Real Estate Information Archive

Over the years that I've watched different markets I have seen many ups and downs, sometimes the swings are due to the economy, sometimes due to the weather.  The last week has introduced days of beautiful weather here in South Central Alaska, and buyers are looking for something to do besides looking at homes.

Can you blame them?

This is normal and we will see them back in the homes shortly.  The market has been good here in Eagle River.  I've been asked several times in recent weeks what is the market doing, and as usual I am happy to say that locally, it is pretty steady.  According to the local MLS there were 20 transactions pend last week here in Eagle River.  That's pretty good, and market supply is holding about 10% higher than last year but is not rising higher like it sometimes does as we approach the summer months.

I've compared the Anchorage, Mat-Su valley, Eagle River markets to see whats what.  How are we doing compared to last year?  Remember last year there was a First Time Home Buyers credit available that fueled many sales.  In comparing the first 5 months of last year to the first 5 months of this year, the Eagle River market has fared better than the other 2.  Our sales volume is up, while their down.  Eagle River is a smaller market and the property prices are above many First Time Home Buyers.  We are more consistent, which leads to stability.

We like Stability!

Now we hope for a warm summer  and lots of sunshine.  Interest rates remain low, new construction is picking up; the Eagle River economy is very vibrant!

It's time to get our economy producing!  This was the message at the CER Chamber of Commerce meeting today.  "Make Alaska Competitive" Coalition was the main speaker and the forum was sponsored by BP.

The message was that Alaska had increased taxes by so much in 2007 that Alaska was no longer a place to develop.  Based on the information they provided it appears that they're correct.  One excerpt from their handout reads as follows:

• We a NOT competitive compared to other areas
  • When oil prices are $100 a barrel, the total marginal government take in Alaska is 82 percent.  In Alberta, it's 55 percent.  In the Gulf of Mexico it's 43 percent.  Alaska is simply not competitive under ACES. (source: Roger Marks)

I have a really hard time with these numbers, but no one gives all the information, so I have included a copy of the tax rate:

The formula for the total tax rate, including the base rate and progressivity is:

0.25 + ((Net per barrel value - $30) X .004)

ACES also contains a 20% tax credit for capital costs, with potential greater credits for exploration depending on location. For example, let's assume the following:

• 100 barrels sold on the US West Coast
• ANS West Coast price of $50
• Transportation cost (pipeline and marine shipping) of $5
• Upstream (exploration, development, production) costs of $20: $10 capital and $10 operating
• No royalties (for simplification)

The net value of the oil would be:

100 X ($50 — $5 — $20) = $2,500

The per barrel net value would be:

 $2,500 / 100 = $25/bbl

Since this is less than $30/bbl there is no progressivity and only the base tax rate would apply. Thus the tax before credits would be:

.25 X $2,500 = $625

The capital credits would be:

.20 X $10 = $200

The tax net of credits would be:

$625 - $200 = $425

Now let's say the price of oil goes up to $70.

The net value of the oil would be:

100 X ($70 — $5 — $20) = $4,500

The per barrel net value would be:

$4,500 / 100 = $45/bbl

Since this is more than $30/bbl there would be a progressivity surcharge. The surcharge would be:

($45 — $30) X .004 = .06

Thus 6% would be added to the base tax rate of 25% for a total tax rate of 31%. Thus the tax .31 X $4,500 = $1,395

The capital credits would be: 

.20 X $10 = $200

The tax net of credits would be:

$1,395 - $200 = $1,195

Now if you can understand all this I am very proud of you.  What I do understand is that as the price of a barrel of oil goes up, so does the tax rate.  Only it is not prorated like our income taxes.  Alaska gave the oil companies a great rate and even a free pass for many years and oil production has dwindled.  Now prices are finely high enough that they can really make money.

Alaska needs a fair share of this wealth, but what is fair.  Talk to your politicians about what you think is fair.  I am no going to say how to fix this, but I do think it is broken.  Don't misunderstand me though. I think that Alaska should get more then we did before, but maybe not all of it.

"Can you believe that they drive from the Valley everyday?"

"Wow, you drive that far EVERYDAY!"  I hear this all the time from people.  A reality in most people everyday life is that they have to commute.  East Coast, West Coast, and in the Midwest, people drive to work.  Some may take mass transit, which does lessen the toll on you, maybe.  I still think the daily grind of getting to and from work is pretty consistent for everyone.  Well not everyone, some lucky people walk to work or ride their bikes.  This blog is not for you!

Its for the rest of us that spend 30-60 minutes on our way to work.

In a Alaska the commute can be quick and other days it can be horrible.  The weather dictates this as well as the moron that just cut off the guy in from of me sending him into the ditch, creating a huge snarl of traffic on the only road linking the Mat-Su Valley and Anchorage.  This is a reality that effects at least 30,000 people a dozen times a year.  Yes, just a dozen times a year.  So its not really that bad, well when it happens it's that bad.

I think if you commute from anywhere it will take you time.  commute from South Anchorage and it will take you longer to get to downtown than if you live in Eagle River.  The commute from Eagle river is the same as from Wasilla to Eagle River.  I just wish more businesses would relocate their corporate headquarters to Eagle River (BTW, Corporate guru's, we have land and would love to have you).  So if the difference is just an additional 30 minutes is it worth it. 

