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Alaska Housing: Opportunity During Uncertain Times

Cabin fever took on a whole new meaning for Alaskans this year. As the coronavirus pandemic swept the world, we were forced into our homes. In recent weeks most of us have spent more time at home than ever before.

In between toddler wrangling, homeschooling and Zoom meetings, many Alaskans managed to find time to tackle house projects. But for others, the walls began to close in and they realized it might be time for a change.

There are incredible opportunities in the housing market during these uncertain times. Home loan rates are at all-time lows, affording many people the opportunity to refinance and restructure their personal debt. For Alaskans the bottom-line is that it’s a good time to buy, sell or refinance.

I’ve received several calls from people who believe that mortgages are hard to get right now, and that’s not true. Even with unemployment numbers climbing every day, lenders are willing to write loans for qualified individuals. Underwriting guidelines have not changed.

One minor change in the process is that within three days of the transaction being recorded we must call to verify employment. However, the debt ratio, credit score analysis and minimum down payment qualifications remain the same.

The Alaska housing market is seeing a burst of activity right now. We’re seeing record closings due to people buying and refinancing. Buyers of all budgets are being enticed by extra low interest rates. These rates are allowing many people to have an affordable payment on their dream home. We’re also seeing older people downsizing. And a record number of people are refinancing to get lower monthly rates. Others are switching to a 15-year loan for a similar payment to a 30-year mortgage.

It’s not just a good time to buy; it’s a great time to sell in Alaska. The housing market is low on inventory. People are hesitant to put their homes on the market because of the uncertainty. Others don’t want to risk people walking through their house. With fewer homes on the market, many homes are fielding multiple offers. We’re seeing more new construction transactions and that’s partly due to the lack of desirable inventory.

Real estate agents are working hard to make sure buyers and sellers stay safe. They’re offering virtual tours and meetings. Mortgage companies and banks were deemed to be essential businesses, so we have continued to operate.

While I’ve always found it helpful to meet face-to-face, we’ve seamlessly adapted to a more virtual approach. We’ve been using eSignatures for several years to make the loan approval process easier. Borrowers typically apply online, and then they are able to safely upload documents to our portal. This allows us to obtain full loan approval without meeting face to face. In certain cases where we do need to meet in person, we deliver documents to people in their vehicles.

Closing still takes place at the title company but they have setup procedures to protect our clients. Borrowers stay in their vehicles at the title company, and the closing documents are presented to them there. Despite new ways of operating, we haven’t had any issues getting loans approved and they are closing in a timely manner.

Appraisals and home inspections are still being completed but exterior only appraisals are allowed in most cases. Most types of financing including Conventional, Federal Housing Administration, Alaska Housing Finance Corporation and U.S. Department of Veteran’s Affairs loans allow these exterior appraisals.

Alaska is experiencing a healthy housing market but COVID-19 has brought many unknowns, some of which we won’t know the effect until much later. Unemployment continues to climb. However, thanks to the CARES act, homeowners who lose their job can receive forbearance on their mortgage for up to one year.

Another unknown for Alaska is the impact of historically low oil prices. In April, oil prices crashed. This dramatic drop brought shutdowns and layoffs to the North Slope. But with low prices across the world and prices expected to rebound, the effects on Alaska’s economy remain a question.

The Federal Reserve is doing more now than it ever has to save the economy. Lower rates should boost housing demand, especially in underbuilt areas. A strong housing market is critical to helping the economy rebound. Construction creates local jobs and generates tax revenue. For example, Robert Dietz, the chief economist for the National Association of Home Builders estimates that the construction of 200 single-family homes in Anchorage creates over 800 jobs. His estimates go on to predict these homes generate almost $25 million in net revenue.

With rates at historic lows now is the time to speak with a lender to see what opportunities are out there. If you have any questions please give me a call at (907) 222-8833.

Richard Mantyla is an experienced and knowledgeable mortgage planning specialist at Residential Mortgage. He’s worked as a mortgage loan originator in Anchorage, Alaska since 1984. He was Alaska Housing Finance Corporation’s top closing officer in 2018 and 2019.

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