The Million Dollar Phenomenon

 

By Connie Yoshimura

The “Million Dollar Phenomenon” has been a stealth growth in the Anchorage residential marketplace for the past 12 months with a reported 95 MLS closed sales above $1 million. Currently, there are 47 single-family homes for sale in this category and they sell an average of 6 per month. There are also 12 homes for sale above $1.5 million. These homes sell at the rate of 2 per month. What is not included in these statistics are the private sales which can occur in this price point—sales to family, personal friends or business related. You might be surprised to know that the average days on the market for all these homes is only 24 days. That is the lowest number of days on the market until you look at the $500,000 and below price range. There are currently 23 pended sale of which $3,499,000 is the highest MLS pending single-family sale ever reported, although there are privately built homes with as high or higher value that are not part of the public MLS system.

 

New construction plays a big part in this “phenomenon”. Of the pended sales, half are new construction. Of the current 47 active listings, 9 are currently to be built. TO BE Built is a house plan or schematic on a lot which does not have a building permit, a foundation, or financing. For some buyers and builders, it is a dream hoping to come true. “Speculative” million-dollar plus homes, in other words, actually under construction and without a buyer, are for builders with strong financial statements and a proven track record In many instances, they already have ownership of the land where the home will be built which provides them with a market and financing advantage.

Lack of inventory, inflation at 35% for cost of goods and transportation, and a severe labor shortage in the construction trades have jacked up not just the cost of new construction homes but also have had an inflationary effect on resale. So, eliminating the new construction which is occurring on the hillside where residential home-sites are available from builders who had the forethought to develop parcels in the last five years with lots zoned R6 with acre plus lots, where are the resale million dollar homes and what makes them so special that buyers are grabbing them in less than a month’s marketing time? If you are living in a relatively new home community with public water and sewer on a dedicated street that is MOA maintained and your home is over 3,000 square feet with a triple car garage your home is worth more than $1 million, depending upon its age and condition. For example resales, sales are now occurring in Resolution Pointe and Bluff over one million. Girdwood has had six closed sales and two pending, well over a million. Two to four-acre home sites close to recreational areas, whether Girdwood or Kincaid Park, Flat Top, the Coastal Trail, lake or inlet frontage, all add a minimum of $100,000 value for the home site alone. Unobstructed mountain and inlet views and not over rooftops also contribute to added value. So much of the million-dollar phenomenon depends on the old adage of location, location, location. Downtown pockets such as Westchester Lagoon, Bootlegger’s Cove, old Turnagain generally have a million-dollar value when extensively remodeled but some downtown areas are stalled due to the visibility of the homeless.

 

Million-dollar sales may also be fueled by increased mortgage loan amounts. Fannie Mae and Freddie Mac, where most conventional mortgages end up, have a maximum loan amount of $1,149,825 for single-family homes. AHFC has an even higher loan limit of $1,264,807. VA has no loan limit and various loan programs for medical professionals can go as high as $3 million. As long as mortgage interest rates remain reasonable and higher loan limits continue, the “Million Dollar Phenomenon” is here to stay and Anchorage becomes a home for the well-to-do while the “Missing Middle” continues its move to the Valley and Anchorage grapples with its homeless issue and lack of housing on the first and second leg of the housing ladder.