Building a Brighter Future: AHBA LOOKS AHEAD
By: Nikki Giordano, CEO, AHBA
The nonstop news cycle can paint a confusing picture. Scrolling can lead to conflicting headlines and deep dives into questionable source material. The labor market is strong, but there are ongoing concerns about inflation and the health of the regional bank system. That’s why it’s important to always get detailed information from trusted sources.
AHBA’s 8th Annual Economic Summit provides valuable insight into what’s in store for the Alaska and national homebuilding markets. The information comes from leading experts in the fields of economics, homebuilding and real estate. The event is beneficial for industry professionals and homebuyers. Economists and real estate professionals look at various factors like trends, labor, home availability, supply chain, home prices, mortgage interest rates and more. By analyzing this data, they can provide a forecast on what to expect in the upcoming year.
Robert Dietz is this year’s keynote speaker. Dietz is the chief economist and senior vice president for economics and housing policy for the National Association of Home Builders. Dietz is an expert at conducting housing market analysis and economic forecasting. He’s been studying Alaska’s housing market and providing analysis for over two decades. He is commonly cited in the Wall Street Journal, CNBC and other business news sources.
Historically, Alaska’s housing and homebuilding markets are significantly off-cycle from the Lower 48. Dietz says the trends of the Lower 48 often don’t apply to Alaska because of its unique location, industry and economy. This is particularly true given the fast rate at which the Fed has raised interest rates, which has produced long lags and leads in the economy data.
The homebuilding market shifted over the last 18 months. Mortgage interest rates across the country have risen significantly but have stabilized at lower levels than many feared (below 7%). This has tightened the budget for many prospective homebuyers.
Meanwhile, ongoing supply-chain and regulatory challenges persist. And the homebuilding industry continues to face a labor shortage. Across the country there are 340,000 vacant construction industry positions, according to an NAHB report from April 2023. Construction material costs are still inflated. Nationwide, they’re up 37% since 2020, according to NAHB. Due to transportation costs that often means the price is higher in Alaska. Supply availability also continues to be an issue.
One of the biggest challenges homeowners and homebuilders face is rising regulatory costs. On a dollar basis, based on a home priced at $394,000, regulation accounts for $93,870 of the final house price. This is based on a 2021 NAHB study. Regulations imposed by the government at all levels account for 23.8% of the final price of a new single-family home, according to NAHB. These costs can be attributed to the cost of applying for zoning approval, compliance fees, builder fees and more. For example, regulatory costs can include fees paid directly to the government, as well as requirements for environmental impact, traffic, archeological and other studies.
Despite these challenges, it’s still a good time to be a homeowner if a prospective buyer can manage to find a home to buy. The Alaska economy is solid and should stabilize in 2024. Total employment for the state is more than 2% higher than it was a year ago and near pre-covid levels after a multiyear recovery. Alaska ranked among the top states for economic growth during the second half of 2022, posting a 4% growth rate for the third quarter of 2022.
Owning a home is an investment. Being a homeowner gives you tax breaks and newly-built homes offer energy savings and reduced maintenance costs. Despite exaggerated forecasts of home price declines, housing markets have proved resilient due to a lack of supply. And home buyers can investigate different ways to reduce monthly housing costs via a variety of mortgage options.
For a deeper analysis into Alaska’s housing market for the upcoming year, attend the AHBA’s Economic Summit. The luncheon will take place on Oct. 12, 2023 in the Dena’ina Center on the second floor. The cost is $65 per person. Doors open at 11:30 a.m. The presentation will take place from noon to 1:30 p.m.