Connie Yoshimura

INSIDE REAL ESTATE: A new option for homebuyers

The Alaska Housing Financing Corp. has a little-known new grant program for single-family homebuyers called the “Closing Cost Assistance Program.” Available only through First National Bank Alaska and Mt. McKinley Bank in Fairbanks, it offers up to a 4 percent grant (yes, grant, not loan) to homebuyers with a credit score of 660 and above. A slightly lower credit score reduces the grant to 3 percent of the mortgage amount. The catch is a modestly higher interest rate that changes daily. As of July 11, the published rate was 4.5 percent for a 30-year fixed rate. A 15-year mortgage is not available with the program. But despite the higher rate, for buyers, particularly millennials, who’ve had to sit on the sidelines of the housing market for lack of down payment and closing cost funds coupled with student loan debt, this program may just be the ticket to owning their first home. The program is also beneficial to older citizens with good credit but without having had the income available to save for a down payment. The AHFC website for this program tells the story of an out of state grandmother who moved to Alaska to be closer to her family. Only Alaskan residents are eligible for the grant. The program is also limited to Veterans’ Affairs and Federal Housing Administration loans, as well as the Rural Development loans through the Department of Agriculture. This AHFC program is part of a nationwide trend to attract more buyers into the housing market that has best been described as stable the past couple of years. Mortgage companies, who relied on refinance income for the past five to seven years now have reduced profits as that market has dried up with higher interest rates. There is more and more competition from online mortgage lenders who have aggressive mixed media marketing campaigns. Mortgage giants Fannie Mae and Freddie Mac who are still in government conservatorship, have also jumped into the mortgage market by loosening their credit qualifications. The nation’s three major credit rating agencies will drop tax liens and civil judgments from buyers’ profiles if the information isn’t complete. If you’ve ever tried to correct your credit score as a result of an identity mix-up, you know how important that is. Both Freddie and Fannie will now allow income to debt ratios of 50 percent, up from the long-standing 45 percent. All this comes at a time when lenders are competing for borrowers and buyers are hesitant. These steps to spur home ownership are modest and are not like the stated income debacle that helped propel the real estate crash of 2008. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Alaska rental vacancies hit five-year high

According to the annual Alaska Rental Market Survey, vacancy rates crept up in 2017 to 5.08 percent in Anchorage, which is almost identical to the national average. Fairbanks, Kenai Peninsula Borough and Wrangell-Petersburg all have vacancy rates double Anchorage’s and have for the past several years. Valdez-Cordova and the Juneau Borough have the lowest vacancy rates with 4.55 percent and 5.68 percent respectively. According to one local property owner, Bethel has a vacancy factor of zero. Overall, the state vacancy rate stands at 7.33 percent, the highest it’s been in the past five years — the low being 5.8 percent in 2016. The 2017 survey, conducted by the Department of Labor, surveyed 16,550 units out of the approximately 92,000 housing units in the state. It’s a reliable survey of the rental market with one exception and that is it does not differentiate the vacancy and rental income between units built since 2000 when building codes and energy ratings began being upgraded and the majority of those built during the early 1980s housing boom. New multi-family units, whether subsidized or market, are few and far between, given the historic low of multi-family permits the past five years. In Anchorage, the handful of new multi-family units being built with five-star energy ratings and thus, lower utility costs, are renting for $1,500 to $1,600 per month, almost 30 percent more than the adjusted median rent of $1,200 per unit as reported in the survey. Increased utility costs add to the cost of housing either for the tenant or the property owner. In Anchorage, you can expect the reported 8 percent increase in natural gas rates to be absorbed by the property owner. Heat is paid by 73 percent of the property owners surveyed. The exception is the Fairbanks-North Star Borough where only 2.8 percent of units have natural gas. In Anchorage, water and refuse are paid by 49 percent of owners and sewer by 94 percent. This is typical of three- and four-story multi-family structures whereas duplex condos and single family rental units are usually separately metered, at least for heat, and electric and paid for by the tenant. On a statewide basis, only 20 percent of landlords pay for lights. Depending on the type of structure, snow removal is included by 80 percent of all surveyed units. The 20 percent exception most likely due to single family or duplex units. Similar to the report in the May issue of Alaska Trends, Alaska is showing a stability and resiliency in the rental market as well as the for sale housing market despite the stalemate of the Alaska Legislature over the state’s budget woes. ^ Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Breaking down myths about what homebuyers want

