From Memorial Day through the Fourth of July weekend, there’s not a lot happening in the local housing market. Potential buyers go fishing; friends and relatives from the lower 48 come to vist; local movers and shakers fly or drive out to their cabins and summer homes on the Kenai, Big Lake and parts beyond. So why sellers always want to put their homes on the market in June has always been a mystery to me. But, there it is statistically. Last week’s MLS inventory is up to 482 homes, a 50% increase from February. Although there are still a handful of relocation buyers trickling in from Texas (BP), most relocating buyers made their home buying visit earlier in the year when the inventory was almost non-existent.
Still, inventory of available homes remains low when compared to other years in this past decade. May 2013 and 2014 total inventory hovered just over 700 units, the lowest since 2005. The average sales price has had a 4% increase so far this year and will probably continue to rise, ending the year at around 6.5%. The average priced home that sold in May was $377,678. However, that price point has only a 2.76 month supply. As we all know, the higher the price point, the lower the absorption. Homes above $500,000 have a 5.24 month supply and homes above $750,000 a 13.58 month supply. The average days on the market for a home sold between $750,000 and $1 million is 140 days. It takes patience to sell a home in this price point.
The vast majority of inventory on the market continues to be pre-owned homes and they are aging in place with functional and cosmetic obsolescence. There were only 39 new single family building permits issued for May 2014. The total number of new home permits year to date is only 119, down even from last year’s 146. May is usually a month when we see a jump in permits but for lack of available lot inventory and/or commercial financing, that didn’t happen this year. The average single family building permit has a $372,000 valuation. If the average lot costs $135,000 that means almost every single family home in Anchorage has now reached the benchmark of half a million dollars! Any new home less than that figure should be considered a bargain. This high watermark, however, is not where the demand for housing is, as demonstrated by the 5.24 month supply of inventory from $500,000 to $749,999.
Homebuyers who can’t afford a half million dollar home and still want to live in Anchorage are going to be forced to turn to a lower density multi-family development and the recent new construction stats point in that direction. Duplex permits have more than doubled and multi-family permits have almost tripled in 2014. There were 36 duplex permits YTD in 2013 compared to 96 this year. Duplex permits include duplex condos as well as duplexes as rentals. Most of the duplex permits as rentals are in Galatea subdivision, located off Lake Otis, and the duplex condo permits are scattered throughout the community. New owner-occupied duplexes range in value from $469,000 to over $600,000 depending upon the location and amenity packages. Any new construction duplex condo under $300,000 with a double car garage is a bargain. Without a doubt, the duplex condo with only one common wall has become the affordable version of the single family home.
Let’s hope for a mid to late summer increase in single family building permits as new lots become available in the Terraces and Powder View (Eagle River) as well as an increase in new low density developments scattered throughout the city in in-fill locations. But, in the meantime, buyers and sellers are enjoying the summer solstice.