High demand and low inventory catapulted average home prices in Alaska to a record $388,648 last year, according to a new state report.
Prices soared 8.9% in 2021 from the year before, the third-highest jump in three decades and only slightly below the record set in 2005, according to the Alaska Department of Labor and Workforce Development.
It was also the second straight year of fast-rising home prices in Alaska, a trend seen nationally as low interest rates and savings boosted by pandemic relief payments drove demand.
Interest rates have risen sharply in recent months, boosting monthly home loan payments, but realtors from Southeast Alaska to Anchorage said the market remains strong.
In Alaska, Lower 48 residents looking for homes or land are helping add to the demand, realtors said. At the same time, the problem of limited land for building continues, complicated by soaring construction costs that help push housing prices higher, they said.
“It’s your classic macroeconomic love affair, where high demand meets low supply and prices go up accordingly,” said Bill Bolling, a co-owner of Gateway City Realty in Ketchikan.
Ketchikan, a picturesque Southeast Alaska community of about 8,000, had the biggest housing price jump in Alaska last year, a 16% increase to push average prices to $439,961, according to the state’s report.
Bolling said Ketchikan has attracted some newcomers who buy homes there and use high-speed internet to work remotely for employers in the Lower 48, he said.
Also, home seekers generally feel more urgency to buy now, to lock down a mortgage before rates and monthly payments rise further, he said.
“Prices are being bid up in some cases,” above the asking price, Bolling said.
The average housing price also rose to new levels in Juneau — the most expensive place to buy a home in Alaska, with an average price of $475,000.
In Anchorage, the average price of a single-family home hit $436,577 last year, the report said.
In Juneau and Anchorage, the market was so hot toward the end of last year that five homes were sold for every one home that was publicly listed, the report said.
“So they were being sold even before they were being listed,” such as through word of mouth, said Rob Kreiger, an economist for the state who wrote the report. “That’s not something I’ve seen before, at those multiples. That’s probably the clearest indicator that demand is outpacing available supply.”
The rapidly rising prices have some people concerned about a crash, he said. But the conditions that drove recessions in Alaska in the 1980s, and nationwide in 2008, don’t exist now, he said. Surges in housing construction contributed to those crashes, but there’s not a lot of new housing construction in Alaska, he said.
“That’s not to say there couldn’t be a crash, but it wouldn’t be like those,” he said.
In fact, home prices remained relatively affordable last year, the report said. That’s based on a measure that includes last year’s record-low interest rates and income, which skewed higher last year thanks in part to pandemic-relief payments.
Still, experts in affordable housing say the higher interest rates and higher prices are increasingly complicating plans for many prospective home buyers.
Sue Perrins with NeighborWorks Alaska, which provides loans that help low-to-moderate earners buy homes, said costs are getting so high that some people the organization works with are setting aside their plans to buy a first home or to move to a larger one.
“Our sense is they can’t find properties to purchase because the market has been so tight and short of inventory in an affordable price range,” she said.
Nationally, interest rates for typical home loans have jumped from around 3% in the past two years to more than 5%, the report said.
Mark Romick, deputy executive director of Alaska Housing Finance Corp., a state agency providing affordable housing, said rising interest rates and home prices can make it more difficult for people to get the home they want. Every 1% increase in interest rates often means an extra $200 in monthly payments for the average-priced home, he said.
He said the housing agency works with Alaska banks and other lenders to offer programs that provide low-interest loans for many Alaskans, such as first-time home buyers, veterans or people with lower incomes.
Affordability is an individual situation, depending on a buyer’s circumstances and other factors, said Anita Bates, who sells houses with Berkshire Hathaway HomeServices Alaska Realty, based in Anchorage.
A big issue in Anchorage is the lack of new home construction at prices first-time buyers can afford, she said.
She said rising interest rates have dissuaded some buyers recently, but the Anchorage market is bustling.
“It’s still very active,” she said. “It’s a combination of a lot of things. There’s still a lot of demand for housing, a real lack of inventory, and in my view, the increase in interest rates has slowed things down a little, but not appreciably.”
Anchorage single-family homes sold in ranges between $225,000 and $800,000 have been exceeding their asking price by a small amount on average, according to data through late May provided by Keller Williams Realty Alaska Group.
Soldotna-based realtor Dale Bagley, with Redoubt Keller Williams Realty Alaska Group, said the higher interest rates seems to have reduced the multiple offers that would come in for Kenai Peninsula property.
“It’s still a very hot market,” Bagley said. “A lot of houses are selling and a lot of land is moving.”
The average single-family home price on the Kenai Peninsula rose to $337,287 last year, a 10% jump, the state report said.
Bagley said buyers are still often offering cash to beat out competitors, and avoid appraisals and banks that can slow a sale or limit the offer.
One thing he’s seen since the pandemic began is more people buying land to park their RVs or have a seasonal place to visit.
“People just want to camp and get out but campgrounds are full,” he said.
Some Alaskans and out-of-staters are also moving to the Peninsula to be near family, adding to local demand, he said.
“We’re seeing people who want a summer home to escape the heat of Lower 48 and be near grandkids,” he said.
One drawback of the market is that it’s hard to see families lose out on a home they’ve become emotionally attached to buying, he said.
Kreiger, the economist, said it’s hard to know when the rising rates will cause the market to cool off significantly.
National interest rates have averaged over 5.25% recently, the highest they’ve been since 2009 and a sharp increase from last year, the state report says. But they could continue rising for months and still remain historically low, it says.
“That’s certainly the question everyone has in their mind,” Kreiger said. “But saying when that point is reached will be nothing more than speculation.”
Daily News photojournalist Loren Holmes contributed.