There’s no denying that new home buyers are frustrated by the high cost of new construction. Whether it’s the land cost or price per square foot for the vertical, buyers are having a hard time wrapping their heads around builders’ quotes for  new homes.  Unfortunately, Alaska is not immune from the inflation occurring in the lower forty-eight for all types of home building materials and supplies.  Alaska is like an island of economic activity with all goods coming by sea, road or air to build a new home or remodel an existing one. Lumber is a key component of every new home. According to a local supplier, lumber is 11 to 12% of the cost of a new home.  And lumber prices have been on a roller coaster ride this past year. But, despite the dip in the fourth quarter, all predictions are that lumber prices will remain higher from  a year ago. One reason is that last year the Pacific Northwest was literally on fire—with 72 ongoing fires. Plus, the tariff on Canadian lumber also had an immediate affect on U.S. lumber costs. U.S. mills contended that the Canadian government subsidized the Canadian mills  and thus gave them an unfair advantage. The tariff was good for the U.S. mills but not for the home building industry.

 

Much of Alaska’s  lumber supply comes from the Port of Tacoma but the trucking costs to get to the port have increased substantially. The U.S. is short on truckers and transportation companies have had to increase  wages just to keep supplies moving. Plus, proposed gas taxes will get passed on directly to the end user. Despite all these challenges and higher costs, buyers are taking a serious look at new homes because the cost of remodeling their existing home will also increase. Seventy-five percent of Alaska’s current housing inventory was built between 1970 and 1990. And much of it was built with two by four construction instead of the now widely required two by six. Increased utility costs will also make older homes more expensive on a monthly basis.

 

New versus pre-owned has always been the ying and yang of home buying. Currently, the disconnect in pricing on a 2,000 square foot home in Anchorage is probably close to $100,000. That’s a lot of investment dollars to be spent for a brand new home with an open living concept and white cabinets which are preferred by 80% of new home buyers. Sometimes, however, it’s not always about the dollars but the lifestyle. We continue to see a high demand for ranches from seniors and aging boomers. The well stacked 3,000 square foot home is also popular for multi-generational families as well as  homes with a finished  basement either for teenagers or mother-in-laws. And then there are the millennials who are beginning to think long term and so prefer a new or newer home.