Tight Anchorage housing market will absorb job losses
Although the need for housing creates jobs in finance and construction, real estate is a reactive industry. We live and work within the market. We do not create or control it.
Last week the 30-year fixed-rate mortgage unexpectedly dropped to 3.85 percent. This week, every eligible Alaskan will receive a record-breaking Permanent Fund dividend check of $2,072.
For a family of four that’s over $8,200 — enough for a down payment and closing costs on a $300,000 home with a Veterans Administration loan. For a Federal Housing Administration loan, with a minimum of 3.5 percent down, the $8,000 will pay all but $400 of the down payment on a purchase price of $240,000 which is more than the Anchorage MLS average sales price of $211,000 for a condo.
Now, Shell has announced they are pulling out of Alaska after spending $7 billion trying to drill for oil in the Arctic. Suddenly, the press and everyone else is worried about our housing market. And there’s fear of a real estate recession like the late 1980s when homeowners began leaving their keys on lenders’ desks.
So, let’s take a deep breath and look at where we are today vs. the 1980s or even the mini-recession in Alaska of 2008. In October 1986, mortgage interest rates were 10.04 percent.
That’s more than twice what they are today and the real cost of a home is not the purchase price but the amount of monthly interest payments over the lifetime of the loan. In 2008, the mortgage rate was 6.2 percent. If there is one thing the federal government is doing right, it’s keeping interest rates low as an economic stimulus.
In 1984, the Municipality of Anchorage issued 6,000 residential building permits, more than the city of Phoenix. Commercial lenders learned their lesson from that excess lending and building boom. This year we’ll have less than 300 single family permits. According to the MOA’s housing study, Anchorage needs 900+ new housing units per year in order to house its population of over 300,000.
The MOA has been underbuilt in housing for the past 15 years due in part to lending restrictions and overregulation.
On any given week in 2015, there were less than 700 housing units for sale in Anchorage. Multiple offers are still being received on well-maintained homes with the average selling price of $368,000.
Shell’s pullout of the Arctic, whether seasonal or permanent, will put some relocation homes on the market at a competitive price. These homes will be quickly absorbed due to the current demand. Unless Alaska begins to experience serious population loss, the need and demand for more housing will continue.
Alaska’s economy is far more diverse and therefore stronger than in the 1980’s. As Gov. Bill Walker has repeatedly said, we don’t have a wealth problem; we have a cash flow problem.
In Anchorage, we have a housing problem. Although we don’t want to repeat the excesses of the 1980s, more housing will continue to be a real need, despite whatever the trickle-down effect on housing might be from the pullout by Shell.
Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected].