What Can You Buy for $500,000?

It’s a big number—half a million dollars! Yet, in 2015, one hundred and forty-nine home buyers took the leap and bought homes in Anchorage between $450,000 and $500,000. So what did they get for half a million? Homes in this price point almost always have four bedrooms, 2.5 to 3 baths, and if you’re lucky a triple-car garage. Brand new homes are most likely on smaller lots, but pre-owned homes in southeast Anchorage, one of the most desirable areas to live in due to good schools and shopping, will also get you a larger lot, generally 8,000 to 10,000 square feet with mature landscaping, and hopefully on a cul-de-sac. In general, home sizes ranged between 2,200 and 2,450 square feet.

So how does a half a million dollar home in Anchorage compare to those in other U.S. communities? In Glendale, Arizona, where my family lives and where every time I visit I decide I do not want to live, you can buy a 3,660 square feet ranch home with a pool and a triple-car garage for the same $500,000. Here in Anchorage, a brand new ranch just came on the market for $459,000 with a double-car garage. It is listed as having 1,431 square feet. But in Seattle $500,000 will buy you a two bedroom, one bath condo that is 887 square feet or a 930 square foot single-family home depending on your location. In Los Angeles homebuyers get more square footage than in Seattle. A first floor condo with two decks and 1,310 square feet goes for $500,000. In the exclusive Hyde Park area of Houston, Texas, a bungalow goes for $500,000 with two beds, two baths and 1,698 square feet which would most likely be considered a tear-down while near downtown and close to the Galleria Shopping Center, a half million dollar home buyer can purchase four beds, 2.5 baths and 2,362 square feet. In that regard, Anchorage is more like Houston when it comes to housing values as opposed to major metropolitan areas like Seattle or Los Angeles where high density drives up the cost of housing.

Today, there are forty two homes for sale between $450,000 and $500,000 in this price point in the Anchorage bowl, including the new construction ranch home mentioned above. There are also two newly reduced brand new homes in West Park priced competitively with resales for under $500,000 on one third acre lots. Multiple Listing Service reports that there are twenty-two pending homes for sale between $450,000 and $500,000 which is a good balance between active and pendings. But it’s not really much of a selection for buyers willing to pay a half a million dollars for a home.

Overall, MLS inventory has crept up to just shy of 500 homes for sale as of last week. That remains an incredibly low inventory for a community of 300,000 population. That low inventory plus low interest rates are two big differences between today’s market and the now often quoted late 1980s real estate crash. Let’s remember that back then, interest rates were 10.19% and we had thousands of homes for sale, an inventory glut that took the 1992 oil spill to suck up. With interest rates still hovering at 3.75%, a half million dollar home today has a lower mortgage payment of $3,283.95 which is $1,596 less when compared to $4,880.65 in l986. Even more importantly, a buyer’s income could be almost $6,000 less per month and still qualify for a $500,000 mortgage. Incredibly low inventory and an interest rate almost one-third less than in 1986 are the two defining factors that make 2016 nothing like the real estate crash of 1986.