Up, Down, or Flat?

Alaskans used to be known for their contrary ways. “We don’t care how they do it in the lower ‘48’. Now, it seems all that has changed with technology and we’re bombarded with internet articles, emails, blogs, TV segments about the demise of the residential real estate market. How it will take years for it to come back and cities, counties, and whole states are grappling with 40,50, 60 percent depreciation and high foreclosure rates. But, despite all this connectivity, we’re not the lower 48 when it comes to our local housing market. So, let’s set the record straight.

Statewide, Alaska had 1,193 residential foreclosures in 2010. In 2009, it had 848. Putting it in national perspective, only the states of North Dakota, South Dakota, Wyoming (all oil and gas related states), Vermont and Maine had a lower number of foreclosures. And of those states, Alaska’s rate of foreclosures compared from 2009 to 2010, was one of the smallest percentages. Foreclosures, even in Alaska, will continue to be a fact of real estate life for the next two to three years, as the over exuberance of the past mid-decade real estate bounce settles down but they are a miniscule part of our market that gets over publicized. Many of these foreclosures can be blamed on predatory lenders who allowed buyers to simply state their income, without verification, to qualify for a mortgage above their ability to pay. On a personal note, I’m grateful I didn’t buy that condo in Marina del Rey four years ago, with my stated income pre-qualification letter. I tried but after three offers on a condo that would have required a significant remodel, I came home to Alaska and decided that in the future, I would simply rent my sun.

Predatory lenders also aggressively sought mortgage fees from home refinancing through online and direct mail marketing. These refinances allowed homeowners to extract equity without any thought that when it actually came time to sell their home, they might have to divvy up some of those refinance proceeds to help pay for closing costs or pay down on their mortgage. Thus, the ‘short sale’, the negotiated sale between the seller and the lender.

Recent MLS statistics confirm what those of us who are actively listing properties for sale have known for the past few months. Prices have had a modest decrease. The average sales price for a single family home has declined 1.95%. It is now $322,527 compared to $328,952 for 2010. The days on the market have increased from 65 in 2010 to 83 days, making realtors work harder and sellers cleaning out the garage. But, let’s put these numbers in perspective. According to our local MLS, between 2002 and 2007, single family homes increased a whopping 47.7 percent! In 2010, thanks to the federal home buying tax credit, we actually had a 2.52% increase, which erased the 2% negative we had in 2008 and 2009. So, we’re down about 2% from our peak values in 2007. Aside from our sister oil rich states in the lower 48, there isn’t a state in the nation that wouldn’t be ecstatic over these numbers.

Our 2011 market stats reflect a stable market with a slight decline– no bounce, no artificial federal stimulus. This is our real estate reality. The question is whether or not we’ll see further depreciation over the next couple of years and, if so, how much? The answer is yes and no. Our market is segmented by property type, age, location, new versus old, like it has never been before. Check back with me next week to find the hot and weak spots in our market.