Compared to US, real estate market here is fine

Observation No. 1: For a troubled real estate market to recover, the oversupply of available homes on the market must be absorbed first.

Nationally many areas are experiencing an increase in inventory as foreclosures and those trying to avoid foreclosure wreak havoc on the markets. This trend is evident in the RealtyTrac's November report, which showed foreclosure rates of one in 76 homeowners in Nevada; one in 173 in Florida; one in 198 in Arizona; one in 218 in California; and one in 309 in Michigan. However, foreclosures seem to be decreasing as loan modification and other programs kick in. On the home front, Alaska ranks 32nd with one in 1,545 homeowners in foreclosure.

We will have to wait to see whether this trend will continue.

As foreclosures surged, the impact of distressed sales could be seen in median sales prices, which generally are dropping in much of the nation. According to the National Association of Realtors, these type of distressed sales accounted for over 35 percent of the properties sold nationally. This helps explain why the median sales price of existing single-family houses decreased in 123 of the 152 metro areas the Realtors association monitors when comparing third quarter 2008 to third quarter 2007 (fourth quarter information is not available yet).

Anchorage's median sales price decreased less than 1 percent to only -0.35 percent during the third quarter. However, by the end of the year, the median sales price flattened out. In prior years, Anchorage showed modest increases of 6.8 percent in 2006 and 3.3 percent in 2007 when compared to previous years. When compared to regional numbers Alaska looks healthy. (See graphics on Page A-1.)

Locally the number of houses for sale decreased in 2008. According to the Multiple Listing Service, since May the number of houses for sale in Anchorage has been lower than during the same months of 2007. Since September the number of houses on the market has also been below 2006 levels.

Observation No. 2: Much of our market was driven by buyers' negative perceptions, which focused on the worst of news.

Even though inventory has decreased, so has the number of sales. However, the sector that was most affected was new construction, as shown in the accompanying table called "Fewer sales of Anchorage houses."

Even with the shift in new construction, Anchorage maintained a flat median sales price. The key again is the decrease in inventory. When broken out in price ranges (see accompanying table called "Hard times for high-end houses"), the outlook is even more positive for all but the $750,000-plus price ranges.

We gauge a balanced market if inventory hovers around four to six months. Less than four months and the scales start to tip toward a seller's market, with a shortage of supply created by higher demand. When the amount of inventory takes longer than six months to absorb, this leans to a buyer's market as more supply provides greater choices.

Properties in the $750,000-plus price ranges need to do or have one of the following: (1) underprice the competition, (2) have special and unique amenities a buyer is looking for in a home, or (3) be able to hold the property until excess inventory is absorbed.

Observation No. 3: The Anchorage real estate market is well-positioned for the coming year.

Even with tightening of lending restrictions, mortgage interest rates remain low with the 2008 annual average of 6.03 percent. In 2007, interest rates averaged 6.34 percent and 6.41 percent in 2006. Low interest rates give buyers more buying power.

Given the information above, it is sad to see the troubles that friends and family are experiencing in other parts of the United States. It makes you thankful to be living in Anchorage.

Clair and Barbara Ramsey are local associate brokers specializing in residential real estate. Their column appears every fourth Friday. Their e-mail address is info@ramseyteam.com.