The lower 48 is full of real estate headlines about how the housing market has finally bottomed out. But, that’s old news for Alaskans who recognized that turnaround earlier this year. This past August there were only 986 homes for sale in the Municipality of Anchorage. According to Multiple Listing statistics, that’s the lowest number in August since 2005, despite the fact that residential building permits have had a 20% increase from a year ago. That low inventory trend has held up all year when compared month to month to 2011. Low inventory and historically low interest rates have increased sales activity by 10% year to date. And prices have increased 4% compared to last year with the average price of a home now $335,670.
So all this sounds pretty good for a recovering housing market which even in Alaska has had some dips and valleys but what’s really driving these good news statistics? For starters, you can’t buy a home unless you have a job and Anchorage has only a 5.7% unemployment rate, one of the lowest in the state and definitely one of the lowest in the nation. Historically low interest rates have turned some renters into buyers because at least on a month-to-month basis, it is cheaper to buy than to rent. Parents are chipping in with down payments to get their adult children into their first home, recognizing that these low interest rates can’t last forever. Our aging baby boomers, an in migration product of the trans-Alaska oil pipeline boom four decades ago, have made Alaska their home. They’re moving around, selling older homes, buying new ones, down-sizing, even modestly up-sizing particularly with a need for triple car garages to hold their recreational toys and hobbies. Investors, buoyed by the stock market, are turning some of those profits into real estate that they can actually touch and feel, let alone enjoy on a daily basis.
Anchorage is the center of commerce for the state of Alaska and we reap the benefits when economic drivers occur on the perimeter of our state, such as oil, gas, mining, exploration and development. So, it’s not surprising Anchorage residential real estate is enjoying a little boomlet amidst the bottoming out in the lower 48t. All MLS districts are doing better than last year as far as number of homes sold except for the Post Road-Glenn Highway area. The downtown area has had a 30% increase in sales, followed by the Spenard area with 24% and Chugiak/Peters Creek with 21% increase.
Average days on the market has dropped from 119 to 78 for all properties sold. One warning sign is that the percent to list price has actually declined from 99 to 98%, indicating that sellers still need to be prepared to pay some significant closing costs, even in the higher price ranges. Closing costs up to $10,000 paid by sellers are particularly prevalent with military buyers which make up a significant portion of our buyers in the average home price. There are, however, two areas of the market that still need contraction and adjustment. The first is the upper end which comes as no surprise to anyone, despite the occasional sale over $1 million. There are 26 homes for sale in this category and they sell at the rate of less than one-half per month. That creates a 56 month supply of million dollar homes. Homes that actually do sell in this price point are only on the market for about 30 days. In other words, we have a lot of over-priced, stale inventory. If you have a million dollar home and it doesn’t sell within the first month of it being on the market, it’s overpriced and most likely has cosmetic and functional obsolescence.
On the other end of the spectrum is the condo market which has had a 4% decline in average sales price this year. That average price is now $192,965 compared to $201,188 last year. Condo buyers should be aware that not all condos are created equally. There are older condos and new condos. Older condo associations frequently have inadequate reserves and have been forced to raise their dues and create special assessments to cover repairs and prior inadequate maintenance. New condo dues are actually lower because the amount of dues that need to be allocated for replacement items can be amortized over a longer period of time. Condo buyers need to not only review the condo budgets but read the prior year’s minutes of the association meetings where discussions occur about future maintenance issues and proposed special assessments. Anchorage has a plethora of modestly built condos and although they may appear a good buy on a price per square foot, buyers should carefully read the public offering statement before making a purchase.
Looking into the future, Anchorage’s low inventory and lack of new home construction (we’re still way below the 800 new homes we need per year to house our population) along with historic low interest rates, low unemployment and renewed economic development in many sectors, creates a stable residential market that is only going to improve in the months ahead.