An End of the Year Reckoning

Published in Anchorage Daily News 12.06.23

 

Since most people are busy with the holidays, December is a good time to shop for a new home. Builders are anxious to get rid of their spec inventory. Nationally, 59% of builders are offering up to a 2% buy down of a mortgage rate or closing costs. Locally, a handful of new construction homes have advertised buy downs, but buyers and their realtors shouldn’t be afraid to ask even if it is not being marketed, particularly if it is a completed home. Other than that, the market remains stable and appreciating. Single family homes appreciated in Anchorage at a rate of 5.57% year to date. That’s less than the 7.64% in 2022 but nevertheless my prediction in 2024 is the market will continue to appreciate due to the historic low housing inventory regardless of any reduction in mortgage interest rates. And if rates do drop below 6% sometime in 2024, it will only exacerbate the rate of appreciation as more buyers rush into the market. Let’s face it. Here in Anchorage, we have a severe housing shortage. This year-to-date new residential construction permits have fallen from 172 in 2022 to 129 through October. And our record November snowfall didn’t help builders who generally risk putting in late fall foundations so there’s not much opportunity to catch up on permits before the end of the year.

 

Condos appreciated in 2023 at a record 10.61%– which is double what single family appreciation was. Condos have become the first step onto the housing ladder. The year-to-date average sales price for a condo is now $269,512 compared to pre-covid at $211,168. Condos will remain one of the best buys in the Anchorage residential market. There will be a smattering of newly built condos in 2024 to help the new construction affordability factor as buyers begin to recognize a condo that may not be their dream home but their first important step onto the housing ladder.

 

Come January 2024, luxury home buyers will begin searching for home sites to build their $1m plus dream home. But maybe $1 million isn’t luxury anymore. Maybe it is simply a 2,400 to 2,600 square foot home with a triple car garage and a peak-a-boo view over rooftops, or mountains, or the inlet on a nice cul-de-sac. Even at a million dollars, new construction is going to be a challenge for buyers and builders, trying to match buyers’ dreams with the builders’ struggle with inflation that is expected in 2024 for labor and materials. Year to date there have only been 205 residential units permitted, including single family, duplex, and multi-family. That’s versus 376 in 2022. Now, let’s put those numbers into perspective. According to the U.S. Census Bureau for 2021, Anchorage has a total of 119,808 housing units, including 4,553 mobile homes that are rarely mentioned but offer many the most livable square footage on a plot of land where you can plant a geranium or birch tree. I doubt, due to fire condemnation or abandonment, that Anchorage is not even replacing the housing units we lose every year. Our housing shortage is so acute that buyers who are willing to fight the 50,000 cars per day on the Glenn, are fleeing to the Valley or the Kenai Borough. The most shocking statistic to come from the Dept. of Labor and Work Force Development is that 51% of all new homes built in the entire great State of Alaska was in the Mat-Su Valley.

 

Anchorage is fast becoming a community for the well-to-do, and the working poor who, despite 1.5 jobs per household, can’t afford to buy a home with a yard, albeit no matter how small the site. Anchorage is my home. I have lived here for over forty years. I love walking the Park Strip and the Potter Marsh Board Walk. I love meeting the buyers who want to make Anchorage their ‘forever’ home. But I’m afraid for our loss of population that I contribute specifically to the lack of housing in all price points under $1 million. I’m afraid we will continue to lose our citizens, our students, and our sense of place not to Phoenix but to our own back door. The recent announcement of the proposed park land surrounding Potter Marsh does not create more citizens to enjoy it if there is no place for them to live. With a little more planning and recognition of our housing crisis, there is more opportunity for a portion of it to be rezoned for housing, including some mixed density for single family and townhouses. After all, Anchorage already has more designated park land and trails than any other city our size in the United States.