Lack of New Construction Frustrates Home Buyers

Last night a buyer said to me, “We were about to make an offer on a home built in l983 but then realized we’d be buying a home that’s almost thirty years old!  We’re concerned about maintenance and repairs. Can you show us something new?”  Just a few days before that, a home owner who owns a lovely hillside executive home built in l984 confided in me, “In the past two years, I’ve replaced the roof, the furnace and two hot water heaters.  Plus, remodeled the kitchen!”

Both the potential buyer and current homeowner were expressing their concern and frustration with Anchorage’s aging housing stock. For those of us who’ve been in the business a long time, the boom years of the l980’s when most of our homes were built doesn’t seem that long ago. But, in reality, thirty years is when properties begin to acquire functional, cosmetic and economic obsolescence. Cosmetic remodeling is fairly easy and reality TV shows are plentiful on how to bring an older home up to date but the deterioration of the nuts, bolts and bones of older homes can create unexpected and expensive repair costs. And with a new century came a significant change in lifestyle for today’s buying generation. Most older homes have formal living and dining rooms which have been abandoned by today’s casual and busy lifestyles that plops everybody down in a great room at the end of the day.

Unfortunately, there’s not a lot of choice for buyers in our local market.  Over the past three years, residential building permits have been at a twenty year low.  In 2010, there were only 229 single family and duplex permits issues in Anchorage, Eagle River and Girdwood.  January through April of this year, there has been a measly 84!  For example, if you are looking to purchase a single family home from $550,000 to $900,000,MLS reports there are only seven new construction homes from which to choose.

Leading the pack of residential contractors is Spinell Homes with 16 permits through April 2011.  (Unfortunately, the MOA has not yet posted the permit activity reports for May and June which hopefully will show a substantial increase in activity.)  In 2010, Spinell had 31 single family permits and it appears he will surpass this number in 2011 with single family permits in WestPark, Powder Ridge and Eagle Crossing in Eagle River. The Petersen Group is second with six permits, including duplexes built for Cook Inlet Housing’s subsidized low income program in Mt. View.  Next is WoodBuilt Homes with 5 permits whose focus is on single family homes in Eagle Crossing and Powder Ridge under $425,000.  Merit and Hultquist Homes has 4 permits each, followed by Hagmeier and Six M with three each.  These are incredibly low permit numbers for all these long-time Anchorage builders, all of which are used to building 30+ homes per year.

Summer is normally the time of year when housing inventory bumps up due to new construction activities but this year the July 5^th weekly MLS report identifies only 898 homes for sale in Anchorage which usually is in the 1,100 to 1,200 range and 232 homes in Eagle River, which indicates that the majority of new construction single family homes are now being built in Eagle River in popular subdivisions like Powder Ridge, Eagle Crossing and Eagle Pointe.  Anchorage is truly running out of residential land except for the hillside which remains financially challenged by expensive road connectivity issues.

Still, these new construction numbers are so low that buyers wanting to purchase a new home are probably going to end up doing so off a piece of paper, i.e. a set of plans which means they will have to wait at least four to nine months for completion, and may, as a result, miss an opportunity for incredibly low interest rates which crept up to a four month high this past week and are predicted to go higher before the end of the year.

Single family new construction homes begin around $350,000 and go all the way up to luxury homes in the $900,000 range. Builders have held their prices and these homes are competitively priced with most resale properties. One exception to a new home preference is any resale single family home under $350,000 that has been properly maintained.  These homes  remain a very good buy despite their age because they can’t be duplicated for the square footage and lot size.