COVID-19 and Alaska’s Housing Market
The COVID-19 pandemic created a housing boom in the Anchorage market. During a time when Alaskans faced layoffs and lockdowns, a healthy housing market was one of the few bright spots. More than a year later, demand for homes continues to exceed supply. Most house listings only last a minimal amount of time and often field multiple offers.
“During a year of economic and social uncertainty, the homebuilding industry was able to continue to be able to provide Alaskans with some sense of security,” said Eric Visser, president of the Anchorage Home Builders Association. “Our industry continued to operate throughout the pandemic, keeping Alaskans employed and essential services available to homeowners.”
AHBA and the National Association of Home Builders fought to keep homebuilding going. Due to its designation as an essential service, the housing market kept pace throughout 2020, with safety precautions in place. The ability to continue these critical operations only helped fuel demand for homes. And as the economy begins to rebound after a rough year, homebuilding is leading that comeback. But it isn’t all good news for homeowners.
Here’s a look at what Alaskan homeowners are facing in the wake of the pandemic.
People are Demanding More of Their Homes
The majority of people faced a big shakeup in 2020. Many people spent significantly more time at home. Lockdowns and safety restrictions forced employees to work from home. Virtual learning kept kids out of school. And with restaurant and gym closures, everyday activities like dining in and working out quickly became home-bound activities.
As pandemic restrictions went from weeks to months, people began to look at their homes in a new way. They wanted efficient space to be able to work, school and work out. People suddenly saw the potential long-term benefits of having a space that worked for this new lifestyle. Homeowners started searching for bigger homes with rooms dedicated to these activities.
Low Interest Rates
Homeowners were treated to record low interest rates last year, which was one of the primary reasons many homebuyers started shopping for a new place. Alaskans’ buying power was suddenly much stronger. Low interest rates mean a bigger percentage of the monthly bill is going toward paying off the principal, instead of the bank’s interest.
For many homeowners, this became a once-in-a-lifetime opportunity to buy the home of their dreams at a price-point they could afford. Or, in the case of first-time homebuyers, these lower interest rates allowed them to be able to afford a home. According to Alaska Multiple Listing Service, average single-family home sales were the highest they’ve been in the last 10 years.
The Anchorage housing market has faced a supply shortage for years. In 2020, the lack of inventory became good news for sellers. People were ready to buy. Whether it was because they wanted a different space or to take advantage of low interest rates while they could, people did not want to wait. Many listings fielded multiple offers almost instantly leading to bidding wars. And this competitiveness continued throughout the winter when the housing market usually slows down for the season.
Building Supply Shortages
It’s not just homes in short supply, building materials became hard to come by. The pandemic didn’t have every homeowner shopping for a new space, many decided to revamp their current one. With sports, concerts, vacations and other events canceled, people filled their empty time at home with remodeling projects. The unexpected rush on building supplies coupled with shutdowns and shipping slowdowns caused a supply shortage.
The pandemic came fast and manufacturers and retail stores weren’t prepared for the rush on materials. In many cases, homeowners are waiting weeks if not months for supplies. And it’s not just homeowners, homebuilders are also feeling the effects.
Lumber Price Spike
One of the biggest challenges homeowners and homebuilders are facing is the extreme spike in lumber prices. When lumber mills shut down due to safety precautions at the start of the pandemic, it quickly
created a shortage of raw materials. This was then made even worse by the unexpected increase in demand due to people wanting to buy homes or remodel existing ones.
NAHB says lumber prices have spiked by nearly 200% since pre-pandemic levels. The organization says the price of an average single-family home has increased by almost $25,000 in the past year. This price is too high for many consumers. Many projects and even home builds have been put on hold. Unfortunately, housing’s potential to boost the economy is limited while lumber remains so expensive.