The announcement that oil conglomerate BP is selling its Alaska assets to Hilcorp Alaska and pulling out of our state brings many questions. We’ll look at one: How will BP’s proposed sale and exodus impact the residential real estate market?
We’ll do this in context of several unknowns: How many BP employees will be affected and end up moving out of state? How does Hilcorp plan to expand its workforce and will that include the former BP employees? Hilcorp, a privately owned firm based in Houston, Texas, is known for boosting production in aging fields, as it has done in Cook Inlet. The firm purchased other BP assets in 2014.
Here’s what we can say in the light of these unknowns:
1. If you are planning to sell, get your home on the market sooner rather than later. (See our tips below for prepping a home for quick sale.)
2. The current limited market inventory is favorable for most sellers. (We discuss this more in the tables below.)
3. If BP employees end up moving out of state, their homes may be handled by relocation companies, skewing the market away from “normal” sellers. (Again, keep reading for how this may play out.)
Let’s start with reviewing how we have fared so far in 2019. We thought now might be a good time to look at the statistics and to dust off our crystal ball. You will see how the market looks in different price ranges.
Statistically, Anchorage has a limited inventory of homes for sale. The chart below shows the number of homes in each price range as of Sept. 8, 2019. The Supply (Active) divided by Demand (Sold) gives you a good idea of how active each price range is in the market. A seller’s market is less than four months of supply, which means a limited number of choices for a buyer. A balanced market has between four to six months supply. A buyer’s market has more than six months supply, meaning plenty of choices for buyers.
In looking back, we found the stats for 10 years ago. While the price range categories are slightly different, today’s real estate market in terms of house sales overall is better statistically.
Tips for prepping your home for a quick sale:
As a seller, even if your home’s price range falls in an under four-month supply category, you should still take extra steps to maximize your property’s value and stand apart from the competition. Here are some suggestions:
1. De-clutter and neutralize the interior of your home. This important step allows a buyer to see the potential of the home without being distracted by the sight of your possessions or personalized decorating colors. Do this work BEFORE putting your home on the market to maximize appeal. The quicker your home sells, the sooner you reap the benefits — money in your pocket that otherwise would be spent for monthly mortgage payments, utility, taxes and upkeep. Here are three important reasons to decrease the time your home spends on the market:
• If buyers don’t focus on the house, they can’t imagine living in it. You don’t want them talking about paint colors or furnishings.
• Buying a home is emotional and visual, so just like a first date, you want to look your best to decrease your time on the market.
• Credits in lieu of doing work don’t actually work as well as you think. You will want to credit the minimum needed, while the buyer wants the more costly maximum done. Also, most buyers really don’t have the time, energy or money to do the work after they own the home. If you have to wait for a buyer who is willing to do the work, you are more likely to increase your time on the market.
2. Pay for professional photos and review the photos before posting them online. Consider this a picture story of your home. You want a logical transition from room to room. Each photo should have some connection to the one that follows to develop the flow. These photos encourage the buyer to take the next step and actually visit your home. The photos also reinforce the buyer’s positive impression later. Photos that jump back and forth between rooms or floors create a disjointed, negative impression that can be hard to overcome even when the buyer finally sees the home.
3. Consider staging. Staging costs vary and come in two variations, but are geared to maximize visual appeal.
• Basic furnishing to show scale and room use; or
• Placement or reduction of your furniture to emphasize the space. Remember there will be more than one person crowding into each room during a showing, so even though you might think the lack of furniture looks sparse, in this case, space is your friend.
Help your home smell good. All the tips above are about creating positive sensory impacts through sight. But now, how does the home smell? The outside air on a normal day (without wildfire smoke) provides a buyer with an olfactory cleanse as they move from house to house. A closed-up house may reek of pet and food odors. To minimize the impact, immediately clean up and remove evidence of pets to prevent subliminal suggestions. Scale back on fried and highly spiced foods when marketing and especially before a showing. Ventilate well by running exhaust fans a little longer, but avoid looking like you are trying to hide a problem.
How relocation companies may play in the market:
The average seller will also have another competitor — relocation companies. BP employees usually have a relocation company to assist with selling their homes. Part of the assistance is an appraisal to help determine value, paid by the relocation company. If employees are unable to sell their homes within a few months, the relocation company takes over to allow them to move on to their next job location. These vacant properties are typically not staged.
Relocation companies just want the properties sold, and aggressively reduce prices and provide incentives that the typical seller is unable to match. Knowing this, don’t try to compete directly on price.
Now let’s dust off our crystal ball from when BP went through some downsizing about five years ago. In late 2015 and early 2016, the BP layoffs pushed the number of new homes on the market each month outside of the normal trend pattern for only four months, so by May of 2016 the trend was back within the normal pattern. For the total monthly active in each year, the trend line for 2019 was in the middle (2016/2018 above and 2015/2017 below) for most of the year, and only recently dropped below 2017 levels.
As of August 28, 2019, there were 5% fewer properties on the market and 6% fewer new listings than during the same time period in 2018. The number of sold properties year-to-date 2019 was down 4%, and the average sales price was up 1% when compared to the same time in 2018. Overall, the market appears to be able to handle this “speed bump.”
So as a buyer, don’t expect fire-sale prices. In 2019, the average sales price was only about 2% off of the listing price in almost all areas of the municipality. What a buyer may get is a little better selection, and an additional incentive of lower than expected interest rates while this lasts.
Finally, pay attention to the news and what we learn about BP and Hilcorp‘s plans for their employees. The potential swap out with Hilcorp employees or hiring of BP employees may shorten the “speed bump” in the trend line. For every BP employee hired, it is one less family moving.
Unfortunately, for those BP employees who will move, we will be losing some good Alaskans to this changing of the guard.