Residential real estate activity is always a reflection of the national and local economy. It’s all about population and jobs, and, particularly in Alaska, the type of jobs that will support our sticker shock higher priced homes. The 2015 predictions are particularly challenging because Alaska is faced with a $2 billion + budget shortfall and the cancellation or postponement of major construction projects, long the backbone of our local and state economy. Despite all those challenges, Alaska has options that other states do not such as the budget reserve fund, permanent fund and increasing revenue through seasonal sales tax, income tax and even perhaps a reduction in the formula for our beloved permanent fund dividend. It’s generally agreed amongst our economists that it’s not going to be possible to slash our way to a balanced budget without finding increased sources of revenue.
These past two years have seen a moderate and stable real estate market. The number of sales has remained consistent (approximately 3,000) and we’ve had 3 to 4% appreciation, due mostly to a lack of supply and inflation for labor and materials. The lower price for petroleum and thus the building products and transportation costs to Alaska won’t be felt until the third quarter of this year, if at all.
So what does all this mean for buyers and sellers of residential property? Stable or increased population is the key to a healthy and sustainable market. Assuming this to be the case in 2015, you can continue to expect a market not unlike the past two years with some quirks here and there. There are 150+ new home sites coming on the market in late summer 2015, giving buyers more choices for new locations. These new developments, many of which were delayed by regulation in 2014, stretch from Eagle River to the Anchorage hillside, to southeast and southwest Anchorage. Also, expect more buyer opportunities for luxury duplex and row homes in some premium locations. This market provides homes for aging baby boomers, downsizers, young urban professionals and move-up condo buyers. It will be one of the most active markets in 2015.
However, new entry level single family homes below $400,000 will still be hard to find. The best buys in this price point will still be your pre-owned homes, especially those that have been updated and are located in desirable southeast Anchorage. New condo developments offer better energy efficiency and a stable dues structure without fear of special assessments. The majority of these affordable condos will be close to the UMED district and east Anchorage. Condos provide an opportunity for millennials to enter the market at an affordable point and also provide future long-term investment opportunities as rentals. Buyers just need to be careful and make sure there is a well-managed homeowners association.
Affecting all this will be mortgage interest rates which all national economists expect to increase at least a quarter of a point by late spring so now is a good time to make a purchase or put your home up for sale. However, these higher rates will be offset by a loosening of credit standards which became too stringent as a result of the non-qualifying stated income mortgage, allowing more buyers into the marketplace.