Alaskan Home Prices
Contributed by Marty Van Diest
ALL ALASKANS - Have you noticed the prices of houses? Everyone is griping on social media about the prices. Everyone that is, except the sellers. We have witnessed the fastest appreciation we ever had here in Mat-Su Valley. Real estate values have been on a tear for the last two years. WHY?
In one word…DEMAND compared to supply. The primary reason for the high demand in the last two years has been the super-low interest rates. With interest rates in the mid 2% range there was a lot of incentive to get a loan. That’s almost free money. During those two years we were selling up to 85% of the total inventory of houses every month. Anything over 20% is considered a seller’s market.
Another reason for the high demand was the millennials coming into this market. They are the second largest generation after the baby boomers. They came into the market at the same time lots of other buyers were trying to lock in low interest rates…it was a feeding frenzy. And the boomers weren’t selling. Many of them refinance their existing homes with the low rates. They still aren’t selling because they are now sitting on a 2.5% mortgage.
The cost of construction increased substantially. I just today had a builder complain that the cost of trusses for a small ranch home were over $20,000. Another one complained that he was quoted $18,000 to bring in power six months ago, now that he actually needs it the cost is $30,000, and pay us up front please. Labor costs increased as well. So new construction has not been able to keep the housing costs down.
In the final analysis, the reason for the high costs of houses can be blamed, (if that is the right word), on buyers and sellers. The actual value of any house is always ultimately determined by an arms-length agreement between a buyer and a seller. That is the market at work. Supply and demand.
Sellers always want the most they can get from their house. Sellers compare their houses to other houses on the market and set an asking price for their home.
Buyers want a “deal”, but they also want a house. So buyers shop the houses for sale and make real world comparisons. They look at the cost of building a new house, the location, amenities, and other things and finally make an offer. Sometimes that offer is considerably more than the asking price because other buyers are also offering on the same house. Sometimes it's less than the asking price. But ultimately, after some negotiation they either do or do not come to an agreement.
That agreement is the value of that house determined by a real world price negotiation. Those values have been trending higher over the last few years.
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Marty Van Diest
https://www.youtube.com/channel/UCO2Ifk8C2g1NviQv3HozkTQ
Valley Market Real Estate
907 232-7900