If homebuilders are wondering what type of housing they should build in 2017 and beyond, all they have to do is read the recently published book by the National Association of Home Builders. The 124 pages with 156 pages of addendums is a blueprint of home buyers’ wants and needs in all age groups and income categories. So let’s get started with breaking some myths. Despite planners’ and developers’ love of higher density, single-family homes remain the preferred choice for buyers of all incomes. Nearly 70 percent of moderate-income buyers like suburban communities. At least 70 percent of high-income buyers also like suburbs that are near trails, parks and retail space. In Anchorage that destination is southeast and southwest areas for new homes. Higher-income buyers prefer new over existing homes. They understand and are more readily able to pay the higher price per square foot for new so that they don’t have maintenance and repair expenses in the future. This is particularly true of the baby boomers who are reaching retirement age and looking for their final “destination” home. More moderate and lower income buyers are still seeking more square footage at a lower price. Here’s another myth: Lot size is not an issue for more than 20 percent of buyers, irrespective of income. That’s good news for Anchorage where single-family lot sizes are getting smaller and smaller due to high development costs. Whether it creates an attractive streetscape or not, larger homes on smaller lots are here to stay. Unless, of course, you can afford to move up to the hillside. Otherwise, developers need to work harder to control architectural details on the front elevation of homes and landscaping to make a cohesive and attractive small lot community. Moderate-income buyers do not care about the popular two-story elements seen in many new Alaskan homes. They’d prefer more square footage. As an alternative to the two-story great room or entry hall, buyers want 9-foot ceilings, even on the second floor. The powder room no longer exists in most new homes. Instead, it is replaced with a full bath on the main level. This is a preferred choice for both moderate- and high-income earners. Everyone talks about technology in the home. We have programmable refrigerators, fans, etc. But what are buyers willing to pay for? Moderate-income buyers want a wireless security system and a programmable thermostat like “Nest.” Technology pretty much stops there unless you are a high-end buyer. Finally, the dilemma faced by all homebuilders is size versus amenities. So, here is the answer: Most buyers prefer high quality amenities such as solid surface countertops. If new means smaller square footage, it needs to be accompanied by luxury finishes. Smart builders understand the differences between new and old and build accordingly. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

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. ^ Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Remarkable stability in Anchorage housing market

The first four months of this year have demonstrated a remarkable stability in the Anchorage housing market due to a continued lack of single-family inventory. The Multiple Listing Service tracks listing and sales data from thirteen geographical areas from Turnagain Arm to Peters Creek and each one has had a decline of single family homes for sale. Overall that decline measured 17 percent when compared to the same time in 2016. Days on the market were reduced by 23 percent and sales by 2 percent. When compared to the 17 percent inventory decline, the 2 percent reduction in sales is meaningless and shows that buyers are continuing to be active in the market. The average sales price remains steady at $360,000 but there is definitely some compromise in value with homes now selling at 98 percent of list price compared to 99 percent last year. But what these statistics don’t reveal is the buyer demands for home repairs due to our aging housing stock that is suffering from cosmetic and functional obsolescence. What you see on Houzz, Pinterest and HGTV is not what you’ll get in an Anchorage home that is 30 years old, even if it has been remodeled. Many of these demands stem from home inspectors who offer recommendations beyond health and safety requirements. These “recommendations” can cost sellers several thousand dollars if they want to continue with the purchase and sale contract. Buyers, in particular, millennials, who generally lack funds for closing costs, are also asking for seller paid closing costs up to $10,000. Repairs, seller paid closing costs and the 1 percent decline in sales vs. asking price indicates a softening of values but not lack of sales. Buyers are actively looking and buying but want concessions. These concessions are hidden costs to sellers and are not reflective in the market data. One of the slower times of year for real estate sales is between now and the middle of July. Buyers and sellers are busy with graduations, vacations, visiting family and friends, and enjoying the long summer days but the smart buyer will tear themselves away from all the sun filled outdoor activities and go home shopping. Mortgage interest rates bumped up an eighth of a percent last week and although it is anybody’s guess, I’m betting they will continue to creep up, which increases the cost of any home financed purchase. Builders are expecting a 15 percent to 20 percent increase in lumber prices as a result of the tariff put on the import of Canadian soft lumber. Local residential building activity remains at record low permits and is likely to continue at that snail’s pace through the end of the year. However, lack of inventory is still the determining factor in the stability of the local housing market. As of last week, Anchorage had 200 fewer single family homes for sale than a year ago at this same time. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: A step toward affordability in Anchorage

Working its way through the public process is a new land use concept that if passed by the Anchorage Assembly would allow for fee simple ownership of attached or detached homes on multi-family zoned land. Already vetted and passed by the Planning and Zoning Commission and the Platting Board, Assembly approval is the final step in what should help to bypass the cumbersome financing requirements for condos. This new form of multi-family development on fee simple land should reduce financing costs for buyers and carrying costs for builders as they wait for sales in order to qualify for Veterans’ Affairs and Federal Housing Administration financing approval. Both VA and FHA approvals require a certain number of sales before project approval can be granted. FHA and VA financing is the most affordable mortgage financing for first-time homebuyers because they require minimum down payments. Shepherded through the public approval process by Seth Anderson, a local mechanical engineer and advocate for small multi-family development, this new land use ordinance is a good first step in creating more new housing opportunities, particularly for infill development in Midtown and Downtown Anchorage. One concern and objection to the proposal harkens back to the 1980s zero lot line ordinance that was allowed to sunset in the late 1980s. At that time, most attached fee simple home communities had no covenants, codes and restrictions and even if they did no homeowners’ association to enforce them, which is why you can still see these buildings where one side is painted green and their attached neighbor blue or any color of the owner’s choice. As a result, these homes have not maintained their value as well as communities where there is some attention paid to landscaping and covenants. The proposed small unit lot ordinance takes care of this concern by requiring a homeowner’s association. It is, therefore, like many condo communities that will require a board of directors. HOA fees will be similar but less, depending on shared or non-shared expenses for utilities, roads, driveways and common areas. In essence, the ordinance decreases minimum lot sizes and side yard setbacks to allow for creative townhome developments. It also maintains the underlying zoning density but a developer is not required to maintain that density. Parking requirements need to be met but not necessarily on the lot being developed. I applaud the efforts put forward by the AEDC and other organizations and individuals who have spent countless pro bono hours to bring the Unit/Small Lot Subdivision ordinance to its final step for approval. The Anchorage Assembly and the mayor should wholeheartedly support this effort. What should come next is a small lot ordinance for fee simple single-family subdivisions. Current zoning requirements restrict the R1 zone to 6,000 square feet for a lot. Although that may seem small to some people, other innovative communities have allowed for a reduction in size to 4,000 square feet. If we truly want to create more affordable housing in Anchorage, that’s the next step. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Anchorage commercial permits up in 1Q

