Alaska home prices jumped again last year as high interest rates also hurt affordability

Alaska housing prices continued to rise rapidly last year with an average home selling for $423,000, even as higher borrowing costs made them less affordable, according to a new report from the Alaska Department of Labor and Workforce Development.

A tight housing market supported the 8.7% growth in prices over a year’s time, according to the report.

Still, the market shows signs of cooling after an unprecedented period of rising interest rates that put some people, especially first-time buyers, on the sidelines, the report says.

The increase in interest rates pushed Alaska housing to its least affordable level in a dozen years. And it had a powerful effect on buying power, dramatically reducing what an average Alaska wage earner could afford to pay for a new home, the report says.

Real estate agents across the state said they’re generally continuing to see prices rise, though sales are slowing in some cases.

“Prices in our area are still increasing,” said Ann Sparks, a Realtor with Platinum Keller Williams Realty Alaska group in Juneau, where average prices are the highest in Alaska. “We have low inventory; however, less desirable homes are not flying off the market like last year.”

It was the third straight year of sharply escalating home prices, a period initially marked by extremely low interest rates that made houses more affordable. That has given way to high construction costs associated with the pandemic, limiting new construction to help keep the market tight, the report says.


[Anchorage Assembly takes step that could revive Holtan Hills housing project]

The limited housing stock also comes as homeowners stay put to avoid paying higher costs for a different home, with the state’s aging population contributing by keeping their existing residence.

“Every area’s average price rose significantly over the past three years,” state economist Rob Kreiger wrote in the report. “Since 2019 — the year before the market began to tighten — the percent increase in the average home price ranged from 43% more in Bethel to 13% in Kodiak.”

Average prices in 2022 were:

• Highest in Juneau at $513,000, a 26% increase from 2019.

• Lowest in the Fairbanks North Star Borough at $337,000, a 21% increase from 2019.

• $469,000 in Anchorage, a 20% increase from 2019.

• $422,000 in Mat-Su, a 40% increase from 2019.

Victoria Roberts, president-elect of the Valley Board of Realtors, said agents in Anchorage and the Palmer-Wasilla area continue to get multiple offers on homes, amid low inventory.

“If they’re priced right and nothing major is wrong with them, they’re going fast,” said Roberts, a state broker for eXp Realty in Alaska.

“I thought after COVID it’d normalize a bit, because then it was such a frenzy with multiple offers, not enough homes, and all that craziness,” she said. “Then it leveled out for about two weeks, and it was back to where it was before.”

Dale Bagley, a Realtor in Soldotna with Redoubt Keller Williams Realty Alaska group, said houses on the Kenai Peninsula are also selling fast. Home prices on the Peninsula averaged $385,000 last year, up 37% from 2019, the report said.

Many people appear to be moving to the Soldotna-Kenai area from the Lower 48, including grandparents that want to be near family, said Bagley, also president of the Alaska Realtors board. They receive an annual Permanent Fund dividend check from the state by living in Alaska part of the year, and collect a big break for seniors on local property taxes, he said.

“A lot of people are buying with cash,” he said, providing a quicker transaction over home buyers using a bank loan.

A sharp decrease in affordability

Home prices grew at a slightly slower pace than the year before, after rising rates for mortgages jumped to their highest level in 15 years, though they’re still low historically.

“Rising rates and diminished affordability have affected first-time buyers the most,” the report says. “Although some have been priced out of the market, any downward movement in interest rates can be enough to bring potential buyers off the sidelines.”

The growth in interest rates began early last year, ending the ultra-low rates that had made housing extremely affordable the previous two years, the report says.


[Federal Reserve raises key interest rate but hints it may pause hikes amid bank turmoil]

In early 2022, one person’s average wages was nearly enough to buy an average-priced single-family home, the report says.

“Less than a year later, a mortgage required one person’s wages plus another half — the sharpest-ever decrease in affordability,” the report says.

Strong demand for newly built units

Single-family home construction last year was extremely low, close to the low point set in 2020, the report says. New construction has trended down since 2005, when close to 3,000 new homes were built in Alaska. Less than 1,500 homes went up last year.

The problem was exacerbated by supply chain problems more than a year ago that made building materials costlier and harder to get, denting construction plans. As those problems improved, the worker shortage last year added to the issue, the report says.

Those factors, alongside demand for new housing, have led to an especially sharp rise in the cost of a newly built home. Prices for newly built homes rose 35% since 2019, compared 24% for existing homes.

“The average sales price for new construction in 2022 was $560,395 and for existing homes was $405,610,” the report says.

“In 2022 alone, new construction (housing prices) went up 14.5%, the most on record,” the report says. “For existing homes, it was 6.9%.”


Market collapse not expected

Despite the run-up in prices, the housing market remains stable, thanks to the factors that have helped keep inventory limited, the report says.

“Alaska’s housing market lacks the conditions that would typically tank house prices,” the report says. “For example, there was no construction run-up before 2022 that would have created a supply glut as (interest) rates rose and demand softened, nor was there a flood of houses on the market by panicked sellers worried about missing out on record-high sales prices.”

“That’s not to say we know housing prices won’t decrease,” the report says. “Less demand could cause them to drop, but it’s more likely that sales will cool down and prices will level off in the near term. The reasons lie in demographic shifts, limited construction, and homeowners staying put rather than losing a low rate on their existing mortgage.”

Alaska’s decade-long trend of more people leaving the state than arriving, known as outmigration, could affect the housing market in the future, the report says.

“The imbalance this scenario could create, if it continues, is probably the largest threat to home price stability,” the report says. “If the number of people leaving grows and they are homeowners or of home-buying age, for example, that would increase the housing supply even without more new construction. At the same time, it would mean fewer people wanting to buy houses.”

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or