The Municipality of Anchorage
Our market includes the Anchorage bowl and suburban locations from Eklutna, Chugiak and Eagle River to the North, Joint Base Elmendorf-Richardson, and south along Turnagain Arm through Girdwood.
Housing choices in Anchorage range from luxury homes costing over $1 million (with only a handful significantly above $1 million), upper-end homes from about $500,000 to $1 million, mid-range homes from about $250,000 to $500,000, and entry-level homes under $250,000. The 2015 average home cost in Anchorage was just over $366,585. Entry-level homes are often in duplex configurations, with or without land ownership and a homeowner’s association. Alaska MLS categorizes anything without land ownership as a condo, no matter how the structure is configured.
Not all the Anchorage bowl is serviced by public water and sewer. Private wells and septic systems require more land per dwelling. The Anchorage Hillside, and the northern suburbs, therefore offer larger lots, usually a half-acre or more, and a more rural lifestyle. By contrast, traditional neighborhoods served by public utilities have lots generally less than a quarter-acre, with about 7500 sq.ft. being common. One of the first choices people seem to make is whether to live in a traditional neighborhood or somewhat in the country. No locations in the Anchorage bowl are more than about 40 minutes away from everywhere else, making commuting and getting around town quite easy completed with major cities in the Lower 48.
Anchorage homes come in a variety of design and décor schemes. Among newer homes from somewhat below median values a two-story design is common and popular. Main living areas are usually on one floor, most often at street level, with bedrooms upstairs. Larger homes, over about 2800 sq.ft., will often have a third level below the two-story plan which can include additional living areas, bedrooms, recreation rooms and often access to the back yard. Older homes, priced below the Anchorage median in most cases, include split entry configurations with bedrooms and living areas on both floors.
New homes in the Anchorage bowl have long been subject to plans review, after being stamped by an private engineer, plus building safety inspections at every stage of construction. (Areas north and south of the Anchorage bowl, such as Eagle River/Chugiak, and Girdwood, are exceptions. Only a land use permit is required in those areas.)
Rental housing has historically been limited to a handful of single family homes, plus apartments found in apartment complexes and smaller buildings. Fourplex apartment configurations are common at the entry level.
Land in the Anchorage bowl has largely been built out, so new construction has been limited. While replacement with new homes at a rate of well over 1000 would keep pace with need, new home construction has lagged. Anchorage’s Building Safety Department issued only 276 permits for single family homes in 2015, down from 293 in 2014.
Home buyers new to the area often find a measure of sticker shock when considering Anchorage home prices. However, prevailing wage scales are proportionately higher, and some employers offer cost-of-living adjustments to their Anchorage employees.
Anchorage homes have appreciated significantly over the long-term, consistent with the general observation that real estate as an investment works well when held for a long time. Anchorage has been subject to significant short-term fluctuations, however, always tied to employment and population trends.
The most severe downturns were after construction of the Alaska Pipeline in 1978, and a big downturn in 1986 when low oil prices led to significant cutbacks in force levels at the same time that Anchorage completed massive infrastructure projects fueled by oil revenue, and (forgotten by most) the Federal Tax Reform Act of 1986 which disadvantaged many forms of real estate investment and brought on bank failures all over the country, including Alaska.
Recovery periods, which were just as rapid, came in the early 1980’s, when oil revenue from the pipeline flooded the state treasury, and in 1989, when as much as $3 billion was poured into Alaska’s small economy after the Exxon Valdez oil spill. Since the early 1990’s, population trends, employment levels, and home prices appreciated slowly and steadily. Alaska found itself hardly affected by the bursting of the tech bubble early in the 2000 decade, and the real estate crash of 2008 that was brought on by mortgage failures.
The most recent six years saw continued growth in home values -- 14.2% from 2009 to 2015 -- attributed to strong demand against a short inventory caused largely by a lack of new home construction. By late 2015, however, signs of a cresting of the market began to appear, and continued into the first quarter of 2016.
Low oil prices threaten state revenue; without the other types of taxes that Lower 48 states have, Alaska has a budget shortfall of over $4 billion. If employment levels in the private sector fall, and state government shrinks dramatically and is forced to create taxes not seen in 35 years, then declines in real estate values are inevitable. A soft landing is possible because of Alaska’s huge savings accounts, but there is significant public pressure to leave those funds in place, and not impose new taxes.