The Municipality of Anchorage has reported that the total value for all categories of building permits in the first quarter of 2017 has increased by $15.26 million when compared to the first quarter of 2016. This increase is directly related to commercial permits rather than residential permits, which remain at historic low levels. New commercial activity for the first quarter of this year includes a $27 million-plus permit for an ODOM Distribution Warehouse. Other permits include a veterinarian office/ER building at 2545 Tudor Road awarded to Watterson Construction; Hyatt Place Hotel at E. 101 Tudor Road for $16 million; $1.47 million for an office building in mid-town and Anchorage Wastewater Utility’s new waste water facility on Artillery Road in Eagle River. Several building/alteration permits also increased commercial activities. They included a $2.3 million Bristol Design Building Services permit for West 111 16th Avenue; a Cook Inlet Elder Housing permit for $1.32 million on Cook Inlet Housing Authority’s Muldoon campus and a First National Bank Alaska Midtown permit for $3.5 million. Davis Construction and Engineers has been awarded a contract for $2.5 million in the Providence Medical campus and the MOA has pulled a $7.4 million alteration permit at 8800 Bald Eagle for the Municipal Light and Power plant. Anchorage housing permits continue to dribble along at the bottom of the market with continued historic low numbers. For the first quarter of this year, only 27 single family permits were issued, just one more than last year. Only 12 duplex units were permitted — down two from last year. So far this year only one four-plex has been permitted. This lack of housing continues to be the sore spot in our local building industry. All commercial/residential/alteration and addition permit valuations do not include any land values. The permit value is the value estimated by the MOA to establish the cost of the permit and is also used to determine the tax assessed value. All builders and developers continue to grapple with the new Title 21 regulations and the increased permit values may be due in part to these new regulations. ^ Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Taking the mystery out of price per square foot

A couple of years ago, the Alaska Multiple Listing Service inserted a field in its standard listing form identifying the price per square foot for every residential listing both new and pre-owned. As a result, virtually all buyers begin their search by asking “What is the square footage price of the home?” Unfortunately, price per square foot is not a very accurate way to evaluate a potential home purchase. And it is particularly problematic when it comes to evaluating a potential new home to be built. As an example, let’s compare some of the differences in cost between a brand new 2,000-square foot homes by competing builders. First, lets look at location. What is the difference in value and cost between a 6,000-square foot lot and an acre home site? How about well and septic systems on that acre lot versus public water and sewer that is already calculated in the price of the lot? Then, lets look at topography and soils conditions. Does the lot need gravel import and if so, how much? Will the septic system be for a three-bedroom home with a den or a four bedroom? What about the length of the driveway? The minimum driveway setback in Anchorage is 20 feet but a pie-shape lot requires the home to be set back farther, which adds cost for fill and asphalt. Some decks are only 4x8 but even a small deck requires hand rails if it is more than 30 inches off the ground. A larger deck plus stairs and handrails can add more than $10,000 to the cost of a new home without adding square footage. Some garages are only 20 x 20 and are not even large enough to fit a full size pick-up. Others may be 22x 24 but both are classified as a double car garage in MLS. Landscaping in Alaska is expensive. Some new home communities are required by their Municipality of Anchorage approval to top soil and hydro seed the entire lot. Others have specific requirements such as the type and height of trees and shrubs. Obviously, landscaping required by the builder adds to the quoted square footage cost of the home. Leaving it up to the first homeowner to put in reduces the cost per square footage but adds to the buyer’s out of pocket expense after the sale. Requirements for lap siding on all four sides rather than just the front of the dwelling also increases the quoted cost per square foot. Builders have different strategies when it comes to quoting a square footage price. Allowances for appliances, lighting, cabinets, flooring, etc., may be lower to initially attract buyers, but by the time all the selections are made the price per square foot may be as high or higher than the competitor. Two-story elements, whether in the foyer or great room, add to the cost of the home without adding to the square footage. All that’s missing in a two-story element is a floor. Ceiling height is another hidden cost. Most new homes now have nine-foot ceilings in the main living level. However, eight-foot ceilings on the second floor and basements are still standard. Count the number of windows included in any plan and you can increase or decrease the cost by $300 to $500 per window depending on their size. We’re probably never going to change the question “What’s the price per square foot?” for either resale or new homes. What buyers and real estate professionals need to do is take the time to understand the differences of each individual property before a final home buying decision is made. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Tug-of-war between builders and subs produces price pressure

Alaska requires homebuilders to have a general contractor’s license plus a residential endorsement. They are also required to be licensed, bonded and insured. However, a new homebuyer isn’t likely to find one of them wearing a carpenter’s belt and working on the job site. According a study by the National Association of Home Builders, it takes 22 subcontractors to build the average home. Those particular jobs include carpet installation, HVAC, electrical wiring, plumbing, technology (Cat 5 wiring, etc.), foundations, drywall, masonry work, concrete flatwork, roofing, kitchen countertops, ceramic tiles, insulation, painting and sheetrock, kitchen cabinets, exterior doors and windows, framing. exterior siding and finished carpentry. Additional subcontractors may also include security system providers, landscapers and fencing subcontractors. Alaskan homebuilders do not generally like to include landscaping and fences in the price of a new home due to the required one-year warranty on new homes. So what role does the homebuilder play if the subcontractors build 70 percent to 77 percent of the home? Generally speaking, they’re the risk takers and managers. Whether they are a lone homebuilder with a pick-up truck and a cell phone or an organization with managers, accountants, estimators, receptionists, field superintendents, et cetera, they assume the financial risk for one house or 100. The homebuilder decides when, where and what to build. They take the risk that the house being built will fulfill a homebuyer’s dream. In most cases, they must personally sign and guarantee any indebtedness to the lending institution for their commercial line of credit. They invest capital, either upfront or on the backend, to build and complete the home because lenders require equity injections. They buy builder’s risk insurance during construction and guarantee title when the home transfers to the buyer. All this adds up to the cost of the new home along with the builder’s potential profit. When I ask real estate professionals what they think a builder’s profit margin is most will say 20 percent. In reality, that profit margin is more like 6 percent to 7 percent according to national reports and may be even less in Alaska where every item of a new home must be imported from the Lower 48. As an example of how a new home with all its imported parts actually gets priced out and completed, let’s follow the trail of a fancy kitchen faucet. In Alaska, we have plumbing wholesalers with show rooms where a buyer shops for fixtures. However, the wholesaler will not give you a price for the faucet. Imagine the frustration when shopping for a new pair of shoes without a price tag! Instead, the wholesaler gives a price to the plumber selected for the job by the homebuilder and the plumber in turn gives his price to the homebuilder who turns around and gives the final price to the homebuyer. Along the way, the wholesaler has his import mark-up, the plumber has his mark-up and the homebuilder is left to explain to his buyer why that faucet costs so much more than the one he/she can buy from Amazon Prime or Lowe’s. All these third party transactions leaves a buyer confused and upset and leaves the builder no choice but to waive any final mark-up for overhead and profit. Subcontractors are in short supply in Alaska and their mark-ups reflect that lack of competition. Ultimately, however, they may find themselves at odds with their customers (builders) and be forced to reconcile their pricing structure more in keeping with today’s economic climate. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Time may have come for more mixed-use in Anchorage

In Anchorage, we’re hearing more and more about the opportunities for mixed-use developments but what exactly does it mean for consumers and taxpayers? According to a recent report published by the Building Owners Managers Association, or BOMA, mixed use is defined as “a real estate project with a planned integration of some combination of retail, office, residential, hotel, recreation or other functions. It is pedestrian-oriented and contains the elements of a live-work-play environment. It maximizes space usage, has amenities and architectural expression and tends to mitigate traffic and sprawl.” Anchorage has seen elements of these concepts in a handful of developments, dating back to the Petersen Towers, which to my memory is one of the first mixed-use buildings in Anchorage, and where I once owned a condominium. To my knowledge, Petersen Towers was a privately-financed development but in today’s world a mixed-use project may need state and local real estate tax credits and funding may need to come from both private and institutional investors. Live-work-play sounds like a carefree environment but, in most cases, it is not without taxpayer subsidies. In its simplest form, mixed-use has a single building ownership. A good example is first floor retail with three or four stories of rental housing above — all owned by the same entity. Mixed-use gets complicated when there is a variety of uses and ownerships. That type of structure may require easements that allow one party to lawfully use the land of another which may include drainage, utility, ingress, egress, elevators, foundations and structure of one section of the project to other sections, according to the BOMA report. After development issues, segregating common area maintenance and expenses is probably one of the most challenging aspects of mixed-use. How much should each individual owner pay for janitorial, snow plowing and removal, and utility costs to identify just a few. It becomes particularly difficult when residences, offices, retail are all residing in the same structure. Medical condos are fast growing developments but even the medical sub-specialties should require different allocation of expenses. When a retail condo “marries” into a building of subsidized rental apartments how is the common exterior light bill pro-rated? And will that pro-ration affect the mortgage cost and interest rate of the condo owner? Anchorage’s lack of land and its high cost to develop due to wetlands, poor soils and drainage issues, to name a few of the issues facing both residential and commercial developers, makes mixed-use appear attractive. Unfortunately, any redevelopment usually costs more on a price per square foot than new. There is always the tear down cost, the issue of asbestos and whether or not the existing utilities are the right sized pipe. Like any “mix-up,” it is always complicated. But I can’t help but wonder if there are enough Anchorage residents who want to go home on an elevator when it comes to the residential portion of mixed use. It wasn’t my idea of home but with Anchorage’s housing shortage that may be a change whose time has arrived. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Evaluating Anchorage property tax assessments

