Published Anchorage Daily News on 10.02.2024

By Connie Yoshimura

In today’s market, condo sales can range from $1,125,000 for a luxury inlet view newer built single-floor condo with elevator to $189,000 or $80,000 lower depending on the style for a REKA Drive condo built in 1971 that no one wanted to buy pre-covid. By definition, a condo can be a single-family home, one side of a townhouse duplex, or a stacked unit in a 20-unit apartment building with interior corridors. However, all these condos have in common is a shared tract of land and a homeowner’s association(HOA) with a governing board that is responsible for maintaining the covenants, codes, and restrictions of the community as created by the original developer.

Since covid, condos have appreciated an average of 29.42%. And because of the lack of inventory, that value is due to substantially increase even more. Average closed sales in August had a value of $293,531 and it wouldn’t surprise me that number will break the $300,000 barrier by the first quarter of next year. One reason you will see substantial price increases is the high cost of new construction, if and when new condos of any type and size come on the market. After all, a piece of sheetrock costs the same whether it goes into a million-dollar condo or a $500,000 one.

Most recently, the design style of new condos has a garage on the first floor, a living area on the second floor, and two or three bedrooms on the third floor. The Park Strip in Anchorage and new condos in Girdwood are good examples of four and five-plexes built in this style. Depending on their location, these units can be as high as $800,000 or lower in less desirable locations. It’s hard to find the more traditional first-floor living townhouse condo. Almost all of these units are resale. These condos require more land on wider lots and will be around $450,000 or more depending on the interior amenity package. Apartment-style condos which are almost always two bedrooms with one or two baths have not been built for many years. Land for that type of density, zoned R3, has been built on over the past several years for affordable, and subsidized housing. The older apartment-style condos can have an exterior door with an open stairwell These condos can have an exterior door with an open stairwell or an interior corridor. However, that interior corridor will increase the monthly homeowner’s dues.

So why aren’t we developing more condos? Much of the traditional R2 and R3 land for low to moderate density was garbled up during the 1990s with the creation of duplex-style condos. These units were 1500 square feet with three beds, two baths, and a double car garage and were a good fit at that time for affordable market-rate housing. Today, the upfront cost to create a condo community includes legal expenses for the CCRs and declaration. It also requires more design and architectural expenses as well as a detailed landscape plan. It’s hard to find infill land that is not wet and contaminated. The most deterrent is the commercial financing for condo development which requires a percentage of ‘presold’ units before breaking ground. So the cost differential between a condo vs. a townhouse style duplex where both sides can be sold quickly is substantial. So even though the market may be there, the financing is more expensive, not just for interest but equity injection.

Anchorage is not alone in its lack of condos. Currently, there are no condos for sale in Palmer or Girdwood. The total pending for Mat-Su condos in all types is three. Anchorage has 124 condos for sale. However, the pre-covid average per month for the prior six years was 444.

The condo market is where the Alaska Housing Finance Corporation could play a helping hand not just with the end mortgage but with the condo development. If their mission is to create more affordable housing, a condo, regardless of the type, is, for many, the first step on the housing ladder. And today, that first step is broken.