Our blog for AlaskaHomeSellers.com is designed to keep our customers informed about what is happening in the real estate market as well as educate about the real estate process. We try our best to help our people stay ahead of the curve. Sometimes we will throw a local interest story in or something else we find noteworthy. Please enjoy, share and comment.
How friends of mine could have saved $30,000 on their income taxes! Love to save on taxes? Read on...
My day is often faced with "damned if you do, and damned if you don't" moments, but recently I had something happen that made me realize that being too passive actually cost some new friends nearly $30,000...shame on me!
When we were introduced a few years back we never really had a conversation other than just casual small talk and pleasantries. But over the last few years we've gotten to be much better friends so we were who they thought of when they were recently in the market for an investment property.
As we discussed the market and what their goals were, they stated that they sold a property out of state a few years ago and were tired of their money sitting in a bank earning practically zero interest. When I learned what the property out of state sold for and what their basis was, I felt almost sick to my stomach as I instantly started to estimate in my head what the capital gains tax liability would have been for them. When I brought the subject up and asked what the capital gains taxes were, my mental estimate was just about exactly right.
Our industry is such that if we're too much in your face, we come off as too "salesy", or too pushy, but had I learned what was going on in their world back then, that nearly $30,000 that was sent to the Internal Revenue Service could have been leveraged in order to purchase another investment property here in Alaska's Matsu Valley.
Instead of mailing a check for nearly $30,000 to the Internal Revenue Service, a better strategy would have been to perform a IRS .1031 Exchange.
Be somewhat cautious with this information though as the rules are always changing making it imperative that you consult with your accountant, along with a qualified intermediary for competent counsel. Alaska Exchange is a locally owned qualified intermediary and can help answer many of your questions. You can find out more about them by clicking on this link. These transactions can be performed quite easily if you have competent counsel throughout the process.
What I've learned over the years is that the best strategy for performing a .1031 exchange is to have a plan pretty well laid out before you sell your property so that you aren't forced to make rash decisions 40-45 days after you sell your property. If you're thinking of selling an investment property you can get an idea what it's worth by visiting our website for home values, and if you are wondering what is out there to re-invest in, you can check out our website containing current properties for sale
One of the most memorable times that this strategy was employed was with a new client that was referred to me that had a significant need for some sound advice. When I learned what his situation was, I suggested he look into the .1031 exchange in order to avoid paying over $250,000 in capital gains taxes. His eyes practically popped out from shock when he heard about this...and to be quite honest, I don't think he believed me. After advising him to contact his accountant to verify the information that he had just learned about, he set off to find out if it was true. When he called back a couple of days later, he was wound up tighter than an 8-day watch and said that his account told him that whoever he was talking to had given him really good advice and knew what they were talking about.
When the transactions closed a few months later, he was so excited he wanted to kiss me...but I told him that was ok and that a handshake would be just fine. LOL
If you're planning to sell an investment property this year and would like to discuss how the process works and how it could work for you, give me a call at the office so we can discuss what your goals are and what would be the best route to accomplish them for you.
Greg Shepard Associate Broker, REALTOR, GRI, SFR Jack White Real Estate Matsu Office (907)352-1828
The best barometer for a real estate market is a calculation called the absorption rate...and based on the current absorption rates for the Matsu Valley's real estate market, it indicates that it is a seller's market!
As a general rule of thumb, an absorption rate of under 15% is an indicator of a buyer's market as homes are not selling very quickly. Conversely an absorption rate of 20% or more is an indicator of a seller's market as homes are selling quickly.
In calculating our 2018 market as we head into the spring selling season, the absorption rate for the entire Matsu Borough real estate market is 22.85% with Wasilla's absorption rate just slightly higher at 24.7%. The Palmer's absorption rate is at a whopping 35.99%!
Although these areas had less overall sales in 2017 than in 2016, most areas experienced a slight increase in average pricing year over year.
If you're considering selling in 2018 check out our website to get an idea as to what your home is worth in today's market.
Feel free to call our office at (907)352-1828 to ask for a more specific report that's customized right down to your neighborhood to see what the outlook is for you.
"How much is it for a gallon of milk in Alaska?!!" is often one of the questions that people have when they consider buying a home in Alaska as there is a phobia of grocery prices based on reality TV, folklore, etc. as we all have heard about the $8 gallon of milk in Alaska.
