Another Slow Year in Anchorage Homebuilding

For Anchorage homebuilders, 2014 is almost over and the home building statistics do not look good. Despite all the community meetings regarding the need for more housing and MOA’s promises of more efficient permitting, our 2014 single family permits will not even match the dismal 303 permits of 2013.  So far this year, there have been 274 single family permits issued through October.  Builders did drop eight more foundations in October than the prior year (most likely due to our unseasonably warm fall), but overall, builders try to avoid putting in foundations in November and December due to the additional $5,000 to $8,000 for heating and tenting.  The only good news is that duplex permits have doubled to 160 units and so have multi-family units which are up to 295 through October. This helps our rental market, but doesn’t ease the pain for the 65% of the population whose preference is for homeownership.

For 2014, Anchorage’s leading single family builders are Spinell with 31 permits; Hultquist Homes with 28; Merit Homes and Hagmeier Homes with 14 each.  The most popular subdivisions are WestPark with 29 permits; Resolution Pointe, 23; Powder Ridge, 15; the Terraces, 15 and Eagle Pointe with 12.  Unfortunately, all those subdivisions have higher new home costs than the average MLS sales price of $360,182 which leaves first-time home buyers seeking resale homes which have short and long-term hidden costs for maintenance and repair due to their average age of 30 years or more. Subcontractors and material suppliers seem oblivious to this conundrum and have continued to increase their prices.  With framers in short supply, it is now taking six or more months to complete a new home which adds to its cost due to extended interest carrying charges.  The only good news in homebuilding is the continuing low interest rates both for commercial lines of credit for builders and low interest rates for mortgages which allow buyers to qualify for higher mortgage amounts.  However, even those financial benefits will have ‘term limits’ when the predicted interest rate bumps up in late spring 2015.

Last week’s Multiple Listing report had only 474 active residential properties.  Overall, our MLS listed properties for the year is down 218 homes and sales are down a corresponding amount at 225.  It’s a balanced market with little inventory and is likely to continue into 2015, despite the jitters over the price of oil and the looming question of when the stock market bubble will begin to fizzle.  The last time the price of oil plummeted, we were overbuilt with thousands of units for sale.  That’s not our inventory situation going into 2015 and although we are not immune from national and world economic woes, Alaska and Anchorage, in particular, is well positioned this time around to ride out any fall-out.  2014 has had a residential appreciation rate of 3.8%.  It is unlikely that rate will fall below 3% in 2015 as the shortage of housing continues, despite the numerous community efforts to understand and advocate for changes in Title 21 and the MOA’s Design Criteria Manual which would allow for more affordable housing, but still meet health and safety standards.