Title 21 and tight inventory: A look at the 2016 market
There are five major reasons why people buy and sell homes. Those reasons are marriage, birth, death, divorce, and job change. Add (in parenthesis) the investor to that list and you have the universal buy/sell equation and Anchorage is no different.
The real question in that equation is what will they buy as the Anchorage residential market continues to suffer from a lack of inventory, particularly for homes under $400,000. During the second week of November 2015, after adjusting for pending and closed sales, there were only 543 single family homes for sale in Anchorage in all price ranges.
Not much to look at if you’re a family trying to beat the expected rise in interest rates come this December. This inventory of aging homes is lower than in 2009 or 2004, despite a population increase now at 300,000-plus.
In October there were 290 sales reported through MLS. With the exception of 2013, when there were 311 recorded sales, this is the highest October number since 2004. So the Anchorage market place remains alive and well, despite the bad news coming out of the oil industry and Juneau.
Departing oil company employees will create a smattering of housing inventory desperately needed. Both Cartus and Brookfield, third party relocation companies to the oil industry, price their homes to sell. They are always the best resale homes in any neighborhood.
Unfortunately, 26 percent of available homes for sale are over $500,000 and you can expect this percentage to increase in 2016 due to the implementation of the new Title 21 regulations finally passed by the Anchorage Assembly.
It’s true that in the past we have built some aesthetically unattractive homes and the new Title 21 now requires builders to add more windows, three different textures to the front exterior, less garage frontage and wider, covered entries. All this comes at a cost, however, not only for a bay window, stones or shakes, but also requires wider lots and thus, more expensive home costs.
The underlying cost of any new home is the building site, which accounts for 20 to 28 percent of the total home value. Lot value is determined by the cost of the road and the extension of water, sewer, and storm drain.
The average cost of a publicly dedicated road with public water/sewer/storm drain is now almost $2,000 per lineal foot, not counting the cost of the raw land acquisition, civil engineering, taxes, interest carry, et cetera. All this coming at a time when we have less than an average three-month supply of homes available between $225,000 and $500,000.
In the past decade, homebuyers fighting the cost of rising home prices in Anchorage moved to the bedroom community of Eagle River. Now, the average sales price of $371,500 in Eagle River is a virtual tie with Anchorage, forcing more and more homebuyers to commute to the Valley. As a result of the new Title 21 regulations, Anchorage will have better looking homes in 2016 but they will be more expensive and fewer of them.
Already, this year’s single family permits through October are 36 fewer than 2014 permits. Counting in duplex and multi-family permits, the MOA is down 104 new housing units from last year. That downward trend will continue as builders and developers grapple with the new Title 21 regulations, consisting of 836 single spaced pages. Not the streamlined version as promised.
Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected].