More good news than bad in Anchorage real estate


The health of the Anchorage real estate market is on the mind of many, with some feeling it is a buyer’s market. This opinion seems heavily influenced by national news, which overshadows our local perspective. Is Anchorage following the national trend, or do local issues create a different outlook for our real estate market? Here are some positives and negatives to consider.

The positive influences:

• Gas line construction proposals currently being accepted by the state under the Alaska Gasline Inducement Act.

• Anchorage job market in its 19th straight year of growth.

• Price of oil topping $70 per barrel this year versus $10 per barrel in 1998.

• ANWR drilling still alive as part of the defense spending bill passed this week by the House. If the price of oil goes higher, who knows?

• Pebble Mine getting boost with new partnership between Anglo American and Northern Dynasty Minerals.

• Air freight going strong with Anchorage as an important gateway for moving cargo around the world.

• Interest rates remaining low at less than 7 percent.

• Limited availability of vacant land for building.

• Fewer residential building permits signaling a slowdown on new construction, creating minimal unsold new-construction homes.

• Permanent Fund exceeding $40 billion strong and growing.

• Tourism strong with more new hotels plus convention and visitors center.

• Commercial construction strong with numerous cranes in the sky. In 2004, there were 35 commercial permits year-to-date. This year, there were 42 permits for the same time period.

The negative issues:

• Increase in the number of single-family homes on the market.

• Decrease in the number of sales.

• Federal investigation of government officials.

While we don’t have a good explanation for the last issue, the first two are not as bad as you think — once you recall a little history.

Yes, the number of properties on the market has increased. However, when compared historically to the last 10 years, it is just another cycle.

Due to computer problems, data from the Alaska Multiple Listing Service is sporadic between 1998 and 2003, so some figures are not available. Yet there is one constant: The market is seasonal with greater selection during the summer months. If you look at the total number of properties for sale, you can see that the current trend is similar to 1998, with a low in March of 939 and a high in August of 1,311 homes. However, in 2001 the number of properties for sale plummeted and stayed low until mid-year 2006. Compare the numbers in those years for January, a normally low period, starting in 1999 with a high of 991 homes for sale. There were only 675 in 2001, lower still with 441 in 2002, then a generally upward crawl to 547 in 2003, 664 in 2004, 559 in 2005, 577 in 2006 and 858 this year.

What happened in 2001? At least two factors kept selections artificially low. The first was the 2000 stock market crash, which reminded many investors about the importance of a diversified portfolio. By late 2000, we realized it wasn’t going to be a quick correction, so real estate became a way to diversify a stock-heavy portfolio. Instead of selling the old home after upgrading to a bigger and better one, some homeowners rented it out. This created more demand and higher appreciation because of fewer choices.

Nationally, many real estate markets began to experience extreme double-digit appreciation over the next five years. As the frenzy fed on itself, “flipping” and subprime loans artificially inflated the market. The old adage of the higher it goes, the harder it falls came true for many real estate markets. National news currently makes you feel that most of the United States is in the middle of a massive correction. It is not.

Once again Anchorage is counter to many other states, as shown by modest increases in the average sales price from $233,496 in 2003 to $259,531 in 2004, then $291,013 in 2005 and $315,156 in 2006 to $331,137 as of June this year.

The second factor that contributed to low selection was the drop in interest rates. With the lowest rate about 5.5 percent in mid-2005, homeowners could “move up” to newer or larger homes. Equity extraction provided down payments for new, bigger homes. Rising appreciation seemed a better way to diversify than the stock market, so many homeowners rented their old home. With low interest rates and generous lending policies, renters also helped absorb supply and moved into the American dream of homeownership.

Like the cycle of homes for sale, interest rates will inevitably rise when the Federal Reserve sees improvement in the truly troubled Lower 48 real estate markets. This threat of rising interest rates should motivate any remaining “interest only” or adjustable-rate homeowners to refinance or work out new repayment plans with their lenders before they are forced into foreclosure. The increase in local foreclosures was noted in a recent Anchorage Daily News article.

Between 2001 and 2005, increasing appreciation coupled with low selection and low rates stimulated multiple offers. Unfortunately, this is what sellers in the Anchorage real estate market grew accustomed to as normal.

Last summer, this changed nationally and affected us locally. Nationally, the bubble began to burst in overinflated markets. Locally, it caused some hesitation in our real estate marketplace.

However, when we look back over a 10-year period, sales maintain a pattern. Sales in the first quarter of this year are similar to the first quarter 2000, while this year’s second quarter closely mirrors the same quarter of 2001.

So what do we do now?

Historically, real estate is considered a long-term investment — so if you don’t have to sell now, don’t. We anticipate that with all of the positives mentioned above, the Anchorage economy will continue to grow.

If you do have to sell, realize that it will take more work to sell quickly. First, price it right. The days of an overstimulated market are gone. You can no longer price your property high and wait for the market to catch up to your value.

Second, good condition and first impressions count. Nationally, professional home stagers are commonplace. Locally, they are just becoming popular. Home stagers reorganize personal items and bring in furnishings as needed to create the best first impression possible. In a more competitive market, sellers who do not spend the time and money getting their home ready for sale help sell the competition.

If you are a buyer, now is a great time to buy because there are more choices. However, the Anchorage market is not experiencing the same problems as elsewhere. If you make a low offer, understand that you may help a competing buyer look even better to the sellers. Additionally, continued low interest rates give you greater borrowing power. Remember, for every percent increase in interest rates, you lose 10 percent of that power.

Overall, a lot of positives will provide steady growth for the Anchorage economy and real estate market. While it is not a buyer’s market, it is a good time to buy. It is a lot like buying produce in Anchorage right now: The prices are not cheap, but you’ll sure love the choices.

Clair and Barbara Ramsey are local associate brokers specializing in residential real estate.

By Barbara and Clair Ramsey, The Anchorage Daily News


Alaska RealEstateRama is an Internet based Real Estate News and Press Release distributor chanel of RealEstateRama for Alaska Real Estate publishing community.

RealEstateRama staff editor manage to selection and verify the real estate news for State of Alaska.


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