Much of Alaska’s residential real estate market is characterized by low inventory and climbing prices, but the market could see slackening demand if interest rates increase, industry officials report.Last year falling interest rates helped spur brisk sales, and some residential brokers expect a strong market to continue in 2002 although interest rates still remain a factor."I think you may see the market flatten out as interest rates go up," said Don McKenzie, associate broker with RE/MAX Properties Inc.The real estate industry looks strong overall, including commercial and residential sectors, said McKenzie, who is president of the Alaska Association of Realtors Inc."What really helped everything was interest rates," he said.Currently, the Anchorage market favors home sellers, with sale prices increasing and limited choices for buyers."We’re still very short of inventory in all price ranges especially entry level," McKenzie said.High demand affects prices, industry officials said."We have more buyers in the market than sellers," said Ron Pollock, associate broker at Prudential Jack White Real Estate in Anchorage. "We have more demand than we have supply. As a result I expect prices to increase during the next few months until the supply and demand balance out a bit."Pollock also notes other trends in the market. One issue is climbing costs of land which in turn affects builders’ prices, despite the public’s need for affordable housing, he noted."The only solution is for smaller lots and higher density concepts," he said.Last year condominium sales rose, a trend Pollock expects will continue in 2002.In the Municipality of Anchorage, home listings and sales activity in early 2002 showed some declines compared with last year.For February the area had 516 active residential listings, down from 699 recorded in February 2001, according to statistics from Multiple Listing Service Inc.Anchorage area active condo listings climbed to 366 so far in 2002, ahead of 292 condos listed a year ago.Total home sales for 2002 also lagged behind last year’s figures. In the municipality, MLS listed 350 residential sales for the first two months, a decline from 395 reported for the same period in 2001.The average time on the market has slimmed down so far this year. Average market time to date in 2002 is 58 days compared with an average of 69 days for the same period last year, according to MLS reports.This year’s average list prices have posted gains from 2001. For the first two months of 2002 the average list price is $212,795, an increase from $197,747 recorded for January and February last year, MLS statistics showed.Average sale prices also increased, to $209,189 in 2002 from $191,196 in the first two months of 2001.One factor affecting the Anchorage market is the role of the neighboring Matanuska-Susitna area, which has more available land and new construction, McKenzie said.MLS reports 867 active land listings in the Matanuska-Susitna area in February, up from 614 land listings last year, compared with 397 land listings in the Municipality of Anchorage, down from 627 last year.Residential properties sold this year in the Matanuska-Susitna area dropped to 35 from 47 sold in early 2001, MLS reported.The average Matanuska-Susitna area list price to date is $146,234, up from $133,642 recorded a year ago. The average sale price for residential properties in that area is $140,820, a increase from 126,072 listed in 2001.Some buyers are choosing to renovate Anchorage homes instead of commuting to Palmer and Wasilla, McKenzie said."The fixer-upper market is strong," he said.The Municipality of Anchorage has issued 42 residential renovation permits in 2002, a decline from 53 issued for the first two months of 2001. The city has issued 132 permits for new single-family home construction, up from 125 for the same period last year.New home construction should play a part in this year’s residential market, McKenzie said.MLS reported 136 active listings in February for current and recently completed residential construction, compared to 103 active listings last February. The average price for these new construction listings is $297,830, compared with $241,289 in February 2001.Another 122 active listings remain to be built this year, a drop from 184 to-be-built active listings recorded in February 2001.MLS recorded 79 total new construction listings sold in 2002, down from 95 for the first two months of 2001.In Fairbanks the residential market should hold steady this year, according to one real estate representative."Last year was huge," said Jim Chumbley, broker and owner of Northern Homes and Land of Fairbanks. "This year seems to be shaping up to be just as active."Inventory is limited in the Interior city, and homes in good shape sell quickly, said Chumbley, who is president of the Greater Fairbanks Board of Realtors.Interest rates and a growing Fairbanks economy probably contribute to the strong residential real estate market, he said.In Anchorage continued population and job growth should spur an active market through 2002, Pollock said. Interest rates, despite recent increases, are still favorable, he said.RE/MAX’s McKenzie is optimistic about the remainder of the 2002 residential real estate market."I expect the market to stay very strong for the rest of the year," he said.