Amid tough times for Alaska's economy, Anchorage residents appear to be more willing to invest in remodels and alterations to their existing homes and businesses than to embark on new construction, data from the city show.
Permit applications to make alterations and additions to buildings are up significantly for the first half of this year, compared to January through June of 2015, while applications for new building projects have decreased.
Chris Schutte, director of Anchorage's Office of Economic and Community Development, said that part of the reason applications for new buildings are down might simply be because some forthcoming projects planned in the city have yet to go through the permitting phase.
There might also be a "flurry of activity" yet to come, Schutte said, "as people wake up and realize that fall and winter are around the corner," which could put permits for new construction more on par with 2015.
But when it comes to alterations and additions, the increase is already notable, Schutte said. For residential properties, there were 292 more permit applications between January and June of this year than during the same period last year (up to 925 from 633 — an increase of 46 percent).
For commercial properties, that number is up by 158, or 28 percent. For government buildings, add-ons and alternations dipped from 84 to 55.
"All I can do is hypothesize, but here's what I think: In a down economy, some people tend to withhold capital spending, to ride it out," Schutte said. "Others take advantage of the down cycle to invest in their business or company. If you have a home you've lived in for five, 10, 15 years, this is not a time when people are excited about getting out on the market and buying a new house. They might do an addition so they'll see greater returns down the road."
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That's reflective of typical investment behavior in a tough economy, he said. And those decisions have ripple effects.
Economic worry is gripping Anchorage and Alaska as a whole as oil prices have tumbled since 2014 and the state is dealing with a multibillion-dollar budget deficit.
John MacKinnon, executive director of the Associated General Contractors of Alaska, echoed Schutte's hypothesis.
"If you can't afford new digs, you dress up what you have," he said. "I think we're seeing that on the residential side, and then commercial as well."
Between 2013 and 2015, commercial alterations and add-ons fluctuated between 540 to 587 applications from January to June. For that same time period in 2016, the number jumped to 713.
Meanwhile, permit applications for new commercial construction dropped notably in the first half of 2016.
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Some workers represented by the Pacific Northwest Regional Council of Carpenters have even left the state because there's been less work here, said the union's Alaska regional manager, Scott Hansen.
"We already have members who have gone to work in Washington, Oregon, Hawaii," he said, adding that he knows of some members have sold their homes in Alaska as they've left. He expects that the union's hours worked in Alaska will be down about 15 percent this year compared to last year.
"There's still a lot of money up here, whether residential or businesses," Hansen said. "There's a lot of cash but they're kinda reluctant to do a whole lot. So maybe they'll do an upgrade, remodel. Maybe not quite spend as much."
People who want to stay in neighborhoods they like might find it easier to fix up their home instead of trying to find another at an affordable price.
"I think a lot of people here are happy with their neighborhoods and are a little unsure of the economy and are spending money just redoing a kitchen or a bathroom, new flooring, something to make it nicer for them," said Mike Kaercher, senior vice president at Anchorage's K&W Interiors, which does design for remodels and new construction projects.
Spinell Homes, which builds homes across Southcentral Alaska, has been affected by lower buyer confidence because of the state's economic situation, said design and development manager Andre Spinelli.
A lot of people are still coming to Spinell Homes to ask about buying new houses, but fewer are going through with the purchase.
"We have a lot of interest, doing plans, meeting with people, very busy," said Spinelli. "But we're just not getting them to the finish line. And that's the buyer confidence issue."
Kaercher also said he's noticed companies constructing fewer buildings on a speculative basis — without definite buyers lined up.
The boom of trendy home improvement television shows might also be spurring some of the increase in remodeling, Spinelli suggested.
Robert Dietz, chief economist with the National Association of Home Builders, said Alaska reflects what's happening across the U.S. Home improvement and remodeling spending is outpacing new construction a bit nationally, he said, and "that's a legacy of the Great Recession," when single-family starts "really fell."
Throughout the country, single-family home construction is still well below where it was 10 years ago, but "investment in residential remodeling and repairs this year will surpass records set during the housing boom," the Wall Street Journal reported in August.
Business is good right now for Trailboss Solutions, a contractor in Anchorage that does mostly remodel work, but general manager Scott Allen said that nothing is ever guaranteed.
"I'm always concerned about sixth months down the road because I don't have a crystal ball. But currently, if I don't get more work signed up, I'd have work through mid-2017," said Allen, who is also president of the Anchorage Home Builders Association. "This is a very cyclical business. There's nothing certain. That's the frustrating thing."