Just One House

It’s hard to believe it but here is a shocking Anchorage housing statistic: there is only one brand new home for sale between $600,000 and $700,000  in Anchorage.  It’s being built by the John Hagmeier Company  in the Potter View development located above Potter’s Marsh.  It’s heated, insulated and will be finished sometime in the next 75 days.  Its asking price is $642,500 with four bedrooms, three baths, a big triple car garage and an unobstructed mountain and inlet view.  Now, let me disclose that I am the listing licensee for this home.  I discovered this statistic when checking out the competition prior to having an open house.

The fact that there is only one home under construction in this price range speaks volumes about the Anchorage marketplace.  Anchorage has long had a love affair with new homes as witnessed by the hundreds of people who turn out every fall and summer for the annual Parade and Spring Preview of Homes sponsored by the Anchorage Home Builders.  This fall there was less than half (15) the number of entries as in past years.

Even though Anchorage and Alaska hasn’t faced the housing crisis of Las Vegas, southern California, Arizona, Nevada, Texas and Florida, it has not been immune when it comes to financing.  There are about a dozen Anchorage homebuilders who’ve built homes in this price range during the past couple of decades.  The fact that none of them except for John  Hagmeier Homes, as of this date, have speculative sticks in the air, is due to lack of availability of interim construction financing.  Wells Fargo, Northrim Bank and First National have virtually stopped lending on speculative homes unless they have an underlying interest in the land, as is the situation in Potter View.   And, even then, the equity injection required  for speculative building has doubled or tripled due to the lower 48  real estate crisis that has virtually affected all lenders, even in Alaska.   And lenders are not passing on the historic low prime lending rate to their builders.  If a builder can manage the equity injection for spec building, the interim construction loan will cost seven plus percent.

There are a total of 29 homes for sale between $600,000 and $700,000. Eight of these homes were built prior to l979 which makes them over thirty years old.  Three were built in the l980’s. Nine homes were built in the l990’s and eight in the year 2000+.  That’s not a lot of choice for a buyer looking to take advantage of today’s historic low interest rates and wanting to cash out existing equity in their current home.  It is also interesting to note that eight of the homes for sale have been remodeled.  But, whether or not that remodel, will suit a new buyer is another matter.

Anchorage does not have an excess amount of residential inventory, particularly in the mid  move-up market.  But what it does have is an aging housing stock.  And that’s not likely to change any time soon due to the stringent financing requirements for new construction homes.

Buyers, frustrated with looking at older homes, may have no choice but to wait up to six or nine months to have a new home built for them. Under that scenario, they can expect to put up at least 3 to 5% non-refundable earnest money that will be disbursed directly to the builder.  The good news is that they will have an opportunity to move a few walls, select all their kitchen cabinets, granite countertops, hardwood floors, kitchen appliances, plumbing fixtures, et cetera.

But don’t expect speculative financing for new homes to loosen up any time soon.  These tight lending requirements are here to stay for the foreseeable future.