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Home prices in Southcentral Alaska highest ever

Alex DeMarban
Loren Holmes photo

A red-hot real estate market produced blistering sales and shot home prices to record highs in Southcentral Alaska for the second year in a row, with the average price of a single-family home going for nearly $350,000 in Anchorage and nearly $240,000 in the Mat-Su Valley.

"This is by far the best year we've had since the beginning of the downturn (in 2007)," said Mike Rasmussen, president elect of the Anchorage Association of Realtors. "It has been dramatic both in prices and in sales."

While the market sizzled over summer, October looks to be another strong month, according to data from the Alaska Municipal Listing Service. That's because the number of homes with offers pending were up substantially in September over the same month in 2012. That was especially true in Palmer and Wasilla, which saw 134 pending sales in September, compared to 70 the year before.

In Anchorage, single-family homes have sold especially fast this year, sitting on the market for 46 days on average, a pace not seen since 2006. Homes have sold about 50 percent faster than they did just two years ago. The rapid selling comes as Anchorage enjoys a resurgence in construction, led largely by new commercial and office permits, with new housing playing a smaller role.     

Sparking the home-selling frenzy is the usual matrix of supply and demand, compounded by Southcentral Alaska's unique factors, such as limited land and soaring rents that in some cases make buying a home cheaper, realtors say. Meanwhile, fears that interest rates would continue rising -- they've pushed past 4 percent but remain historically low -- have helped super-charge the market.

Niel Thomas, with Coldwell Banker, said competition among buyers has sometimes been fierce. A client of his bid on six different homes this summer, offering the asking price or more. But he lost out every time.

"He was really getting frustrated," said Thomas. "He was not the only one, too."

The strong "seller's market" in Anchorage had residual effects for Wasilla and Palmer, as potential Anchorage buyers suffering from sticker shock looked north -- and did the math.

With single-family homes in the valley selling for an average of $237,000 -- about $110,000 less than in Anchorage -- many buyers realized cheaper mortgages would more than offset the higher gas prices for the 45-minute commute, said Michael Droege, president of the Alaska Association of Realtors.

That has helped make Palmer a rising star in the Southcentral market, equal to its bigger sister city of Wasilla in terms of quality and price, said Droege. Palmer, with about 6,500 residents, is drawing buyers looking for larger lots and newer homes than they can get in Anchorage, yet with all the comforts, said Droege.

In Palmer in 2013, 28 percent more homes have sold compared to this time last year, with 256 moving compared to 200, he said.

"Palmer has come into its own as a growing market," he said. "It has amenities people are used to seeing in Anchorage and don't always associate with Palmer or Wasilla. People realize it's no muss, no fuss, they don't have to buy a remote parcel and put in a road and septic -- the streets are paved, and there are sidewalks, curbs and gutters."

Wasilla continues to enjoy a strong market. Home sales in that city are up 23 percent to date, compared to the same time last year, with 695 homes sold versus 568.

As for Anchorage, 15 percent more homes have sold than the same time last year, 1,756 compared to 1,529. The price for an average single-family home jumped noticeably upward in 2012, after wavering around $320,000 for about six years. Prices rose to $337,000 last year, rising 5 percent, then hit $346,000 this year, rising 3 percent.

The last big surge in Anchorage home prices came early last decade, with costs rising much faster than they are today, sparking new construction, said Rasmussen. Then the Great Recession began in 2007, adding some foreclosed homes to help create a surplus of properties.

But while home values across the nation collapsed, prices in Anchorage largely stayed flat, as the state's oil-based economy kept chugging along and unemployment remained low. Anchorage's ever-changing military population helped stabilize the market, with the Veteran's Administration extending credit for mortgages as other lending had tightened.

With rental costs also soaring in recent years, many found it was cheaper to pay monthly mortgages than rents, adding to the numbers of people looking for a home, said Rasmussen.

And last year, the number of houses for sale began to get smaller as the months went by, setting the stage for this summer's hot real-estate market, Thomas said.  

Builders are erecting more homes across Southcentral, but it won't be enough to pull down prices, said Droege. Builders are generally erecting homes on an as-needed basis, and not on spec. Meanwhile, the price of land and materials -- driven by the relatively high price of oil and transportation -- are continuing to rise, he said.

"The big thing that could reduce the cost of housing is available, affordable land, which is why for me, I look at the landscape and think we need a bridge across Knik, and a bedroom community 2.5 miles from Anchorage. The cost of land would be precipitously less and that would reduce the average cost of housing."

Contact Alex DeMarban at alex(at)alaskadispatch.com