Residential construction recovering after 2009 downturn
Home-building is recovering, albeit slightly, after a downward turn following the 2008 economic crisis.
Residential construction was booming at a rate of about 3,000 single-family homes per year prior to 2005, according to the Alaska Department of Labor and Workforce Development, but the number of new state residents declined by 60 percent by 2009.
That decline reversed after reaching the low point in 2009, and as residential construction picks up, it’s naturally concentrated in Alaska’s two major housing markets: Anchorage and the Matanuska-Susitna Borough.
“Things have certainly slowed down but we’ve stabilized,” said Alaska Department of Labor and Workforce Development Economist Caroline Schultz.
Mat-Su experienced a population growth of more than 59,000 since 2000, according to 2010 U.S. Census data.
This led to more homes being built, and the average home price went up to match.
The Labor Department reports that by 2005, 46 percent of new homes were built in Mat-Su even though it held only 11.2 percent of the state’s population.
Schultz said this was mostly due to more residents living in Mat-Su who work in Anchorage, a continuing trend that looks to have staying power.
Mat-Su also had more than twice the average loan amounts for new construction than the state average, according to the Alaska Housing Finance Corp.
Although the Mat-Su Borough’s new construction still leads the state, new home numbers remain below the peak years.
The borough reports that there were 631 new homes in 2011 compared to 937 homes in 2007. Mat-Su Public Affairs Director Patty Sullivan said that although the number of new homes slowed, it was still growing at a time when many places in the Lower 48 were wracked by foreclosures and collapsing prices.
Unlike Mat-Su, the majority of new residential construction in Anchorage is in the multi-family sector.
The Labor Department reports that less than half of residential construction in Anchorage was for single-family units as opposed to more than 80 percent in the Mat-Su Borough between 2000 and 2010.
Schultz said Anchorage’s decline could partially tie in to the Mat-Su Valley’s boom because more people may be living there. Mat-Su also has more land availability.
Vicki Portwood, executive officer for the Anchorage Home Builders Association and the Alaska State Home Building Association, said Anchorage had been pretty flat in terms of permits but things are trending upward this year.
Portwood said one reason new homes declined after the economic downturn was because even though Alaska wasn’t hit as hard as other places, the worry was still there and customers would look but not buy.
Portwood said things still look good for the rest of the year. She said people are starting to invest more in homes because the economy looks stable enough to spend money and that Alaska is a very credit-worthy state.
“We feel folks have decided to not sit on their money,” she said.
Anchorage permit applications for housing are slowly rising. Permit applications took a sharp dive in 2006 with 525 single-family homes, 72 duplexes and 59 multi-family units.
The previous year had 673, 188 and 89 applications, respectively, for single-family, duplex and multi-family units.
After the economic downturn, applications increased slightly in 2010, and new multi-family units in Anchorage helped build the average sales price for new construction of all building types by 27 percent in the second half of 2011.
As home-building dropped after 2005, construction employment went down by 2,500 jobs. The Labor Department states this was the biggest decline in construction employment since the recession in the mid-1980s.
“Overall, building activity has been declining over the past few years and sales prices statewide have been nominally stable but declining once adjusted for inflation,” Schultz said. “Building activity has likely already bottomed out, however, and I imagine it will slowly pick up as long as Alaska’s economy keeps doing well.”
Portwood said the market looks good while builders and subcontractors report that they’re busy.
“We’re really psyched about this year,” she said.
Last year ended with 233 new home permits and 925 remodeling permits. This was a smaller number of both permits than in 2010.
“We were very concerned in 2012 if we would see same numbers and we’re happy to say they’re up,” Portwood said.
Mat-Su had 667 single-family units and 35 multiple-family units.
The Alaska Housing Finance Corp. reports that loan volume on new construction statewide fell $15 million, or 11 percent, in the second half of 2011.
Building permits can be difficult to quantify in several parts of the state where such permits aren’t required. Portwood said new phone hookups were once used to gauge such areas but that has become unreliable as more homes opt for strictly cell phones.