In order to dispel those fears, I took a few photos of various grocery items at the local Wal-Mart store in Wasilla Alaska on 4-4-16. I chose Wal-Mart as they are commonly found in almost every state and would be the easiest for you to compare prices to. While we have other grocery stores here, Wal-Mart was the one that seemed to be the best choice for the purposes of this post.
The price of butter has been fluctuating a lot lately and can often be bought for around $4/pound for store brands.
The same thing can be said for ice cream lately too. If you watch the sales, it can be bought for around $3.50 for a tub like this.
The kids used to eat a lot of these but not as much anymore as they have taken to eating a healthier homemade version.
When we don't have moose/caribou burger and have to buy burger in the store, we prefer the ground chuck over the other choices. And what burger is complete without a splash of ketchup on top with some french fries and Ranch dressing?! If you do have moose burger, you have to try this moose burger recipe!
Our youngest is the baker in the family and makes the best chocolate chip cookies in the Matsu Valley!
You can't beat a grilled cheese sandwich on sourdough bread with tomato soup on a cold winter day in Alaska! If you don't have any sourdough starter let us know as we have a starter that has roots going back over a 100 years in Alaska.
Anyone that has ever been to Alaska knows that we LOVE our coffee...it's hard to drive a mile around any of the main roads in the Matsu Valley and not come across a coffee hut.
For the non-coffee drinkers here is a case of Pepsi for you to compare prices to if you are a cola drinker.
For your real estate needs, feel free to stop by our website to see what the real estate market is currently doing. You can call my office at (907)352-1828 with any questions that you may have regarding the market as well.
When I first talk to people that are considering a move to Alaska and they learn that we actually do things during the winter they often will ask, "But isn't it dark all day during the winter in Alaska?" Not here in the Matsu Valley! Are the days shorter this time of year than they are during the summer? Of course, but they certainly aren't pitch black all day. As a bonus, it creates some of the most extraordinary ambient light during the sunrise and sunsets that can be found on earth.
For many, the thought of moving to Alaska seems to conjure up fears of how dark it will/must be, especially during the winter solstice in the Matsu Valley. From personal experience, I can tell you that was a concern of mine as well before we moved here years ago. For many, the thought of being plunged into perpetual darkness the day after Labor Day Weekend is a very real fear.
In order to dispel some of those fears, and to further illustrate that not only is it not pitch black all day, it's always an adventure to get out and enjoy the day of the year with the least amount of daylight so we headed out for a hike to one of our favorite spots.
The skies were going to be clear and although the temperatures were only about 5 degrees above zero, I finally fulfilled a goal that I've had for a few years by hiking to the top of Bodenburg Butte (The Butte) at noon on the winter solstice. Having made the hike 4 times out of the last 5 summer solstices at midnight to take in the day of the year with most amount of daylight, I wanted to see what it looked like at noon on the day of the year with the least amount of daylight.
Part of my mission was also to climb to the top of The Butte to gain a better vantage point in order to document for our incoming clients just how much of an impact the Chugach Range plays in casting a shadow across much of the areas that we serve. For those that feel that they would go a little 'stir crazy' without having direct sunlight for a couple of months during the winter months, I felt it would be helpful to know how big of an area that the shadow actually covered.
As expected, we were in the shadow of The Butte when we arrived in the parking area and were even entirely covered by the shadow of Pioneer Peak once we made the summit. Although it was daylight, there was no direct sunlight on the top of The Butte as the sun didn't quite get high enough to clear Pioneer Peak.
As you can see by the photos, the shadows cast from Pioneer Peak and Twin Peaks of the Chugach Range extend across much of the Matanuska Susitna Valley. The further north or west you go in the Matsu Valley, the better odds are that you will be able to enjoy direct sunlight during the winter, with the Chugach Range losing some height as well as angling more to the southwest allowing the sun to be out longer in those areas. The sun was out for 5 hours, 27 minutes and 41 seconds the day of the winter solstice but it was certainly a beautiful day for a hike.
The following video captures a 360 degree view from the top of The Butte. It was shot at 1PM on the day of the winter solstice.
The trail up the north side of the The Butte was a little icy in spots but we made it up and down without any falls. Unfortunately with the low temperatures, our phone batteries were very short lived so we didn't get as many photos as we had hoped for but I think that you will get a pretty good feel for what it looked like.
The views certainly were extraordinary and even our dog had a full day of exercise getting to the top of The Butte...he wouldn't have missed it for the world as it is one of his favorite hikes too!
