Hot and Weak Spots in the Market

First, for those of you who checked in earlier this am, my apologies for this late posting. It’s been a busy week in real estate. Closing transactions is getting harder and harder. No mortgage lender can afford to have even the slightest paperwork mistake or oversight or they’ll end up having to buy back the loan. That’s one weak spot in the housing market and it gives everyone the jitters. It encompasses every transaction from the first time condo buyer at $200,000 to the $800,000 custom home buyer. It has nothing to do with the buyer’s credit score, down payment and reserves in the bank. It’s that mortgage investors look for even the slightest paperwork mistake to not purchase a loan. This ‘process’ slows down closings and makes our market look weaker than it actually is.

According to Multiple Listing Service, the value of single family residences has declined 2% since the first of the year. But, try to find one to buy and you’ll be hard pressed to find one in good condition that is less than ten years old and under $350,000. If you do, don’t fool around with low ball offers. Offer as much as you can afford. There are a couple, and I mean that literally, of brand new homes out there in that price point that are worth taking a look at. Hultquist Homes and Spinell Homes have single family homes on full-size seventy foot wide lots in WestPark. Both builders have had pre-sales in this price point. WoodBuilt has sold 11 single family homes in Eagle Crossing and Powder Ridge in the past 8 months—all under $400,000. However, builders in Eagle River that have homes at $500,000 are hanging onto finished inventory. Make them an offer and you’ll probably get a pretty good deal.

New construction condo prices have fallen over the last thirty days. Most price reductions have been in the $10,000 range with some closing costs, refrigerators, washer/dryers included. Condo builders have reduced prices to get rid of their fall starts so that they can have new starts come the end of break-up. This is pretty much the case across the board in new construction. If a builder has finished standing inventory right now, a spring sell off may be in the making.

The new condo phasing regulations requiring increased sale commitments before closing are making builders anxious. Glenn Abbey has just reduced some models by $10,000 and today’s paper shows popular Aurora Square prices down to $299,500. Other builders are considering price reductions so don’t be afraid to make a reasonable offer or ask for closing costs. Now’s definitely the time to go looking for a new condo home. These prices won’t be there in the next phase. Summer starts won’t have granite countertops and wood laminate flooring—extras that buyers have learned to love and expect. After these spring close-outs, these semi-custom touches will appear on builder’s upgrade pricing sheets.

One caveat on the condo market—buy new. Sacrifice a little square footage or maybe even that double car garage for a single. Ironically, new condo dues are probably going to be less per month than an established community. As condos age, exterior repairs and special assessments aren’t unusual. Carefully read your public offering statement and budget. Read the minutes of the meetings—that sometimes will tell you more about the community you’re moving into than the budget itself. New condos don’t have that ‘history’.

There’s not much to say about the upper end market. It’s there and it’s depressed. Most of the homes for sale above $800,000 is somebody’s else dream and not yours. Over-customization of homes in the upper end market creates depreciation. When a custom home buyer turns into a seller, their dream deflates pretty fast. Anchorage has plenty of well-qualified buyers in the upper range. Their problem is they can’t find a home they want to purchase. One exception is a lovely home in Sky Hills. It was built by the Petersen Group ten years ago and the sellers have maintained it in like new condition. It has a great room concept and lots of windows. I recently saw where it’s price has been reduced. (It’s not my listing so call or email me if you’d like to see it. It’s currently listed at $690,000). It’s the best buy in this price point and move-in ready.

If you’re in the market for an upper end home, you’ll want either a view or acreage, preferably both. There’s not many homes out there in the upper end that meets that criteria. I’ve been fortunate to sell three upper end homes this past year in Potter View—two by the John Hagmeier Company and one by Merit Homes. All three had outstanding views and on half-acre lots with water and sewer on a paved street. It’s interesting to note, however, that these homes, with some minor variations by one buyer, were proven floor plans. All three were great room concepts. I’ve said it once, and I’ll say it again, the formal dining room in large homes, is not what buyers are looking for. Resale homes in this price point need to be more competitively priced.

I haven’t met anyone in the real estate and mortgage business this past month who doesn’t believe that interest rates won’t increase before the end of the year. The interest you pay on the home costs more than the home itself. So buyers need to stop quibbling with sellers about refrigerators or extra closing costs. You’ll be paying for that refrigerator every month if you wait to purchase when interest rates bump up a point or two.