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Connie Yoshimura

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A Perspective on the Anchorage Housing Market

by Connie Yoshimura

Despite Alaska’s three years of economic recession, the Anchorage housing market has remained stable with no noticeable decline in values except in isolated circumstances. So, unlike our neighbors to the south where both Portland and Seattle have seen recent rapid appreciation above 30%, Anchorage remains an affordable place to live with an average sales price of $365,000. Anchorage’s housing problem is not really affordability but rather what a buyer can purchase for the average sales price. Anchorage housing stock is aging and not like a fine wine which gets better with age. Seventy-five percent of our housing was built between 1970 and 1990 making it not just cosmetically but functionally obsolete.

The 1970’s was the decade of the split entry or the ‘breeder box’ as it was called by some. It had a small entry and a set of stairs going up to the living/kitchen area and two or three bedrooms. Down the stairs was a family room and extra bed/bath. Then came the more luxurious two story homes of the 1980’s which had a larger first floor entry with a nearby powder room for guests. These homes had a formal living and dining room on the first floor. The back of the home had a kitchen, breakfast nook and family room. Upstairs was three or four bedrooms. The oversized master bedroom became the parents’ hideaway and was frequently as large as 16 x 20. Over time, these homes grew in size from 2,000 square feet to over 3,000.  

The nationwide real estate recession of the 2008 to 2010 changed the way not only people thought about home ownership but how they wanted to live. Something changed in the American psyche and it was reflected in the homes that were built. Gone was the formal living and dining rooms. Instead, it became all one great room. Home offices became important as more people chose to work from home. So did flex rooms—that added extra space somewhere whether off the entry or a loft upstairs for a quiet space. The kitchen grew larger—even though food take-outs grew in popularity. The kitchen was no longer the heart of the home but the heartbeat. It was no longer a galley or U-shaped configuration but an open concept with a view of the entire first floor. And the islands grew even larger—whether bi-level, flat or curved, it was where the family gathered not just for meals but homework and storytelling at the end of the day. Paint colors changed along the way as well. From white to beige, to gray, to grayish and back to white again. Master bathrooms have become home spas and are almost as large as the master bedroom. Today’s spa bath no longer has a built-in jacuzzi or soaking tub but a sleek freestanding tub.    

The need for more car storage also grew over the decades from a carport in the 1960’s to the single car garage in the 70’s and the mandatory double in the early 80’s. The 90’s brought the big triple and many of today’s giant garages of over 1,000 square feet. Alaskans love their toys and not only do they want to ride, fly, kayak and fish but want to keep them covered in their own garage as part of their home. 

The August issue of Alaska Economic Trends has confirmed what we’ve known all along and that is home prices haven’t dropped during Alaska’s three year recession. However, they do have a good take on why that hasn’t happened. As previously discussed in their July issue, Alaska migration patterns with Anchorage at the epicenter has helped keep prices stable. Plus, some job losses, particularly in the oil industry, have been among nonresidents who don’t own homes in Alaska. If you’re a frequent flyer on Alaska Airlines chances are you’ve probably sat next to some of these itinerant jobbers who may live as far away as Florida and commute to and from the North Slope.  

Interest rates still under 5% for a 30 year fixed rate mortgage has also helped keep our market stable although I maintain the five basic reasons people buy and sell homes have nothing to do with interest rates but changing factors in an individual or family’s life. Those are marriage, birth, death, divorce and job change. Obviously job change is a dominant factor—both positive and negative as most buyers need a verifiable and steady source of income in order to qualify for a mortgage, although I am continually amazed at the number of cash sales that occur in all price ranges. Alaska has a lot of quiet wealth.  We are also seeing some equity extraction from the stock market as investors turn to real estate. With uncertain and changing economic policies, many investors, large and small, turn to the old time staple of real estate investing.

The report used the term ‘controlled’ building as one reason for our housing stability. “Controlled’ requires me to ask the questions of who and why is doing the controlling. I would not want to think this market is being deliberately controlled by forces unknown to me or others in our industry. Instead, we have a lack of home building due to the continued high cost of development, lack of land and an unwillingness of our local government to loosen the oversight requirements for vertical home construction and horizontal residential development which go far beyond the need for protective health and safety regulations. 