After the trek to the top of The Butte, we stopped at Dairy Queen in Palmer to replenish some of the calories that we burned on the hike. As a bonus, the moon was just starting to come up over the mountains at about 3:21 PM and the Palmer water tower in the foreground made for a scenic photo too.
Although this post doesn't contain much information about the Matsu Valley real estate market, it does shed some light (pun intended) on what life is like here...and we felt that it is important for you to know what it's like so that you can determine if it's a place that you would be comfortable living.
For information about the Alaska real estate market visit our website to find out how to turn this extraordinary area into the place that you too will be proud to call home! If you have questions about the area feel free to call my office at (907)352-1828 or send an email to Greg@AlaskaHomeSellers.com.
Since the Federal Reserve's announcement this week that they were raising their rate from 0% to .25%, the 10 year Treasury has actually went down slightly. Stated differently, the increase in the Federal Reserve has not equated to an increase at all in mortgage interest rates. Yet.
Treasury bonds are traded in the world market, and as such, are being compared to other country's bonds by investors. With the turmoil occurring in other regions of the world, particularly European countries, world investors seeking higher returns are looking elsewhere.
As a general rule of thumb, the Federal Reserve raising interest rates is a way to curb inflation which normally translates to higher mortgage interest rates. So we'll continue to monitor this over the next year to see where this goes, but we expect a gradual increase in mortgage interest rates over this period.
In looking at the Year over Year numbers for home sales in the Matanuska Susitna Borough, there is something that jumps out as more of a factor for home prices into 2016 than an increase in mortgage interest rates. The average price of home prices in the Matsu is up 6% Year over Year shown by the report below.
With an increase in the average sale price of 6% Year over Year, combined with an increase in mortgage interest rates of 1%, the monthly price difference is quite dramatic. Many home buyers are hoping for home prices to drop in order to get a better 'deal', but based on the report below, that train of thought results in considerable increased costs on a monthly basis, showing an additional cost of over $200 a month. Over 7 years that equates to $17,623!
In addition to the loss by waiting, those renting in the Matsu might not know that the price of rent is usually much higher than actually owning when you take into account the added cost benefits such as principle reduction, appreciation, and income tax savings. The worksheet below illustrates the difference between renting vs owning here in the Matsu Valley housing market.
As you can see by the worksheet above, the actual cost of home ownership instead over renting actually results in an income to the home buyer of about $164 a month after the principle reduction, appreciation and income tax savings are factored in Read that again...based on a very accurate model of the current Matsu real estate market, your home actually paid you $164 a month to live there given the example shown above!
When you factor in the Cost of Waiting and Rent vs Own worksheets the total amount of money saved/earned is $198,929 over 7 years if all factors stay the same over that period.
Can all of these factors change in future? Unquestionably. But based on the information that we are currently monitoring, this is a very accurate snapshot of what your housing needs would look like based on the averages currently found here in the Matsu Valley housing market.
If you have questions about your specific housing needs, we can prepare a customized analysis for you based on your actual situation. If you are in the market to buy, simply log on to our website to perform a search to see what the market is currently like. If you have to sell your current home, you can log on to our website's selling page to find out more. I will do a blog about that later in the week to show you what the differences in what doing that now looks like too.
You can always call our office to speak with us directly too at (907)414-9456, or email me at Greg@AlaskaHomeSellers.com
Have a great week!
Jack White Real Estate Matsu Office
Is it time to sell my Alaska rental home you ask? Many homeowners over the last few years have opted to rent out their homes rather than sell them as they didn't have enough equity to sell without having to come to closing with a check. For those homeowners that were 'upside down' or 'underwater', as it is commonly referred to, renting the home was an acceptable alternative.
If you have a home in Alaska and are curious about the value CLICK HERE for a fast easy evaluation. We at Alaska Home Sellers feel that there are a couple of things that you might want to consider. If your goal was never to become a permanent landlord there are some timelines that you don't want to overlook. And if you have lost touch with the current values of homes in the Mat-Su, it might be time to revisit the idea.
For many because they couldn't sell before they moved, they have been forced to rent at their new destination because they had always hoped that there would be equity in their home that they could carry forward to use to purchase their next one. For many that have left the state of Alaska and have moved to the lower 48, they may also want to factor in what the appreciation rates are in their new state to help determine if selling here (albeit not as much as they hoped) might be a good financial move in order to to purchase sooner there. For many that purchased at the peak of the market in Alaska in 2007-2008 and then tried to sell in 2011-2012, they found that their properties hadn't appreciated enough to cover the costs associated with selling. Many then opted to rent it out and cross their fingers and hope that the market would come back. If you have been wondering if now is the time to sell your Alaska rental, it could just be....but more on that shortly.
