My Crystal Ball has a Hairline Crack

 

 

 

Published Anchorage Daily News on 12.18.2024

By Connie Yoshimura

 

This is the time of year when we reflect not only on the past year but try to plan for the future.  But this year my crystal ball has a hairline crack like those sudden cracks that appear in the sheetrock after a small earthquake that you probably  didn’t even know occurred. So today my clairvoyant real estate crystal ball not only has a hairline crack but also is a bit cloudy. Predictions are always a guessing game and if you look back over the forty years I’ve written this articleI’ve probably been more wrong than right but that won’t prevent me from trying one more time, despite the crack and cloudy crystal ball.

 

MARKET PREDICTIONS

  The national general consensus is that home values will continue to rise at 4%.  This is a little bit lower than our local 2024 increase at 6.71% but may be appropriate given the negative projections for a slow population decline, according to Alaska Economic Trends, but a closer read has only a minor for 2025.   One prediction that doesn’t need a crystal ball is that Anchorage’s average home prices will exceed $500,000 which it already has consistently since April except for the November dip of $497,694.  

 

MORTGAGE RATES

If mortgage rates follows politics, it can be a bumpy and volatile year.  IF, mortgage rates do decrease, it will only create a greater demand. What is predictable, however, is that there will be a lot of uncertainty in the mortgage world, particularly in the first quarter of 2025 as the economy and world gets used to a new US administration.  But  we do know lower interest rates will  create  more buyers  who will enter the market, creating more competition, for our limited inventory and thus increased prices. 

 

A BUYER OR SELLERS MARKET

But the question most people want answered is whether 2025  will be a buyer’s or seller’s market.  Here in Anchorage, the answer is definitely a seller’s market due to our extraordinarily low inventory.  The bottom line is with 6% interest rates, increasing home prices and insufficient inventory, 2025 will be another tough year for buyers, particularly for those first time home buyers who don’t have a family member or friend to help them with a downpayment.  

 

Rates are going to be unpredictable, despite Jerome Powell’s commitment to remain at the Fed. That volatility can work well for buyers who are prepared to immediately take advantage of any drop in interest rates.  Buyers need to be pre-approved, have their down payment funds readily available, including any gift funds, already banked. Over 86 percent of homeowners with a mortgage have a rate under 6%. It is difficult to entice these homeowners to sell except for in the cases of marriage, birth, death, divorce and job change. Buyers who can afford it should be ready to buy down their rate and/or do a 15-year mortgage. Keep in mind, the total cost of home ownership includes property taxes of which Anchorage has some of the highest in the nation, HOA fees, maintenance, and in particular higher insurance premiums.  Then should buyers simply give up and rent although renting might be a short-term option?  Renters lose out on appreciation in a market.  My advice to renters is be prepared to jump on the housing ladder.  It may not be the perfect home but it is the first step into homeownership which promotes personal stability for you and your family.   Buy whatever you can afford today. 

 

ADVICE to SELLERS

Despite our continued low inventory, sellers need to maximize their value by being better prepared to put their home on the market.  During the dark winter months, house plants tend to droop or turn burn.  About 50% of all the house plants I see in the winter should be throw or given away prior to putting a home on the market. Sellers  need to make sure they have adequate homeowner’s insurance and must keep their driveways and entry steps well sanded. With the average median age of 42 years, sellers need a home inspection and a home warranty.  Roofs and hot water heaters need to be in excellent condition.  A new roof or hot water heater can dampen any buyer’s enthusiasm for a home or create unexpected costs in order to generate a sale.  with the average median age of 42 you need a home inspection and a home warranty.  A new roof or hot water heater can erase any appreciation for a year or two.  Older homes have less of a chance to float up to a higher housing step if not well cared for.  I frequently advice sellers that good housing can increase their value by 2-3%.  Buyer want to believe that a seller has taken good care of the home and they look more with their eyes than down a crawl space.

 

ADVICE for Today’s Buyers 

Today, we have all cash buyers, multigenerational buyers and single buyers. And whether or not you are a downsizer looking for a condo with an elevator or a first floor master, my advice is don’t want for the perfect home. It rarely exists, even in the million dollar price range.  All home purchases are a compromise of some sort.   That’s particularly hard for the first time home buyer to understand.  In an appreciating  market with so little inventory it’s smarter to compromise than to wait. First time home buyers are getting older and  25% use a gift or a loan.  Multigenerational buyers are pooling their money to purchase a home.  Home builders would do well to realize single women outnumber men buyers by 2 to 1 and should plan according for spacious bathrooms and gourmet kitchens as well as added security features. 

 

 So like all good advice, take what you like and leave the rest.  See you in 2025!