An Eagle’s Eye View of the Market

     Last week, MLS reported 51 new single family sales in Anchorage.  Of those sales, 19 were under $300,000 and 15 were under $400,000. In other words,  more than 50% of the sales were under $400,000 while at the same time, the new construction average valuation in 2014 for a single family building permit is $369,830, not including the lot value.  This disconnect between single family buyers and current new construction prices is at the heart of Anchorage’s housing crisis.  The statistics get even more interesting when looking at the average age of the homes sold.  The year 1992 is when building codes began to make significant health, climate and safety changes.  However, of the 51 sales, 34  were built prior to 1990, making 67% of the homes sold facing some current or future  functional obsolescence and ultimately increasing the annual cost of home ownership for maintenance and repair, to say nothing about the 48% increase in the cost of gas that Enstar just announced to heat these aging properties.

     During the same week, 26 condos went under contract with an average sales price of $190,650 while only two single family homes sold under $200,000.  With one-third of all sales last week under $200,000, the shortage for affordable housing in Anchorage could not be more glaring.  With a few exceptions, the average price per square foot for condos is $164, although new construction medium density condos can’t be built for less than $200 per square foot.  Buyers are definitely willing to live in smaller square footage just to get into the marketplace and stop paying high rental rates.  Of the 25 condos, 11 are under 1,000 square feet; ten are under 1,500 square feet and only 4 are over 1,500 square feet.  Fifteen of the 25 condos were built in the 1980s and 1970s which means condo owners are going to be faced with special assessments or association loans from AHFC for roof repairs, painting, driveway and street replacements in the near term.

     A good example of the condo market and its ups and downs are the Foxwood condos off Arctic Boulevard.  When they were first built in the 1980s, the asking price was $82,500. These units have two bedrooms, two baths, 745 square feet, a fireplace and a heated garage space.  During the real estate recession of the late 1980s, these condos dipped in value to $32,000.  Since then, they have experienced steady appreciation and last week’s pending sale was for $158,000, making it one of the highest priced resales in the complex.  And at $212 per square foot, that price meets or exceeds the cost of new construction.  I wish I had bought a few way back when at $32,000 a unit!

     What is obvious from these statistics is any newly built condo under $300,000 has to be a good investment.  Newly built condos have less of a risk for special replacement and repair assessments.   And any new single family home on a 6,000 square foot lot with water, sewer and a publicly dedicated road under $500,000 also makes for a smart buy.  Unfortunately, with the low number of building permits for both single family and multi-family development, not much is going to change in the way of affordability in Anchorage.  Costs are only going to continue to creep up and buyers who hesitate are going to regret not buying when they should have. Just like me, passing up the opportunity to buy a $32,000 condo way back when.