Anchorage Need More Housing

The 2010 census data is out and Anchorage grew 12.1 percent to a total population of 291,826. That’s about 60,000 more residents than ten years ago, creating another small city in our midst! The Mat-Su Borough grew by 50% to a population of 88,995. If population is the primary factor in the need for housing, then south central Alaska is in desperate need for more housing. According to the 2010 Alaska Housing Finance Corporation Rental Market Survey, Anchorage has a 1.8 vacancy rate—one of the lowest on the local record, if not the lowest. Building usually occurs when vacancies hit 3% but the lack of land, financing and fear has created the lowest number of residential building permits in the past 20 years.

But lack of land and financing pales in comparison to the fear factor. All the bad news coming out of the lower 48 housing market has spooked many local residents from taking the step to home ownership, thus, creating higher rents. The median rental rate in Anchorage is now $1,042 per month plus gas and electric for a two bedroom apartment. A three bedroom will cost you even more. Many renters could purchase and pay an equal, or sometimes lesser, amount for a mortgage, if only they weren’t afraid to make the move.

Let’s face it. The housing market isn’t what it used to be with 6 to 8% average appreciation during the first half of the decade we just passed. Our market values are stable with some decline in homes older than 25 years, depending upon their condition. But to quote from the August 2010 Alaska Economic Trends Magazine put out by the Dept. of Labor, “Alaska’s housing market has puttered along like a reliable old car—you wouldn’t want to drive it to the prom but it always starts. As long as the economy doesn’t completely run out of gas, Alaska’s housing market should have a lot more mileage left in it.”

It’s easy to make a purchase when all your friends and family are buying a home. It’s a lot harder when you know someone who is facing a foreclosure. But, if you have a steady job and savings in the bank, now is the time to be that contrarian. The housing crunch is likely to continue for quite some time which ultimately will increase values. Last month, we had a dismal 30 residential units permitted for new construction. Just as the lack of housing has put upward pressure on rental rates, once the fear factor is mitigated, you’ll see the return of appreciation in the home ownership market.

Granted, I am a residential land developer. I make my living developing subdivisions, selling lots and tracts of land to builders, and selling mostly new homes to buyers. But the statistics speak for themselves. Unlike the lower ’48, we do not have a glut of unsold or foreclosed inventory on our streets and in our neighborhoods. Not only do we have a certain amount of ‘fear’ in our market we also have buyer ‘frustration’ in not finding homes that meet their needs. Foreclosed and short sale properties aren’t going to meet the changing demographics of buyers, even after they get over the fear factor. Anchorage has a housing shortage and local lenders, now that they’ve recovered from the financial trauma of the past four years, need to recognize the need for more housing, both in the rental and homeownership categories.