INSIDE REAL ESTATE: Rents, prices, foreclosures still stable
The Department of Labor and Work Force Development has confirmed in their May report what real estate professionals have been saying all along: “a reduced supply of housing has created stability in both the for sale and for rent housing market.”
Statewide, only 2,120 new residential units were built in Alaska 2016 — one of the four lowest permit years since 1993. The report called out new housing construction as “tepid at best” in 2016 and said it represented a 12.5 percent decline from the year before.
Significant declines in new housing starts occurred in Anchorage in both the multi-family and single-family category with less than 200 single-family homes permitted.
Only Juneau had an increase in housing units in 2016, thanks to several projects for special needs populations. That trend in multi-family development for special needs and subsidized low income housing is most likely to continue for the next few years as private developers hesitate to take large financial risks during a recessionary period.
In Anchorage, new multi-family development was also stymied by the new Title 21 rules adopted in 2016 and, in some instances, community councils’ vocal objections to higher density.
The lack of new residential units statewide has “plateaued” rents with an average cost of $1,238 plus utilities. However, the Kenai Peninsula Borough had a 7 percent increase in rents and Valdez-Cordova 6 percent.
Anchorage and Mat-Su rents were virtually stable at less than 1 percent. There are approximately 92,000 households in Alaska that are impacted by changes in rents and vacancies which overall has remained steady during the past 10 years.
Another factor creating stability in our market is the lack of foreclosures, which at the end of 2016 was 0.6 percent compared to the l980s recession when foreclosures peaked at 10.57 percent.
This comparison of foreclosure rates is probably the most startling of all statistics presented in the May report and should destroy any remaining myths or misrepresentations about Alaska’s housing market tanking in the near future.
During the past decade, Alaska, for whatever its myriad of reasons, has failed to keep up with the need for additional new housing as a result of population growth.
It would take a significant exit of population to recreate anything near the housing collapse of the late l980s.
Just ask any friend or co-worker how their search for a new home is coming along and you’re bound to hear frustrating stories of hours of Zillow searches and drive-arounds.
And missed opportunities with lowball offers or unnecessary home inspection “requests.” With the lack of new home inventory, buyers must understand they are most likely purchasing a home that is probably 30 years old, an age when not only cosmetic obsolescence has set in but functional and perhaps mechanical/structural as well.
The Alaska housing market has also benefitted from historic low 30-year fixed rate mortgages that over the past couple of years ranged from 3.75 to 4 percent.
However, even with modest increases over the next few years, Alaska’s housing stability should continue. Homes for rent or sale should not decline in value or monthly cost. It will take a decade to fulfill our housing needs, even if we started today.