Did you know that the IRS has specific rules about the length of time that you can be out of your primary residence and still be excluded from a capital gains tax? IRS Publication 523 has a wealth of information that you need to know about if you are one of those homeowners that rented out your home over the last few years. In it there is a section regarding "Ownership and Use Tests" and that is the section that you might want to pay particular attention to. It reads:
Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the
date of the sale, you must have:
Owned the home for at least 2 years (the ownership test), and
Lived in the home as your main home for at least 2 years (the use test).
What does that mean? Here are some examples that it gives:
Example 1—home owned and occupied for at least 2 years.
Mya bought and moved into her main home in
September 2011. She sold the home at a gain in October 2013. During the
period ending on the date of sale in October 2013,
she owned and lived in the home for more than 2 years. She meets the
and use tests.
Example 2—ownership test met but use test not met.
Ayden bought a home, lived in it for 6 months,
moved out, and never occupied the home again. He later sold the home for
gain in June 2013. He owned the home during the
entire 5-year period ending on the date of sale. He meets the ownership
but not the use test. He cannot exclude any part of
his gain on the sale unless he qualified for a reduced maximum exclusion.
Period of Ownership and Use
The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous
nor do they both have to occur at the same time.
You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or
730 days (365 × 2) during the 5-year period ending on the date of sale.
For a homeowner that rented out their home for the last couple of years because they couldn't afford to sell, now could be faced with a capital gains tax on the proceeds of the sale if they have waited too long and no longer can meet the Ownership and Use Tests.
Many homeowners may not have kept a close pulse on the real estate market in Alaska after moving and may not know that property values have been on the increase, and particularly so over the last year. CLICK HERE for a look at Sold vs. List Price. We pulled up 99654 for this example. To find out another area, simply change the zip code to find out info about the area you are interested in. If you have a home in the Matsu Valley that you have rented out because you were upside down, the environment hasn't been better in years to reanalyze your position and determine if now is the right time for you. If you are getting to a point where time is of the essence, you will also be happy to know that approximately 1/3 of the pending home sales have occurred within 10 days at the moment, as buyers are scrambling to purchase before someone else beats them to it. Take a look at current listing prices here.
If you are curious as to the current value of the property, you can fill out this short form to obtain an approximate idea as to what it's worth.
As it relates to tax matters, we always recommend discussing the tax ramifications with an accountant or other tax professional in order to find out how it will impact you.
Why Do People Live in The Ranch and Creekside at the Ranch Subdivisions?
The Ranch and the new Creekside at The Ranch addition is a large neighborhood of single family homes, situated between the cities of Palmer and Wasilla, AK and located within a short distance of the Parks Highway. One of the big draws to this neighborhood is the proximity to the Machetanz Elementary School and of course the gorgeous neighborhood and beautiful surroundings.
What's the Neighborhood Like?
The homes you would expect to find for sale in The Ranch and Creekside at the Ranch Subdivision are generally going to range between 1460 and 4713 square feet. Most of the homes were built starting 2005 to 2014. The typical configuration is mainly 3 to 5 bedrooms and 2 baths. The lots are approximately a little less than an acre to almost a full acre, most being at around 1/2 acre.
What's Going on Nearby These Subdivisions?
The Ranch and Creekside at the Ranch is conveniently located just off the Parks Highway between Palmer and Wasilla, Alaska and it is an excellent commute location to Anchorage and JBER. Mat-Su Regional Medical Center is close by as well as big box discount shopping areas, most chain fast food establishments, as well as the local movie theater within 10 minutes. In addition we have a wonderful collection of local favorite restaurants, including Locals. Find out about The Ranch and the surrounding area's community information including banks, schools, shopping and what the community statistics are at my web page.
What Schools are nearby?
If you buy a home for sale in The Ranch Subdivision and Creekside at The Ranch of Wasilla AK, the local schools serving this area are Machetanz Elementary School as well as Colony Middle and High School. To get local school scores and more information about these schools check out the Wasilla school reports on my website.
Because the area is in a growth phase sometimes school boundaries change, so you will need to reconfirm this.