According to a report by the National Association of Realtors, first-time home buyers have dropped to only 24% of all residential sales. These first-time homebuyers are not who you may think they are anymore.The median age is now 38 compared to the late 20s a decade ago. However, they wait to purchase, whether through the inability to save due to inflation or spending patterns. They may be waiting for that perfect home or a lower interest rate. No home, regardless of its size, is ever perfect. That decade of no purchase plays a punch on the housing ladder. In Anchorage, waiting, even for five years, costs a loss of 28.74% in appreciation for a condo. Or 32.29% loss of appreciation on the average $500,000 home. And women’s share of purchases is more than double men’s.Perhaps we are finally learning Brand awareness, such as GUCCI or Louis Vuitton doesn’t mean as much as a remodeled single-family home or a new condo. However, that wait of a decade loses equity. Yet, the idea of renting instead of purchasing negates any hope of creating wealth through home ownership. And there is no guarantee against ‘rent inflation.’ As a renter, you have no offset against increased utility charges, taxes, and renters insurance, which are all passed on to you by a savvy investor on an annual basis. It is true those costs also occur in home ownership, but at least as an owner, you have the benefit of appreciation. Sometimes, you just have to pay your mortgage and wait.
Homeownership is a leveraged opportunity where you can borrow up to 100% of the purchase price if you are a veteran or 97% through FHA. And your appreciation has nothing to do with the interest rate on your mortgage but, hopefully, instead, on your purchase price. I am not an economist or have a degree in finance but home ownership appears to me to be a good long-term investment. It’s only if you have to sell due to a sudden personal circumstance that you might incur a loss.
A good example is the Foxwood Condos, which came on the market in the 1980s with an original purchase price of $76,000 several decades ago. During the late 1980s recession, the number dipped to $32,000. The last sale in November 2024 was $250,000. I wish I had been smart enough to buy one at $32,000 or even $100,000.
A typical age of a seller is now 63, and most likely bought their home in the 1980s. And 35% of Alaskans own their homes free and clear. The only dilemma is what to do with the equity. There are 35 homes for sale over a million dollars in Anchorage, and my best guess is that those owners, have large equities. Although, you don’t need a million-dollar home to own it, free and clear. It could be a duplex, a condo, or a $500,000 single family home, now the average sales price reported in MLS. The average single-family home has appreciated 32.29% in just the last five years alone. What is particularly interesting to note is that 2024 had a 6.72 percent increase despite the appreciation in mortgage interest rates.
Locally, there is a little more inventory for buyer selections, which is up 15.92%, although, under $500,000, there are 106 residential properties for sale, and sales have only increased by 1.54% over 2023. The market is top-heavy, with 144 single-family homes above $500,000. Of these, 35 are above $1m, a pretty consistent number as they move in and out of the market in about 30 days.So whether you are a 38-year-old first-time homebuyer or a 63-year-old seller trying to figure out how to extract your million-dollar equity and where to spend it, this housing ladder is pretty much upside down.
Connie Yoshimura, Owner/Broker of Berkshire Hathaway HomeServices Alaska Realty.
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