Every year on Jan. 15, the Municipality of Anchorage is required to mail assessment notices to property owners for all taxable property. That date begins a 30-day appeal period. Feb. 29 is the last day to submit evidence for appeals and during mid-March to June, the Board of Equalization, consisting of private citizens, hears the appeals. Very few property owners actually file a formal appeal and most minor appeals are handled at the counter, which is efficient and friendly, given all the circumstances. What is perhaps most important is how the valuation occurs in the first place. The MOA is required to physically inspect every property at least once every six years, which becomes a year round re-inspection process for the staff. September through December is when they do new construction inspections and valuations. An interesting anecdote is that some land developers actually wait to file plats for completed subdivisions until after the first of the year in order to pay taxes on undeveloped land instead of fully improved lots. Sixty-five percent of the property tax base is residential. Twenty-seven percent is commercial and eight percent is personal property. The geographical area taxed includes south of Portage, north to Eklutna, the Anchorage Bowl and parts of Cook Inlet and Turnagain Arm. Within that jurisdiction, the commercial definition includes four-plexes, hotels, apartments, retail, industrial and office. Although there is no actual data on what type of properties receive the most appeals, either informally or through the appeal process, one can surmise that higher dollar properties, like commercial, would be most likely to make a formal appeal. What you might be surprised to know is that there are mandatory exemptions from property taxes required by federal and state governments. Those exemptions include cemetery, charitable, educational, hospital, religious, disabled veterans, senior citizens, housing authorities, Native claim, veteran organizations and fire protection systems. Optional exemptions enacted at local levels may include business personal property, disabled veterans, widow/widower of active military service connected death, charter schools, community purpose, economic development and residential owner occupants. The most controversial, however, is a tax-free abatement on deteriorated properties. Why a property that is an eyesore to the community should pay no property tax is a mystery most likely to everyone except a few politicians who approved the tax-free status. Senior citizens have 24 percent of the total exemptions followed by the municipality with 19 percent. Residential has 12 percent and the state and federal has a total of 15 percent. Just keep in mind that any new state, federal or MOA building does not contribute to the tax base and in some cases takes away current tax revenue when previously taxed land or buildings are put to a new tax-free use. Most real estate professionals have acknowledged that the 2016 market was flat, at best, with small pockets of de-valuation in certain categories. Hopefully, the MOA tax assessor’s office views the market the same way with no increase in property taxes. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

INSIDE REAL ESTATE: Past is not always the future in home sales

A fourth quarter surge in activity brought 2016 within field goal range of 2015 home sales. Year-end sales for Anchorage came in just shy of 3,000, down only 58 sales from 2015. The late fall mortgage rate jump up to 4.325 percent for a 30-year fixed loan jolted both buyers and sellers into making buying and selling decisions even though the rate increase had been long expected. The year ended down only 2 percent in sales volume and, according to MLS, sale prices on average held at $366,000 for a single family home. But the big question is what will 2017 look like with almost daily headlines of job losses? Are we headed for a real estate recession like 2008? The answer is not hardly and the reason is lack of inventory. Take a look at the chart comparing inventory and sales in 2016 to 2008, the year we saw the real estate recession hit. In 2016, Anchorage had 15.67 percent less inventory than it had in 2008 while at the same time, we had 17.69 percent more sales. Even during the last recession between 2008 and 2011, Anchorage home prices fell only an average of 1.85 percent. Since then, they have increased 13.28 percent. Even with a decline of 2 percent to 3 percent in sales in 2017 and a similar modest increase in resale properties, we’re nowhere near the real estate recession numbers of 2008. Although I have bemoaned the lack of new home inventory over the past four years due to local overregulation, it has successfully kept inventory low. Real estate bubbles are generated in most part by overbuilding which hasn’t happened in several building cycles in Anchorage. My advice to both buyers and sellers is to take action the first quarter of 2017. Anticipated statewide job losses and how the newly elected President’s decisions affect the national economy will make for some uncertainty the remainder of the year. However, what will keep at least Anchorage’s home market stable is continued lack of inventory, despite any surprises that come our way — either positive or negative. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]  

