Alaska Housing’s Wild Ride
Alaska’s housing market, along with the rest of the country’s, has been on a wild ride over the past few months. The pandemic coupled with historically low interest rates sent demand for houses through the roof, but supply can’t keep up with the demand, and inventory has fallen desperately low.
The lack of inventory has caused housing prices to increase sharply. However, even this price spike hasn’t deterred many buyers because the low interest rates are giving homebuyers much more bang for their buck. For example, a mortgage with a 2.5% interest rate on a $500,000 house equates to a $1,975 monthly payment versus a 5% rate on the same house equates to a $2,684 payment (without taxes and interest). So, that means homebuyers can purchase a $500,000 house today for a similar monthly payment on a $375,000 house two years ago.
While these rates are great for homebuyers, the lack of inventory isn’t making things easy. With so many more buyers than homes for sale, sellers have a lot of leverage when it comes to negotiating price, terms and repairs. Some buyers are choosing to purchase homes with zero contingencies and are even willing to pay over the appraised value, meaning they’re paying cash over appraisal or all cash.
In Anchorage, buyer demand finally is beginning to slow down. Many buyers are feeling frustrated with the intense competition in addition to the fact that homes they could get into a year ago are nearly 15% more expensive. However, things are looking up. At the beginning of the summer, more houses started to come onto the market. Buyers are rushing to list their homes to take advantage of bidding wars. As inventory rises and demand slows, prices should begin to even out.
Some buyers are just choosing to build instead of competing for existing homes. The MatSu Valley is seeing a huge boom in new construction. But that comes with its own set of complications. The pandemic created a supply and labor pool shortage that has complicated new builds. Contractors and builders are working on thin margins and unknown timelines due to the price increases and limited supply of materials.
This is an unprecedented time for Alaska’s housing industry. Real estate agents, mortgage lenders and homebuilders are doing everything they can to get Alaskans into the homes they want. However, there’s a lot that’s beyond their control when it comes to availability, prices and timelines. As more inventory becomes available, prices level out and timelines become more certain, this wild ride will start to become smoother sailing for everyone.
Keller Williams Realty Alaska Group