With Anchorage’s rental vacancy rate at only 2.3% as reported by the Alaska Housing Finance Corporation’s annual statewide rental report, a lot of small real estate investors are picking up condos to use as rentals. The Anchorage rental market has a plethora of two-bedroom apartments with no car storage or carports, so particularly desirable are condos with garages and three bedrooms. With 20% down, non-owner occupied financing, some rentals are providing as much as a 35% cash on cash return. That’s hard to beat these days compared to stocks, bonds, gold or just plain old certificates of deposits.
But these good deals go fast in the marketplace, particularly under $200,000, so investors or first time homebuyers shouldn’t hesitate when they find one that’s less than twenty years old and in good condition.
Another hot spot in the market is new home construction. And it’s a hot spot simply because there’s not much of it and price per square foot is extraordinarily reasonable. Historically, the Municipality of Anchorage has been built out by a number of small builders who frequently built less than 15 homes per year. The majority of these residential contractors came up from the trades – framers, sheet rockers, dry wallers, excavators. Today, only a handful of home builders remain after weathering the recent protraction in available financing from local lenders.
The number of residential permits (including single family and duplexes) for 2010 was 229.Â At the end of September 2011, that number was 206 and it is not anticipated that we’ll have more than 250 permits by the end of the year.
Residential building and Eagle River land use permits do not take into consideration the value of the lot, but only the estimated cost of vertical construction. The majority of the permits were for less than $400,000, making the average new construction home about $350,000 to $400,000. There were only 29 permits issued so far this year over $400,000. There were 10 permits valued over $500,000. Only four permits were valued over $600,000 and three over $700,000. Of the three permits over $700,000, one was over $1 million and one was for $2.5 million. These numbers coincide with recent MLS statistics that show less than one home per month sells over $1 million and only three in the $700,000 range.
You only know when the bottom of the market is when it has passed, but with historic low interest rates, and flat prices at best, plus some compression in certain geographical areas and price points, it’s close enough to the bottom that investors and new home buyers are taking a hard look at buying now. All we need is one major economic event to occur on a statewide basis to make us all look back with regret for not buying today.