Alaskan Real Estate News March 2013

     The Dow Jones Home Construction Index, which tracks seven publicly traded builders, is up 178% since it hit a two-year low in August 2011.  Alaska doesn’t have any publicly traded builders but our local building permit activity indicates similar gains in new home construction. Through February, there were 37 single family permits vs. 28 a year ago and 18 duplex permits vs. 4. Although our numbers may be small, they’re a far improvement from the past few years. At this rate, single family permits should hit 400 by the end of 2013, almost double from two years ago.

     But it’s not all good news.  Second quarter lumber prices are due for a substantial price increase. The Wall Street Journal reports prices have climbed yearly 40% since late September.  Three of the main factors are Chinese buying, recovery of the U.S. housing market and the limitation of supply.  Alaskans may be geographically isolated, but what happens in other parts of the lower 48 and the world has a dramatic impact on our housing.

     So, too, when it comes to mortgage financing.  FHA recently increased their mortgage insurance rates by 7.5% and the popular HUD 184 program is now temporarily out of funds.  Historically low interest rates are fluctuating almost daily, but the trend is clear for a slow creep upward as are the prerequisite credit scores for home mortgage buyers.  If you bought a brand new home last year, or have one under contract with lumber still in the yard, give yourself kudos, for committing at the bottom of the market.

     The resale market tells the same story.  Multiple offers on single family homes under $400,000, particularly if they were built after 1990 when Anchorage’s building codes began having major structural and energy saving updates.  Last year home values increased 4% and this year, without some major economic downturn, that increase should be  6 to 7 percent.  That’s good news for home sellers who’ve waded through the trough of sluggish home prices the past four years.  It’s not such good news for home buyers trying to enter the market for the first time who are caught between rising rents and increased costs for both resale and new construction homes.  New three-bedroom apartment rentals are going for as much as $2,150 per month plus utilities and renters are lucky to find one.

     There are a lot of small investors currently in the market for duplexes, triplexes and four-plexes, either as investor property or as owner-occupant.  This is what I’m hearing from buyers: “We qualify for more but we don’t want to live just for our house payment.  I need to provide an apartment for my parents. I want them close (but not too close). Why not live in a four-plex and let tenants help with the mortgage?”  There’s been a change in the mindset of the Alaskan consumer. Yes, there is still the buyer who wants the big house, the trophy room, literally and figuratively.  But this past recession, and all economic indications are we can put “past” in front of the noun, has changed the way we think about how we’re going to live in the future.