INSIDE REAL ESTATE: Adding up the costs vs. the value of a home remodel

According to the cost vs. value report published by Hanley Wood LLC, in 2014, mid-range remodeling projects vary greatly when comparing actual job cost to resale value. One project where owners can expect a 100 percent return, particularly in Alaska’s cold climate, is the addition of a garage. That job cost is estimated at $55,120 and has a resale value of $57,500 that, interestingly enough, is significantly more than an appraisal gives for a garage. Other remodeling projects which come close to recouping their job cost, according to the report available online at www.costvsvalue.com, include an attic bedroom remodel, basement remodel, bathroom addition and wood deck additions. Costs recouped tend to best occur when useable square footage is added or completed, such as finishing a basement or attic. However, the kitchen remodel, which is ever so popular as it is the heart of every home, does not recoup job cost. A major kitchen remodel, including cabinets, countertops, lighting and flooring, has an estimated cost of $62,069 while only increasing the resale value by $20,000 or returning only 32.2 percent of its job cost. Minor kitchen remodel at $21,398 only increases resale value by $5,000 or 23.4 percent. Upscale remodeling has even less return on all jobs. That’s when personal preference takes over and owners order Italian marble, Miele appliances. custom wall paint with multiple applications and made to order light fixtures. It’s hard to say “no” to that $500 kitchen faucet but just don’t think you will receive any value for it when it’s time to sell. Although considered part of remodeling, window, roof, garage door replacement are really maintenance issues and have less than 50 percent return on job cost.   So why do remodeling costs not return dollar-for-dollar value? Demolition and inconvenience can add 20 to 25 percent to the cost of any job. The tear out or tear down has labor and permitting costs. Plus, there is the unknown and unexpected as to what’s behind that sheetrock. Frequently, plumbing and electrical have to be moved which requires the hiring and coordination with subcontractors. Most owners continue to live in their home while being remodeled which frequently creates confusion and delays over scheduling. A day lost is also a day’s worth of costs. Licensed, bonded and insured remodelers have the same overhead and administrative costs as homebuilders with a residential endorsement. By state law, subcontractors are only allowed to work in their licensed field. They should not be used as a general contractor. Nor should your friendly handyman be used for any significant remodeling. Remodeling a home versus buying new is a personal lifestyle choice. Most homeowners simply pay cash for any remodeling whether it’s $18,000 for a midrange bathroom redo or a quarter middle for an upscale master suite addition. Just don’t think you will recoup those dollars when it comes time to sell. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]  

Interest rate jump wakes up Anchorage homebuyers

This month’s mortgage interest rate jump up to 4.125 percent has sent buyers scampering to find a new home. The week before Thanksgiving, 45 homes pended in Anchorage compared to 27 in 2015. That trend continued into Thanksgiving week when six additional sales were reported compared to 2015. These sales occurred in all price ranges but particularly noteworthy were five new sales between $650,000 to $750,000. Mortgage rates have hovered in the mid-3 percent range for so long that buyers have taken them for granted, but not anymore. On a $400,000 mortgage, the rate increase amounts to $170.21 per month. Plus, a buyer needs to have approximately $680 in additional monthly income to qualify for the same mortgage. Rate increases are projected to continue in December and into 2017 as the economy adjusts to inflation and price increases for materials, goods and services.  It’s a dual dilemma for buyers: less home for the money and a higher mortgage payment. Millennial first-time homebuyers, in particular, are going to be impacted by these increases. Already frustrated because of unrealistic expectations, they may opt out of the market and rent, even though rental rate increases are bound to occur.  The second big bulge of buyers in the market are the boomers who may opt to just stay put in their aging home, particularly if they were smart and refinanced at the 3-plus percent mortgage rate. Already challenged by the price per square foot for new construction, more and more will opt to simply remodel. It is always hard to identify the bottom of any market. Usually, when it occurs we acknowledge it only in past tense. In Anchorage, I believe that bottom has just passed us by. Last week’s active inventory was only 575 homes. New construction building permits continue at historic lows. Only 175 single-family building permits were issued for the first 10 months of this year.  Only eight Anchorage builders were issued permits for more than five single-family homes. Despite the concerns over the state’s economy, buyers are motivated by personal housing needs related to marriage, birth, death, divorce and job change. The job loss we experienced in 2016 resulted in some good relocation buys in suburban areas of Anchorage that were readily absorbed into our market. If you’ve been waiting to buy a home, now is the time.  Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Homeowners’ associations can add value to community

Homeowners’ associations, or HOA, are a necessity in today’s world of residential development. Whether it’s a condominium or single family development, any new community that has a common area, including signage easements, greenbelts, perimeter fencing, is subject to the uniform Common Interest Ownership Act requiring a public offering statement be given to each and every buyer. And every common ownership community must have an association that consists of a board of directors which oversees the enforcement of the covenants, codes and restrictions for the community. Without an association there is no opportunity for enforcement of the CCRs. The Municipality of Anchorage code enforcement division does not enforce the HOA rules and regulations, only MOA requirements such as air or water pollution, fences and signs that violate sight distances, junk vehicles, land use and zoning, noise and unsafe buildings.         Required by state law, the minimum number of board members in an association is three and there is no maximum on members. Their powers are extensive, including the ability to adopt and amend bylaws’ rules and regulations and establish fines for those homeowners who are not compliant with the regulations. Most associations create a fine policy with several levels of infractions. Long-term violations such as landscaping, improper fencing, decks that are not immediately correctable are given a longer period of time to comply, normally 30 days. Short-term violations such as materials stored in the front yard, improper placement of a satellite dish, sheds built without approval are given seven days to correct, depending on the association. Repeated violations, such as a boat parked long term in the driveway during the summer, would have an automatic fine assessed to the homeowner.  The state law requires a notice and hearing prior to a fine being assessed to a homeowner’s account and the amount would appear on their quarterly or monthly dues statement. Many homeowners are unaware of their rights to a hearing and so it is important for the homeowner to request a hearing in writing to the board. If the board assesses a fine after the hearing and the homeowner does not pay, the board has the right to lien the property, which would make the amount due and payable upon any sale. Only the board can lien a property. An adjacent property owner, regardless of how egregious the circumstances, does not have the right to lien a neighbor’s property. An active HOA can add value to a community by keeping common area landscaping well maintained and junk cars, et cetera, out of eye sight. However, a fractious, overly aggressive HOA can likewise deter prospective buyers from purchasing in the community. Fair and balanced is the best course of action. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Latest data shows continuing decline in new construction

