 compared to an overall average sales value of $199,341.  Still, for those home buyers looking for an urban lifestyle, a $276,000 condo seems like a bargain.

    The Boniface to Muldoon area has the greatest number of condo sales with a reported 83 which is a 24% increase from this same time last year.  However, the average sales price for this area actually declined 7% to $174,949.  The neighboring area of Seward Highway to Boniface had the second highest sales at 58 but also  the lowest sales price of $143,489.  This area also had a decline in value of 9%. These two areas are the only ones which showed a decline in value and yet they represent almost one-third of all condo sales which, in effect, distorts the average value of a condo in Anchorage.  It is interesting to note this decline in condo values, despite the fact that these two areas encompass JBER and the UMED which are two of Anchorage’s major employment centers.  One reason for the decline in value is most likely due to the age of the condo developments (most were built during the early l980’s which makes them thirty years old) and high dues for replacement of aging infrastructure as well as lack of energy efficiency resulting in high utility bills .  Special assessments to replace roofs, driveways, common heating systems are also not uncommon.

    Spenard is an unexpected bright spot in the condo market with a decline of days on the market from 127 to 70 and an average sales price increase of 18%.  Spenard and the downtown area have a lot in common. Although it’s not as walkable, it has popular retail with REI, the Alaska Club, Bear Tooth and Sugar Spoon.  Spenard is a yet to be discovered and emerging hip place to live.

    The Dimond South  and Girdwood area both have higher than average sales prices.  Girdwood comes in second with an average price of $268,595 and Dimond south’s sales price averages $255,669.  Both of these popular areas have on-going new construction condo developments which increases average prices and unit sales.  The Petersen Group is at Discovery Park which is almost sold out and Hultquist Homes is building in Girdwood. It is interesting to note that both of these new developments are not entry-level but rather designed for move-up, move down buyers or those buyers simply looking for a more carefree lifestyle away from snow shoveling, lawn mowing and exterior maintenance responsibilities.

    Condo living, even in a duplex or townhouse style configuration, isn’t for every home buyer, but it is an emerging market in certain locations and somewhat of an answer to our diminishing supply of residential land.

Test your knowledge of the local real estate market.

by Connie Yoshimura

Test your knowledge of the local real estate market by answering the following questions.  

If you score more than 75% consider yourself an expert.  You may be surprised at some of the answers which appear at the bottom of this column.

1.      How many single family building permits have been issued YTD 2013?

a.  150    b.  211   c. 304   d. more than 400

2.        This number is a

a.       20% increase from last year   b.  30% increase   b. about the same      c.  10% decrease

3.        Single family sales have increased by what percent in 2013 from 2012?

a.       10%   b.  20%   c. 25%    d. more than 30%

4.       What is the average price of a condo sold in May 2013?

a.        $175,000     b.  $199,000    c. $205,400    d.  $221,478 

5.        The average number of days on the market for single family homes is

a.   30 days     b.  45 days     c. 56  days    d. 75 days

6.    What area in town has had  the greatest increase in homes sold during 2013?

7.    Identify the area of the municipality that has had the greatest increase in condos sold.

8.    For sale single family homes have declined by what percent when compared to 2012.

9.    Has the decline in inventory resulted in an increase or decrease in sales price?

10.   What single family price range has less than a two month supply of inventory?

11.   How many $l million + homes sell per month?


1.   146 single family permits were issued as of the end of May.  June should see a sharp increase in permits as the frost was very deep this year and builders have postponed digging foundations.

2.   This is a 20% increase in permits YTD but last year was an historic low so we still have a long way to go to meet the housing needs of our population.

3.   Sales have also increased by approximately 20%.

4.   $205,400 which indicates increasing value.  Year to date average is less at $197,194.

5.    56 days.  This is a 25% decline in days on the market from 2012.

6.    Downtown.  It’s a small market and even a few sales makes for a big increase.

7.    Girdwood!  The second home market is recovering along with the economy.

8.    Approximately 20% decline in inventory.

9.   Interestingly enough, prices have only increased by 1%.  This could be due to our aging housing stock.

10.   Several price ranges have less than a two month supply of inventory including homes from $180,000 to $199,999 which is to be expected.    $225,000 to $249,999 and $300,000 to $349,999 also have less than a two month supply of inventory.

11. They sell at the rate of 0.62 per month.

Interest Rate Increase is More Than a Baby Bump

by Connie Yoshimura

     The big news in the housing market came from Washington, D.C. this week. According to the Federal Housing Finance Agency, interest rates jumped up almost half a percentage point from approximately 3.5 to 4.0 percent for a 30-year fixed rate mortgage, creating a scramble to buy up existing inventory before rates rise even further. The almost half point bump, the largest bump on record within a three-week period, has created significant fears of continued rate increases, propelling buyers who have previously been sitting on the fence to make a purchase now. The .5 point rise diminishes home buying power. For example, a $300,000 mortgage at 3.5 % has a monthly principal and interest payment of $1,347.13 while a 4% rate increases the monthly payment by $85.11 which means that a buyer needs to make an additional four times that amount, or $340, to qualify for the same $300,000 home. If rates increase from 3.5% to 4.5%, the payment will increase by $172.92 which diminishes buying power even more.

     We've known for quite some time that historic low interest rates, the lowest being 3.35% six months ago, can't last forever. Smart buyers buy when prices and rates are low. Unfortunately, most of us never know when the bottom of the market occurs. We only know that in hindsight and so that time has already passed and for those of us who missed it, we can let out a big groan. The lowest 30-year interest rate occurred in December 2012 when the rate was 3.35 and the average sales price in Anchorage was $331,997 for single family homes. The average sales price for April 2013 was $338,065, another creep upward.

     But the price of a home is much less important than the interest rate paid over 30 years. Interest on a fully amortized 30-year loan for $300,000 at 3.5% is $184,968.26. An increase of 0.5% annual interest rate would be an additional $30,640.26 over the lifetime of a loan. That's why it is ridiculous for buyers to quibble over a $1,000 counteroffer or even $10,000. Offers from buyers that fall apart over a few thousand dollars in a seller's counter aren't receiving good advice from their selling realtors and buyers aren't seeing the forest for the trees. An interest rate bump of 1% costs a lot more than a loss of $5,000 in closing costs paid by the seller or a slightly higher sales price. In the long run, a lower rate of interest rules over purchase price every time.

     In the coming months, it might be well worth it to pay to lock or buy down your interest rate, particularly if you're purchasing a new construction home which might be four to six months before completion.

Purchase Price 3.5% 4.0% 4.5% 5.0% Payment Increase
$200,000 $898.09 $954.83 $1,013.37 $1,073.64 $175.55
$300,000 $1,347.13 $1,432.25 $1,520.06 $1,610.46 $263.33
$400,000 $1,796.18 $1,909.66 $2,026.74 $2,147.29 $351.11
$500,000 $2,245.22 $2,387.08 $2,533.43 $2,684.11 $438.88
$600,000 $2,694.27 $2,864.49 $3,040.11 $3,220.93 $526.66

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Dwell Realty
561 E. 36th Ave., Suite 200
Anchorage AK 99503