Alaska Real Estate is in a Stong Seller's Market

Alaska Real Estate is in a Strong Seller's Market.

The supply and demand ratio has tipped in the odds of the seller.  If you are curious what your home value is PLEASE CLICK HERE FOR MORE INFORMATION

Future House Values? Simple as Supply and Demand
For some time now, we have attempted to shed light on the fact that pricing in today’s real estate market, as it is in the markets for every other saleable item, will be determined by the concept of ‘supply and demand’.

According to dictionary.com:

“The relationship between supply and demand determines the price of a commodity. This relationship is thought to be the driving force in a free market.”

In real estate, supply and demand is represented as the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).

While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline:

• 1-4 months supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
• 5-6 months supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.
• 7-8 months supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.

What is happening across the country right now?

In most parts of the country, home values are rising. This is for two reasons:

1. According to NAR’s latest Existing Homes Sales Report, raw unsold inventory is at the lowest level since December 1999 when there were 1.71 million homes on the market.
2. According to this month’s Pending Sales Report from NAR, houses going into contract reached levels last seen in April 2010 which was the month the Home Buyers' Tax Credit expired.

This has resulted in a 4.2-month supply at the current sales pace which is the lowest housing supply since April 2005 when it was also 4.2 months.

Based on the table above, we can see that the supply/demand ratio is leaning toward a sellers’ market where prices will appreciate. That has created positive movement in housing values in most parts of the country.

IS BUYING A HOME IN ALASKA LESS EXPENSIVE THAN RENTING?

Is buying a home in Alaska less expensive than renting?  Buying Alaska Real Estate can often be approximately 50% cheaper than renting when the added advantages of appreciation and income tax savings are factored in.  If you wish to find out what's best for you, feel free to contact us on our website at Alaska Home Sellers.  You can also look at Mat-Su homes for sale here to see what your money will buy in the Wasilla Real Estate market.

A couple of months ago we blogged about the concept of the Boomerang Buyers that are coming into the Alaska Real Estate market, and how I feel they are going to further drive inventories lower and therefore resulting in higher prices in the months to come.  And when combined with our blog on Interest Rates and what is happening with the Anchorage Housing Shortage you can begin to gain some insight as to how these pieces of the Alaska Real Estate puzzle all start to fit together.   

According to Trulia's Winter 2014 "Rent vs Buy Report", it is 38% less expensive to buy than rent in 100 of the nation's largest metro areas.  Here is a link to the full story Trulia's Rent vs Buy Report Winter 2014.
  
There is even a very cool calculator on there that allows you to input your specific area and to use the sliding scales to find out more for your unique situation.  The link to the calculator can be found here Rent vs Buy Calculator.   As the article points out, the financial advantage to buying vs renting will lessen with an increase in home prices when also combined with higher interest rates.  We are already seeing an increase in both home prices and interest rates for home buyers in Alaska.  There is never a "one size fits all" answer to questions like this and it is only after counselling sessions with a competent real estate professional and an accountant that the answer will become more clear for your particular situation.  As Residential Finance Consultants, we employ even more empowering calculators to design a customized analysis tailored specifically for you.  

If you are a current homeowner and are contemplating a move you can visit our website and fill out this Short Form to obtain a quick estimate on your Alaska Home's Value.  We can prepare an analysis for you illustrating what the financial aspects of making a move now look like compared to waiting.

We can also be reached at (907)352-1828 to privately discuss your Alaska Real Estate goals.

Greg Shepard
Associate Broker GRI, SFR, RFC
Jack White Real Estate Mat-Su

WILL 2014 PROVE TO BE THE YEAR OF GROWTH?

Will 2014 prove to be the year of growth?  We at Alaska Home Sellers absolutely believe it will be.  2013 proved to be the year of stabilization as investors purchased an enormous amount of the "low hanging fruit", including the thousands of foreclosures that were available.  They were compelled to enter the market and invest after they watched from the sidelines during much of 2012 to see if the bottom had indeed drawn near and the market would start to recover.  And when they jumped 'feet first' into the market over the last 12-18 months they substantially, and knowingly, reduced the remaining inventory (homes for sale) levels causing a rapid increase in values.  With real estate being a market like anything else, it is predicated on a "supply vs demand" principal.  The more demand there is for something, the price naturally increases on the remaining supply.  
 
In an ideal world, you would always like to buy at the bottom of a market and sell at the top...but all too often, when the consumer 'senses' the market has hit the bottom, it has already made it through the lowest point and has already started back up.  Conversely, when a seller 'senses' that the market is at it's peak and tries to time their sale, the market has often already started a downward trend.

The investors over the last 12-18 months have hedged their bets with a bit of 'insider trading' of sorts.  Knowing that the price of the housing would increase with a decreased supply, they purchased untold amounts of it with that knowledge.  In a way...they were hedging that bet by purchasing placing large volumes of real estate (in many cases entire blocks filled with empty housing) into their portfolios and renting them out knowing that their asset would gain almost instant equity by virtue of the supply vs demand dynamic.  They know that reducing the inventory increases the price. 

It's in large part why areas like Nevada have experienced phenomenal year over year appreciation as illustrated in map below compiled by FHFA's third quarter report in 2013.

