If your New Yearâ€™s resolution was to buy a new home in 2011, you may have a hard time keeping it.Â In fact, it will probably be harder to keep than your resolution to lose weight and we all know how hard that is.Â According toÂ Alaska Economic Trendsmagazine for January 2011, â€œthe number of new residential permits issued in 2010 approached a 20-year low, and a major rebound in 2011 is unlikely.â€
The Multiple Listing Service weekly market activity report for the last week of 2010 reported only 539 homes for sale in Anchorage and only 123 for Eagle River.Â These numbers are as low as I can remember.Â Pending sales were almost twice the number of new listings coming on the market in Anchorage for the same time period. Â So itâ€™s not hard to surmise that Anchorage is in a housing crisisâ€”the exact opposite of the kind being experienced in Phoenix, Las Vegas or Riverside, California, where entire subdivisions have only one or two occupants.
Instead, Anchorage and Eagle River, are experiencing a housing shortage that is not likely to diminish any time soon. According toÂ Alaska Economic TrendsÂ , our market peaked in 2006 after six years of an average of 8 per cent appreciation per year.Â In 2010, we saw very modest appreciation after three years of no growth or slight negatives.Â When our market doesnâ€™t appreciate or stagnates, it makes move-up, move down more challenging.
Couple this with our aging housing stock ( most of Anchorageâ€™s 2,000 housing units were built prior to l990), and you have a housing crisis of the first order.Â Add to the mix that trying to convince a commercial bank to lend money for speculative housing is harder than losing weight, and a lot of well-qualified buyers are going to have to wait out 2011, despite continuation of historically low interest rates below five percent for a 30 year fixed rate mortgage.
Todayâ€™s buyer has only three choices.Â First, stay put which is not very satisfactory if youâ€™ve made the resolution to move.Â Second, buy an older home and remodel it, even though it will cost you more cash out of pocket than purchasing a brand new home and will not return you dollar for dollar on your cash investment. Third, act now.Â There are a few new construction homes out there. Donâ€™t assume that something better is going to come on the market next week or next month because in todayâ€™s tight credit market for commercial financing for new homes, it is highly unlikely.Â Even Anchorageâ€™s most successful and long-term builders have had their lines of credit curtailed to recessionary levels.Â Spec homes are one or two at a time per subdivision.
A presale (which means making a commitment to purchase a home before it is built) can take up to nine months from issuance of the building permit to certificate of occupancy.Â For a buyer that means a commitment to purchase in January will mean a move-in date of September or October.
A buyerâ€™s best bet is to look seriously at the new homes that are already up.Â Because one thing is for certain– new title 21 land use regulations, stricter building codes and design standards are going to increase the cost of housing in the near term.Â And lack of inventory will begin to put upward pressure on prices.Â 2010 was the bottom of our housing market.Â We may limp along waiting for a major economic happening to jump start us again but in the interim, for sale housing, particularly in the new home market, is going to be in short supply and price creep is on its way.