Is Now A Good Time To Buy A Home? (October 9, 2015)

October usually brings some surprises in the financial markets but this past week’s quarter percent drop in 30 year fixed rate mortgages to 3.75% came as an unexpected announcement. Not that it’s not welcome news for Alaskans in addition to a record breaking $2,072 permanent fund dividend check to every eligible man, woman and child. A quarter percent drop in interest rates means a savings of $49 per month on the MLS average sales price of $368,000 assuming a 5% down payment. It means buyers qualify with approximately $200 per month less income, according to Aileen Dimmick of Residential Mortgage.
Now could not be a better time for homebuyers in the Anchorage/Eagle River market place. Low interest rates, moderately low inventory and modest appreciation have been the characteristics of our housing market all year long. Late fall or early winter (really early this year) has never seasonally been the best selling months but that’s what makes it so attractive for homebuyers. Sellers who have their homes on the market this time of year are motivated sellers. Builders are anxious to sell their summer inventory so they can get foundations in the ground before freeze-up. This week’s inventory was 613 homes for sale in all price ranges in Anchorage. But look a little closer and there are only 34 homes for sale that have four bedrooms and a double car garage. And here is the most shocking statistic of all. Of the 34 homes, only 3 were built since 2000. So, brand new or newer homes are hard to find.
During the past thirty days, there have been 74 single family active price reductions with an average reduction of $20,625.78. There are also 14 active condos with price reductions in Anchorage and Eagle River within the past 30 days. That average price reduction was $7,464. These reductions speak to the motivation of sellers who are looking to move out before the dark winter freeze sets in. But regardless of the year or temperature, Anchorage’s housing stock continues to age just like our aging baby boomer population. And that means changes for our type of housing. The first floor bedroom/den/flex room is now a necessity whether it is at the back of the house or next to the entry. The first floor powder room has become a full sized bathroom for the future mother-in-law or disabled spouse with handicap grab bars. Downsizers are tired of large lots and lawn care but still want a small backyard for a potted vegetable garden or flowers. And, of course, there’s the need for Boomer’s fenced area. Those are all market necessities while at the same time, homesites are becoming smaller due to the continued high cost of roads, water and sewer installation.
And let’s not forget the ranch or rambler. There are a surprising 86 for sale—more than 10 percent of last week’s active inventory. They range in price from $96,900 to $1,395,000. There’s even one built in 1941 and a handful of brand new ones. For new construction, ranches are about 25 to 40% more expensive than the traditional two-story home, due to larger foundations and roofs. Downsizers may give up some square footage but they still want all the luxury items of the past ten years, including cherry cabinets, solid surface countertops, spa bathrooms and hard surface flooring.
So use your permanent fund divided as part of your down payment and take advantage of the drop in interest rates and go shopping for a new home rather than that new car which will depreciate the minute you drive it off the lot. Anchorage has had four consecutive years of modest appreciation and given the low inventory and age of our housing stock, even the departing Shell employees’ homes by Cartus Relocation, won’t change that.