The bi-product of their investing has had a pleasant side affect that existing homeowners have been able to take advantage of.  Rather than being subjected to a long protracted recovery, the investor involvement has accelerated the recovery exponentially.  As you look at the map above, you will see those areas that were hit the hardest during the housing bubble bursting, are recovering at a much higher rate than those areas that were least hit.  Investors aren't interested in single digit returns on their money...they are interested in the big returns! 

And with the values rapidly recovering, the number of mortgage delinquencies is on a sharp decline as well.  Homeowners over the last few years that were 'upside down' in their homes and couldn't afford to sell because they would have to bring a check to the closing table, are suddenly learning that the market has often recovered to a point where they can now sell and actually walk away with a check in many cases.  And voilà, delinquencies are dropping like a rock.  The following map is from the National Association of REALTORS from December 2013.

We at Alaska Home Sellers feel that there is an ENORMOUS amount of pent up energy with existing homeowners that would love to be able to move...maybe to a larger home due to an increase in family size, or that have job opportunities in another area but couldn't accept them due to their negative equity positions in their existing homes.  Not only do we feel that 2014 will be the year of growth, we are starting to see signs of it being larger than even the experts are predicting.  All of this teamed up with our post about the Boomerang Buyers a couple of weeks ago is further evidence that 2014 will prove to be the year of growth.  

 

Of course all real estate is local...and Alaska real estate is no different.  The Matsu real estate market is off and running for the year so if you have been sitting on the sidelines trying to decide what to do, this might be your year to make the move that you have been dreaming of.  

There is no substitute for competent counsel and advice when it comes to making decisions regarding large financial matters.  If you are curious how the local market is impacting you and would like to get our professional advice along with a customized analysis based on your individual real estate goals, you can call our office at (907)352-1828 to set up an appointment to discuss them.  

ALASKA BOOMERANG BUYERS ARE TAKING AIM AT THE HOUSING MARKET

Alaska Boomerang Buyers will be taking aim at the housing market over the next 2-3 years and if you aren't familiar with the term, you will soon start to hearing more and more about it.  The impact of the Boomerang Buyer is we are seeing a strong Seller's market here in the Mat-Su Valley and the inventory supplies are low in the most popular price ranges.  

For current information on homes for sale in the Mat-Su please click Mat-Su Homes for Sale or if you would like to find out how the Boomerang Buyers entering back into the market can impact your home's value, Click Here and fill out a short form.

A "Boomerang Buyer" is someone that has lost a home through the foreclosure process or other credit damaging event, and is working on repairing their credit (and in many cases already has) and wants back in to the home ownership arena.  The following illustration is from AfterForeclosure.com and highlights where we are currently at in the recovery process for those buyers and is an absolute bright spot for the real estate market in the coming years.  

There is also a very informative article on their webpage that you can read here 2014 Needs the Boomerang Buyer.  

Why do we at Alaska Home Sellers feel that it is especially applicable here?  We have seen an influx of in-migration into the state over the last few years as the employment opportunities here are greater than where they are moving from.  Many of the residents that have moved here over the last 3-5 years did so to seek a better financial environment, but due to the financial hardship where they were at either have a foreclosure, a short sale, or a deed-in-lieu of foreclosure and have been forced to rent once they arrived here.  

For many of our new arrivals, they fit the above illustration to a "T" and we are already starting to see evidence of them coming back into the housing market.  Something that the illustration doesn't address is how they will view the current interest rates.  Don't think for one minute that it went under their radar when interest rates were around 3% a year ago!  But for many, they were helpless to do anything due to the prior blip on their credit.  If you also think back to where we were at in 2006 when the housing market started it's collapse, interest rates were around 6.5%.  At 6.5%, it was still well below the 40 year average, but yet it's nearly 50% higher than where they are at today.  The following graph represents a snap shot of mortgage interest rates dating back to 1971 from Freddie Mac's Primary Mortgage Market Survey and compiled by www.calculatedriskblog.com.

What does all of this all mean?  

We are convinced that not only did we see a substantial increase in the number of transactions last year in the Matsu Real Estate Market, but it was also combined with a healthy 2% increase in average pricing.  We feel that as the Boomerang Buyers continue to gain financial traction, that they will put even further downward pressure on the declining inventory levels locally, creating an even larger increase in pricing in 2014.  

We also know that there are buyers that opted out last year thinking that mortgage interest rates were going to stay around where they were, and hoped they might even go lower.  But that have now realized that the "Mortgage Interest Rate Horse" is out of the barn and may be nearly impossible to put back in.

You can obtain real estate market information on the various communities in the Matsu Valley in Alaska by visiting this link Wasilla, Alaska Housing Market Insider Data.  Based on the last quarter of 2013, it appears that the trend is clearly toward higher pricing in 2014 as you can see by the illustration below.  Once there you can enter other zip codes in Alaska that you would like to obtain similar data on as well.

We see some definite trends starting to emerge as we hit the 2014 season and welcome you to come back to gain valuable local information presented in a logical format that you can use to determine what the best options are for you.

For current information on homes for sale in the Matsu please click Matsu Homes for Sale or if you would like to find out how the Boomerang Buyers entering back into the market can impact your home's value, click here and fill out a short form.

You can visit our website at Alaska Home Sellers or call our office at (907)352-1828 to privately discuss your real estate goals.