The Municipality of Anchorage recently released its building permit summary through September 2016. As expected, it showed a continual slide in the construction of new housing units whether multi-family, duplex or single family. At the same time, according to the report, cost per unit has increased, an indication that new housing units are feeling the impact of the implementation of the new Title 21 regulations. What is also interesting is the increase in both residential and commercial alterations. This increase is 25.65 percent greater for residential and 12.94 percent greater for commercial than for the same time last year, indicating that commercial tenants and home owners alike are not inclined to make an expensive move. Given the recent cold snap and the shut down of paving plants, not much is anticipated for new starts for the fourth quarter. Nor can we expect many new starts in the first quarter of 2017. According to the statewide Multiple Listing Service, housing inventory is tightening up in Anchorage while at the same time, we’re seeing relocation buyers coming into the market. It’s going to be a frustrating next six months. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Buyers are hesitant and inventory is up

The 2016 Anchorage residential market could best be described as having had a minor fender bender, not the fatal crash so many naysayers predicted for the housing market. Thousands of owners have not turned in their keys to the bank like they did in the 1980s. In fact, Alaska continues to rank in the bottom three states for foreclosures. Values have remained constant with minor pockets of decline due to aging housing stock and in some geographical areas. Transportation and the medical field continue to bring new residents to Anchorage. The military and oil industry continue with their in-and-out migration. There are, however, some minor dents in the market. Homes that are 30 years old and in need of maintenance and remodeling are not appreciating and in some instances, depreciating in value from their original purchase price from five or 10 years ago. Two of Anchorage’s most expensive areas, downtown Anchorage and DeArmoun/Potter Marsh, have seen a modest decline in average sales price while the rest of the market has remained flat with virtually no appreciation in the average sales price of $362,000 from a year ago. Areawide average days on the market has increased by only a modest 6 percent. But, what has increased is inventory. Buyers have a much wider selection than they did at the beginning of the year. September had 999 active listings compared to 569 in January. While some of this increased inventory is seasonal, this September had the highest inventory of for sale properties since 2011 while at the same time sales dipped to 275 from the previous month’s 325. More inventory doesn’t mean more buyers. Quite the contrary. There is definitely emerging a hesitancy in the market place. Buyers appear to be distracted whether by the somewhat electrifying presidential election or the state and local concerns over the economy. For whatever the reasons, buyers are taking their time in making a decision. But, as inventory begins to fall which it does every winter and the long anticipated Fed increase rate occurs in December, buyers will begin to feel the pinch.  Current 30-year fixed rate mortgages are at 3.5 percent. We’ve heard the threat of a rate increase for the past two years but this time, whoever wins the White House, it is almost a certainty. Motivated buyers would be wise to take advantage of the wider selection and current mortgage rate before more change occurs. Buyers looking for a new home are going to continue to be frustrated by a lack of finished inventory. New home starts remain at historic low levels while at the same time prices continue to increase. Winter construction costs for heating and tenting will exacerbate the price disconnect between new and resale even more. Now is not the time for buyer hesitancy if you’re in need of a home. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Why 'new' costs so much

Robert Dietz, the National Association of Home Builders’ chief economist, in a speech to Anchorage’s real estate industry this month, predicted a mortgage rate hike to 4.1 percent in 2017 and 4.9 percent by 2018 compared to our current rate of 3.5 percent for conventional financing. Dietz’s presentation also addressed the constraints on building growth as witnessed in Anchorage that continues to face historic lows for single family permits. He called them the “three L’s.” The first is a labor shortage for tradesmen which has had a long decline and currently has a labor force participation rate of only 63 percent due in part to the aging labor force for construction. Alaska’s median age in construction jobs is 39 to 40 and any homeowner looking for repairs can attest to a lack of trade people. The second “L” is a very low inventory of lots which continues to plague the housing industry on a national basis as well as locally. Lot size is declining while lot value is increasing. Nationally, the average single family lot size is 8,589 square feet. In comparison, the Municipality of Anchorage zoned R1 single family lot size is 6,000 square feet and there is continued discussion about a small lot ordinance which would lower that size due to our lack of available land for residential development. Dietz’s third “L” is lending: the lack of “AD&C” access which stand for acquisition, development (of roads, water, sewer) and construction (vertical home building). Despite low interest rates and pent-up demand for housing, many lenders remember the trauma of the 2008 real estate recession and are hesitant to participate in AD&C lending which is considered the highest risk for timely performance. Regulatory burdens are rising for home builders and have increased 29.8 percent over the last five years, as our local builders can testify with the enactment of the new title 21 and annual changes to the Design Criteria Manual. That increase includes building codes, environmental issues (SWPPP), wetland permitting, labor and zoning. National Association of Home Builders research finds that 24 percent of the final cost of a new home is due to direct and indirect regulatory costs. Three-fifths of that total is associated with land use. If a new home has an average cost of $400,000 that means almost $100,000 of that purchase price is due to over regulation. Of that $100,000, almost $60,000 is from the land development burden, including the cost of interest due to approval delays. So, it is no wonder that our lots are getting smaller and more expensive as the disconnect between “new” and “pre-owned” continues to widen. Nationally, the gap between the new and existing homes since 2012 is now $72,100 compared to just $20,000 between 1990 and 2008. No wonder new homebuyers are faced with sticker shock. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Are home inspectors overreaching their regulatory authority?

Selling a home is a four step negotiating process. Step one is deciding the asking price in consultation with your realtor. Step two is negotiating the price and terms of any offer that you receive. Step three is negotiating the recommended list of repair items from a home inspection report. Step four is any change in the final sales price as a result of the appraisal coming in less than the agreed upon sales price. Step three is the sticky part where the buyer, seller and realtors often disagree with what needs to be done as a result of the home inspector’s recommendations. This is a growing issue in our local industry due to Anchorage’s aging housing stock. Buyers want everything fixed or replaced that is identified in the report, often times requesting beyond the health and safety items to include cosmetic and maintenance items. Sellers, on the other hand, see no need for most if any of the items called out on the report because they have lived comfortably in the home during their ownership. Thus, the home inspector report becomes almost the defining negotiating document in any transaction and becomes as important as a buyer’s credit score or an appraiser’s value. So who are these home inspectors and what are their qualifications? There are 72 licensed home inspectors in the state of Alaska; 22 are in Anchorage. Home inspectors must pass significant national exams in order to become licensed in Alaska. They are also required to be bonded and insured by the state of Alaska, according to the Statute and Regulations for Home Inspectors published in January 2015. So what does the license allow them to do? It allows them to do a “visual” inspection of an existing or new residence of the heating and air-conditioning systems; plumbing and electrical system; built-in appliances such as stove, hood, dishwashers; roof, attic and visual insulation; walls, ceilings, doors, windows and floors; foundation and basement; visible exterior and interior structures; drainage to and from the residence; and other systems and components as specified by the department of commerce. They must physically inspect the property and write a report. The statute does not authorize them to address general maintenance issues, lawn care, stained or frayed carpet or any other interior/exterior cosmetic items and should not be noted in the report. That responsibility falls to the appraiser to address the general condition of a home. It is in everyone’s best interest to sell a home with all health and safety issues clearly identified and repaired prior to closing. Home inspectors should be careful, however, not to extend their comments to items of general maintenance or address items of cosmetic discretion or preference. And first time home buyers need to remember that they might very well be purchasing a home that is older than they are and may need to lower their expectations for a like new home. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]  

Residential building permits continue lagging in Anchorage

Despite all the organizations, committees and public discourse dedicated to Anchorage’s need for more and affordable housing, the Municipality of Anchorage continues to have historically low residential building permits. For the first half of 2016, Anchorage had only 106 single family permits, a 40 percent decline from 2015 and the lowest permit numbers in more than six years. Duplexes fared little better with 30 units (a 30 percent decline) and multi-family had the lowest number of units permitted in the last five years with 54 permits, compared to 220 year-to-date in 2015. To call this a housing crisis is an understatement despite our loss of 1,200 residents to the Lower 48 or the Valley. Anchorage remains in dire need of housing. Talk is not really cheap when organizations, whether private, public or non-profit, dedicate time and human resources in an attempt to solving the problem but the time has come to produce solutions and actions. Certainly, the implementation of the new Title 21 slowed permits for the first half of this year but the six-year average for single family home permits is still only 148 — a dismal showing for a population hovering on 300,000. Title 21 has not only slowed permit activity as builders grappled to meet new standards but it also made new homes more expensive with the average per square foot cost now more than $200, including lot and garage areas. With mortgage interest at rock bottom rates, and the Feds hinting at a rate increase after the presidential election, Anchorage has missed an important opportunity to meet its housing needs for its citizens. There are solutions to our housing crisis but they require action by elected officials. Number one is a small lot single family ordinance which will lower the cost of the home. Right now, smaller building sites are only allowed in the cluster housing ordinance which requires usable open space or single family condos on one tract which delays and adds to the cost of financing with condo dues. The tiny house vs. the McMansion is getting a lot of publicity from New York City to Wasilla. Anchorage’s old Nunaka Valley is an excellent example of what an 800-square foot home with two beds and a bath on a small lot could be but those homes are decades old. An Anchorage ordinance that allowed for the sharing in the cost of private road development by the MOA was abandoned during the real estate recession of the late 1980s. It’s still on the books and with the will of the assembly and the mayor’s office, this road sharing cost could alleviate some of the prohibitive cost to private developers and open up new areas for homes. This ordinance would be the equivalent of the “improvement of public space” reimbursement of $500,000 recently announced to a commercial developer for a warehouse/storage facility for beverages. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]    

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