The reality is that our lack of new home construction is hitting a crisis point. The six month building report recently published by the MOA shows more than a fifty percent drop in new housing starts compared to last year’s six months report. Only 121 housing units were permitted compared to 300 in 2017 for the same time period.  That number includes permits for single family, duplex and multi-family. Less than one hundred single family homes were permitted.  Only twenty-eight duplex units and not one multi-family permit had been issued through June. Alaska’s population is projected to stabilize and may even have slow growth as a result of increased births. But, what happens if and when Alaska comes out of its three year recession?  Where will an influx of population or growing families live in Anchorage?  

Come Learn Everything there is to Know about Condos

by Connie Yoshimura

A condo can be a single family home, a flat or a side by side duplex.  You can’t always tell by looking at the structure what it is and how it is defined. Do you own the air space around the building or only the interior  space between the walls?      What is a limited common area and who maintains it? Who pays for water and sewer and what if a water pipe breaks in the building?  Is it your responsibility or the homeowner’s association? What is the responsibility of the HOA management company? Does your board of directors have insurance?  How to find out about upcoming special assessments before you buy a condo?

 

Find out answer the answers to these questions and more by  attending this Dwell Realty sponsored class “A Condo Is a Condo or Is It?  It’s open to the public  and if you’re a licensee will provide you with three hours of elective continuing education. I’ll be there along with Natalie Travers-Smyre who has over ten years of home owner’s association management experience and Jim McCollum, attorney at law.

  •     Friday, August 10th
  •     9 am - 12 pm 
  •     First American Title
  •     Breakfast Provided
  •     Free Admission!
  •     Sign Up Today 646-3600 

 

Call in your questions to the new INSIDE REAL ESTATE show on 650KENI every Thursday at 2 pm. This week we will be with Anita Bates talking about the various roles that the Alaska MLS, Board of Realtors & the Real Estate Commission  play in the real estate industry.

A Real Estate ‘True Confession’

by Connie Yoshimura

I have been listing and selling real estate in Anchorage for almost forty years. It’s a job I love and will continue to do in the future. You would think after all those years of experience I would not make a simple mistake but I did. It has haunted me for the past several weeks and so in order to get it out of my psyche, I need to share it with you and also others in the business so that we can all learn from it and be reminded of our professional vulnerabilities. 

The vast majority of residential real estate offers are written on an MLS purchase and sale form (PSA) which is a legally well-written document. When properly filled out, the PSA has specific dates and times for performance of various contingencies and acceptances, including such items as the time to order a preliminary title report; the home inspection and buyer’s request for repairs; the time to order the appraisal and the closing date. Most importantly, any offer or any counteroffer has a specific date and time for a response. I missed a counteroffer deadline. The lesson I learned is that my email response of acceptance which was seven minutes past the stated deadline is not a legal counter. I knew that, of course, but under most circumstances the email would have been ‘good enough’ but this was a sought-after property with multiple offers. The legal DocuSign acceptance on an MLS form arrived approximately two and a half hours later but by that time the seller had accepted another offer which was their legal right to do so. I lost a sale but more importantly my buyer lost a significant opportunity. 

The lessons learned here are many. Emails, texts, PDFS and DocuSign have made our industry a bit sloppy. We have no control over when DocuSigns are going to arrive in an inbox. Two weeks ago, the internet carrier that most Alaskans use was down for several hours. Some people lined up at other carriers’ stores just to buy a second phone so that business could continue. But that is not my excuse. I was late in writing and sending the acceptance, whether seven minutes or two and a half hours. It is also a cautionary tale for buyers and sellers who are busy people. Make sure your realtor tells you when you must respond by. Voicemails, emails left on buyer, seller or realtor devices are not binding contracts.

As a broker, I review files on a daily basis and even a missing initial, if push came to shove, can void a contract. Many of us do business with family in addition to repeat buyers and sellers who become friends and/or long term professional associates. Twenty percent of all realtors do eighty percent of all sales so it is easy for us to forget, take for granted or make assumptions about business relationships that may not always be reciprocal in intent but the bottom line is this: follow the contract.       

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. 

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