Unlike Alaska’s majestic scenery with its tall peaks and glacier crevices, Anchorage’s 2017 real estate market was more like a Midwestern plain—pretty uneventful and, if I dare say it because I grew up in Iowa, a little bit boring. Mortgage Interest rates remained steady, hovering up and down between 3.35 and 4.08%, depending on the loan program and a buyer’s qualifications. Lack of inventory allowed the average value for a single family home to remain at $366,000 except for certain spot markets.
New single family housing starts continued their historic low pace at just under 200 permits–pretty appalling for a community of almost 300,000. Anchorage’s two top builders, Hultquist Homes and Spinell Homes, continued their duel with little competition from other builders. People bought and sold homes at the same rate as in 2016, based upon their family and lifestyle needs. We had downsizers who bought a surprising number of single level homes—both resale, brand new, single family and single story condos. Millennials started their trek to the suburbs as they married, adopted a dog and started a family. In that regard, they proved many of the planners wrong who believed Millennials would be urbanites forever. Instead, they sought out and bought homes where they were raised—in the suburbs on a single family lot. We also sold a surprising number of million dollar homes—but at a 7% discount from the original listed price. Generations X and Y began entering the move-up market and some were deterred by the higher cost of new construction and smaller lot sizes. Mortgage companies suffered a sizeable decline in dollar volume due to the lack of refinances. In 2017, anyone who had wanted to refinance had already done so.
I’m not sure what 2018 will be like in residential real estate but I will make one prediction: it will not be like 2017. Buyers should definitely shop and compare mortgage rates and fees. With refinances gone, it’s a competitive market out there. But still shop local, particularly if you’re buying a brand new home. Outside lenders don’t understand Alaska’s weather and escrow holdbacks for exterior work and landscaping. It’s safe to say 2018 will bring three or four interest rate hikes and by the end of 2018 a conventional mortgage will hover around 5%. I do not expect any more single family homes to be built than the 200 we’ve had the past few years. It is unfortunate for a community our size to not be able to provide buyers with more new home choices due to over-regulation and the lack of privately held residential land for development at a reasonable price. Heather Wood in southwest Anchorage will come on line with public streets, water and sewer in late summer. Luxury homesites in Resolution Bluffs will also be available late spring 2017.
As land becomes tighter, more townhouse style condos will be built in 2018. It’s an efficient land use and boomers, in particular, will begin that painful process of downsizing. The dreaded home inspection will continue to be an obstacle sellers will have to overcome. With the vast majority of our homes built prior to the 1990’s, sellers can expect a long list of requested repairs from sometimes unrealistic buyers who want the home to be in essentially new condition. Health and safety repairs should be the only standard for repairs in 2018.
In my world of real estate brokerages, the big news is that as of January 2018, all 2,910 individuals who are licensed by the state of Alaska to list, sell, lease and manage real estate, whether part of a mega brokerage or as a single proprietor, will be required to have errors and omissions insurance. That’s a long overdue positive step forward for the real estate industry.