Anchorage housing market
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Bidding wars give way to buyer bargaining power
Price rises slow, and the housing supply is large
By RICHARD RICHTMYER
Anchorage Daily News
Published: September 10, 2006
Last Modified: September 10, 2006 at 04:30 AM
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When Karl and Kirsten Davis went looking for a new house this summer, there was no shortage of prospects.
They wanted a bigger place in a quiet neighborhood with a nice yard where their two young daughters, Mari and Katelyn, could play. The one they picked, a four-bedroom on a cul-de-sac in a mature Old Turnagain subdivision, was one of many they had checked out during their hunt.
"There were tons of houses," Karl Davis said.
After sorting through scores of houses in the Alaska Multiple Listing Service's Web site, they narrowed the search to about 20 they visited, never feeling pressured to make a quick offer, Davis said.
"We bided our time, looked around and found a couple that we liked," he said.
In fact, they made an offer on a house they liked but walked away from after the seller countered the proposal trying to get a higher price, Davis said.
Cooling prices and a much larger supply of houses to choose from have given buyers more bargaining power than they've had in recent years, when double-digit appreciation rates, a tight inventory and rock-bottom mortgage interest rates made for a red-hot sellers market.
A LESSENING MARKET
There is no definitive measure of how Anchorage's housing market is doing, but the Alaska Multiple Listing Service tracks sales and pricing information from real estate agents, giving a good snapshot of a large portion of the market.
The MLS figures, however, do not include houses sold by their owners, a practice that became more common in the sellers market.
The average selling price of a single- family house in Anchorage last year was $291,013, according to the Multiple Listing Service, an association that tracks the housing market for real estate agents. That was a 12 percent increase over 2004, the biggest jump in more than a decade.
As of the end of July, the average selling price of an Anchorage house had risen only 6.5 percent to $309,824, the MLS figures show.
At the same time, the number of houses on the market has swollen compared with recent years, a trend that started in late spring. As of August, more than 1,100 houses were listed for sale, compared with 620 a year earlier. Most houses for sale in August were priced between $250,000 and $500,000, according to the MLS figures.
Although supply is up, demand for houses appears to have remained relatively stable.
Many sellers are having trouble coming to grips with the more modest appreciation rates and want to price their houses as if double-digit increases are still the norm, said Elaine Bales, who owns Assist-2-Sell Real Estate, a small agency that mostly represents sellers in Anchorage.
"They're still pie in the sky," she said. "I tell them that what happened last year at this time isn't going to matter. It's what's happened in the last six months."
Most come back to earth after enough potential buyers -- like the Davis family -- make offers below the listed price and then walk away after the sellers ask for more, Bales said.
OWNERS SENSE A PEAK
Last summer, bidding wars where multiple buyers submitted offers for the same house were common. Now some sellers are snatching up any offer they get, said Belinda Wallace, an agent at Northern Trust Real Estate.
Recently, a client who was asking $169,000 for her East Anchorage ranch house took $159,000 for it after it had sat on the market for two months without any offers, Wallace said.
"She took it because she was nervous after hearing neighbors talking about how the market may be softening," Wallace said. "At this time last year, that house probably would have sold within a week."
The recent spike in the inventory of available houses might be driven by sellers who are sensing a peak in the market and looking to cash out, said Niel Thomas, an associate broker with Coldwell Banker Fortune in Anchorage.
Instead of selling their houses for the traditional reasons -- such as moving away or needing a bigger or smaller place because of family changes -- a lot of home owners are posting for-sale signs to see how much they might get, Thomas said.
"A certain amount of the inventory is dramatically overpriced by people who are not going to succeed," he said. "They're people who are looking to make a buck. They don't have to sell, and when they fail they'll probably just give up and bunk in for the winter."
The higher inventory levels do not appear to be because of overbuilding. Home builders for years have lamented a dwindling supply of easily developed land on which to build Anchorage subdivisions.
This year, most of them are building far fewer houses than they did in 2005, continuing a three-year downward trend.
"We're tracking 10, 15 percent below last year," said Chuck Spinelli, owner of Spinell Homes, one of the area's largest home building companies. "There's a big decline in new single-family houses. We're building a lot more condos and stuff like that."
Over the past few years, the dwindling supply of land and rising costs for materials significantly boosted the cost of building houses, Spinelli said.
The higher construction costs also make existing houses more valuable. Because fewer new houses are going up, this upward pressure on values is easing, Spinelli said.
"We've been seeing this slowdown coming for years, and everyone anticipated it so prices spiraled up," he said. "Now we've hit the wall, and the spiral has stopped. It's basically leveling off."
MORTGAGE RATES CREEP HIGHER
Compared with some other regions in the country, Anchorage's real estate market is faring quite well.
The U.S. Commerce Department recently reported that sales of new houses nationally had fallen 22 percent in July from a year earlier, while inventories of unsold houses rose to an 11-year high.
The National Association of Realtors predicted Thursday that home prices nationwide will drop during the next few months. That would mark the first time since 1993 that median home prices have fallen in any given month. A federal agency reported earlier in the week that prices of traditional single- family houses fell in 87 of the nation's 379 major metropolitan areas in the second quarter while prices overall flattened.
Of course, Anchorage home values never rose to the astronomical levels seen in some cities in Florida, California, Arizona, Nevada and other states, where sharp declines have weighed heavily on the national averages.
Historically low mortgage-interest rates helped fuel the housing boom in Anchorage and the rest of the country over the past few years as first-time buyers were able to take out loans that gave them similar payments to what they'd pay in monthly rent.
Although rates have crept higher over the past year, they're haven't risen far enough to price many people out of the market, said John Carman, president of Homestate Mortgage Co.
Rates for most loans these days are around 6 1/4 to 6 3/8 percent, compared with the low of around 5 1/2 percent last year. On a $200,000 loan, the higher rates increase the monthly payment by about $100, Carman said.
Many first-time home buyers also can qualify for rates below 6 percent under a Federal Housing Administration program, he said. But that also is higher than a year ago.
Homestate's business is down about 5 percent from last year, which is likely because buyers are taking more time feeling out the market, Carman said.
Carman, a longtime Anchorage banker, said the real estate market appears to be balancing after having tilted for several years in sellers' favor.
"It only feels like a buyers' market now because we were in such a sellers' market," he said.
The MLS figures support that idea. Since 1995, appreciation rates have averaged 6.6 percent a year, while the average number of houses for sale in August has been just over 1,000, they show.
Bales said the last few years were uncharacteristic of what's been happening in the Anchorage real estate market over the past 20 years.
"Buyers were fighting over properties. There'd be three or four offers -- bidding wars. That's not happening anymore," she said.
While it may be tough for some sellers to accept the shift in the market and temper their price expectations, Bales points out that prices in a lot of Lower 48 cities these days have actually dropped, making a 6 percent annual increase easier to swallow.
"We're doing great compared with some other places," she said. "It's not like it's the end of the world."
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Daily News reporter Richard Richtmyer can be reached at rrichtmyer@adn.com or 257-4344.
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Tips for selling your home:
1. Be realistic about your asking price.
2. Set price lower than prices for newly constructed homes.
3. Offer to pay buyer's closing costs.
4. Lower price if house isn't moving. |
