INSIDE REAL ESTATE: Unique factors still impacting Alaska housing market
Before we can predict the future of Alaska’s housing market, we need to remind ourselves about some of the unique factors affecting our market.
One dominant factor is that 75 percent of Alaska’s housing was built between 1970 and 1990. A home built in l970 is now 48 years old — way past its functional and cosmetic life. Even one built in l990 is now 18 years old with ineffective energy standards.
This aging inventory is why there has been and will continue to be a spike in the Alaska Housing Finance Corp.’s renovation loan programs which include purchase renovation, refinance renovation and second mortgage renovation.
When first introduced in 2015, AHFC financed $12.8 million. Loan volume grew to $20.6 million in 2016 and should exceed $30 million in 2018.
A recent article from Zillow declared there are 12 percent fewer homes to choose from nationwide than there was a year ago and 51 percent of for sale properties are in the top one-third of home values that are out of reach for first-time home buyers.
The national average price for a single-family home is $234,000. In Anchorage, last year the average price of a home was $366,000, the same as in 2016. So not only does Alaska have a much higher sales price it is also following the national trend with 46 percent of our current active inventory priced at more than $400,000.
Inventory shortages will continue to plague our local housing market in the affordable price range as well as the middle up range well into the year 2020. Last year there were only 196 single family permitted in the Municipality of Anchorage — only six more than in 2016, a dismal showing for a community of almost 300,000 even taking into consideration Alaska’s mild recession.
Permitted duplex units almost doubled from 2016 to 104. Builders sold each side as a condo. Buyers can expect that trend to continue as it helps fulfill the affordability needs of millennials as well as downsizers. Developable land shortages will create higher density housing styles.
Alaska continues to have one of the lowest delinquency and foreclosure rates in the nation despite our mild recession. On a statewide basis Alaska’s delinquency rate was 0.6 percent in 2016 with little change in 2017. The national foreclosure rate is double Alaska’s.
Due to the shortage of housing, the Federal Reserve rate hikes expected in 2018 should have little impact on our local housing market. Prices will remain stable and properties in excellent condition and amenity-packed locations will begin to sell at a premium.