Definitely not. And here’s why. Unlike the housing debacle of the late 1980’s, Anchorage hasn’t had 6,000 residential permits in a single year and hundreds of homeowners are not dropping off the keys to their house to their local lender. It’s true, we’ve had a dribble of population loss these past few years but that population was primarily young renters who have gone off to college or to explore the lower 48 and the world, resulting in current vacancy rates of 9.2%, according to Alaska Economic Trends. But, meanwhile, our senior population (over 65 yrs.) has increased from 7.7 percent ten years ago to an estimated 13.1 percent according to the same report. Seniors who already own their home are more likely to not sell, particularly if it is now free and clear of a mortgage. And thanks to all the pandemic relief funds, foreclosures have also fallen from the normal 600 to 1,300 per year. Check out the May issue of Alaska Economic Trends for additional details.
Add to the above, the historically low building permits over the past four years and you have a housing shortage that is not going to be cured in a year or two. It is going to take years to build back up our local housing stock. Meanwhile, frustrated buyers are bidding up resale homes or moving to the Kenai Peninsula or the Mat-Su Valley where there is still plenty of land to build new homes on. So just how low has new home starts been in Anchorage? For the first quarter of this year, only a combined 60 single family and duplex units have been permitted. In 2019, there was a total of 257 units and in 2020, there was 284. I doubt there will be 300 single family/duplex permits issued this year as builders pull back from permitting due to rising increases for labor and material costs. Plus, buyers are hesitant to commit when builders insert escalator clauses to protect them from rising costs.
According to MLS stats, from 2020 thru April 2021, the average home sale increased 9%. And that’s just about what builders need to charge for a new home based upon increased costs of materials and lack of a labor force. Let’s not forget there is a lot of economic stimulus in the bush where the trades can work for Davis Bacon wages as opposed to non union work for most residential starts. Alaska’s at the end of the road when it comes to receiving building materials. Our market is not large enough to garner much attention from lower 48 suppliers. Our builders are waiting weeks just for garage doors and appliances so new housing stock is not going to fill the gap in our heated resale market.
But buyers need to take a deep breath and not buy a home just because its available. There still needs to be a home inspection and health and safety repairs. Septic tanks need to be replaced if they are more than 30 years old. And remember, the cost of remodeling is almost always 1.5 times more than your budget. I know that from personal experience.