Anchorage folks, many of us are getting older -- and our homes are as well.
The average age of housing in Anchorage is 34 years, with 75 percent of homes built between 1960 and 1990 and 15 percent built after 2000. Chances are you are living in one of the 75 percent now.
Like other maturing cities, Anchorage also has a limited amount of land left for affordable new construction. This combination creates a dilemma when life's circumstances change and you have to decide whether to purchase a newer home or renovate an older one.
The first step in making a decision is to understand the costs.
A move typically costs a minimum of 9 percent of the value of your current home.
This amount includes the closing costs on the home you are selling, plus closing costs for the new home. This does not include any additional funds you will need for a down payment, which can vary depending on the loan program. There will also be additional expenses such as updating and repairing your current home enough to maximize value, paying a moving company and buying new appliances or furniture (if your old items don't work in the new home).
If you want to move, you might consider making a move within the next year while interest rates are still relatively low. For every 1 percent increase in the interest rate, you lose 10 percent in borrowing power.
If you decide to remodel, what is the next step? For most owners, a large chunk of available cash went towards purchasing the home, so they typically lack available funds to tackle structural problems, major renovations, or maybe even cosmetic updating for a while. Overwhelmed owners either put off projects, or they start updating a room at a time. Unfortunately, cash runs out. When time comes to sell, the work may be only partially done and the seller gets minimum credit for what was done. The next homeowner begins the cycle all over again.
Consider taking these steps this year. First, stop into the fall Home Show on Sept. 19-20 at the Dena'ina Center for improvement ideas. Myriad vendors will be showcasing their products, and you can attend helpful seminars and how-to workshops.
Next, check into the Alaska Housing Finance Corp.'s renovation program for help with needed cash. The program is designed to help owners pay for renovations by refinancing their current loan or obtaining a second mortgage. Potential homebuyers can also finance renovation upgrades into one new mortgage. The goal is similar to that of the home energy rebate program -- to provide incentives to improve Anchorage's aging housing. The terms are reasonable but, of course, there are a few rules to follow so contact any AHFC-approved lender for more information.
Finally, if you haven't taken advantage of the energy rebate program, at least do the pre-inspection. If nothing else, you can better understand what energy updates your home needs. The pre-inspection might even be fully paid for through the rebate.
Once you know how you will finance the renovations, consider taking some of the AHFC free seminars. Topics range from the top of the house to bottom: insulation, indoor air quality, lighting, windows, crawl spaces, etc. Classes will give you a better idea of the pros and cons of latest technology and available products. AHFC also offers educational classes for contractors to keep them abreast of industry changes. If you take the classes, but your contractors haven't, then you might know more about the latest information and products than they do. This may even allow you to better communicate with contractors you eventually hire.
Finally, get recommendations from family and friends for a licensed contractor to address the cost of your wish list. A licensed contractor is one of requirements of AHFC. You can check if the contractor is licensed at commerce.alaska.gov/web.
Renovating an older home has benefits. It allows you to stay in your established neighborhood or near your favorite amenities. If you address accessibility issues, you may be able to stay longer in your home as you age. Remember to keep all of your receipts for tax purposes, so you can document the increase to your cost basis when you do finally sell your home.
No matter which option you choose, homeownership is really a hybrid investment. A portion of the investment builds equity with regular maintenance, care and improvements. The other portion is consumption -- the ability to enjoy the work you put into the home before you sell it to the next homeowner.