Some say the cost is huge, but I would argue its not.  For example 30 minutes at 65 mph in a truck that get 16 mpg ( I hope your car does better) uses 2..03 gallons and costs $7.03 ($3.46 per gallon) each way, $70.28 per week for the additional miles driven each way.  I think most people get better gas mileage than this.  This adds $302 to the monthly commute bill.

If a home in the Mat-Su Valley is $90,000 less does the difference save you any money at the end of each month?  Is the extra space that you get, as most homes are on larger lots (Half acres+ compared to a 1/4 acre or less in Anchorage), worth the difference?  there are more newer homes in the Mat-Su Valley, so the energy costs of these new more modern homes possibly offset the cost of the commute?  Easier access to the trails and rivers of the Mat-Su valley, that can save on your weekend gas bill, so there is a minor trade off, unless you go to Kenai or Seward every weekend than there is an increase.

Current interest rates are 5.125% today, and that additional $90,000 will cost you $490 per month on a 30 year conventional loan.  That is a saving of $182 per month that could go towards a more fuel efficient vehicle, or maybe a new boat?

BTW, this is what I was thinking about on my way in from Wasilla today.

In the Mat-Su Valley homes can be more affordable with a majority of the homes in the $150,000 to $350,000.  The Mat-Su Valley offers larger lots and access to recreational properties that Eagle River and Anchorage do not.  You can click anyone of the links below to see the current homes for sale.

• Wasilla
• Palmer
• Big Lake
• Houston
• Willow
• Talkeetna

Alaska Real Estate

The local real estate market continues to chug along with more buyer moving up from the lower 48.  Many of the buyers that I am seeing in the market are military relocating from other bases.  Will these new Alaskans buy or rent.  Many of the inquiries I've seen have asked about rental in our area.  This is a trend that has been ongoing for the last 3 years and I believe is driven by the turmoil down south.

The housing market across the country is getting better, however there have been casualties along the way and unfortunately many buyers that are relocating to Alaska have taken losses before they moved here.  I understand that it is very frustrating to lose money that you have invested in your home.  Our parents taught us that his was one of the safest investments we would ever make, but in the last 5 years that changed.

Here in Alaska the market has had its ups and downs.  We've seen corrections in valuation, but not to the extent that our neighbors have down south.  There are a few more foreclosures in recent months, and there will be more.  Even here in Alaska there were lending practices that snared a few ill prepared buyers.  For the most part we have seen a slow down in the market.

Last year in the Eagle River area the number of homes sold decreased by approximately 6%, but the average sales price went up.  It varied depending on the price range.  The Anchorage market saw minor increases, as did the Mat-Su Valley.  As we move towards the spring sales season, homes are slowly coming on the market.  Inventory numbers are increasing, but only marginally.  The number of sales are increasing as well.  Three years ago I forecasted that it would take 5 years to fully rebound here in Alaska, and I still stand by that forecast.

There will be a move to quality, and that has been a trend that started about a year ago.  People want more for their money.  New construction will continue to get better.  I believe that Eagle River will see growth from this has the subdivisions in this community continue to grow.  This year should be good, a little better than  last year.  According to ADEC there will be more jobs in Anchorage, and the Mat-Su Valley will also see job growth. 

No boom here just good growth.  Just what we need.

If you have questions about buying or selling a home feel free to call me at 907-360-7471, or visit me on Facebook at www.facebook.com/eric.bushnell/

2011 Forecast for Eagle River Alaska

January 2011 has arrived and now its time to pull out the crystal ball, or the magic 8 Ball, whichever you think is most accurate.  Now is when I do much of my planning for the coming year.  In the past months we have celebrated the holidays, enjoyed our friends and family, and looked forward to dealing with a new year.

So what will 2011 be like?  Before we decide on our best guess we need to take a look at 2010 and 2009.  How have we fared in the past two years?  In Chugiak and Eagle River we have sold 971 single family homes (This does not include condos), 501 in 2009 and 470 in 2010; down 6.2%.  Not too bad considering that the market was down much more substantially in the lower 48 markets.  The average sales price was unchanged in the Chugiak market, but up 3% in Eagle River and the median sales price was up in both markets.*

The available homes on the market was up at the end of the year with approximately a 5 month supply of homes.  This was up from a 3 month supply at the end of 2009.  The numbers have dropped off now at mid month and when you remove the new construction to be built (homes that have not been started at this time).  Currently there is about 1/3 less homes available; however these number are sure to climb over the next 30 days.  This low number limits a buyers choice and they tend to look in Anchorage or the Mat-Su Valley, trying to find a home they can afford.

If we look at these numbers it is easy to suggest that 2011 will be a slow year, however I would like to point out that we are coming off several booming years.  Our market is more normalized now the ever before.  The sales rate will be steady and I think most client are looking for quality over quantity, a nicer home vs. a bigger home.  I have seen more people trending towards larger garages.  Banks will continue to be a speed bump in the selling process as the underwriting standards become stricter.

My forecast for 2011 is similar to many others I have heard, I believe the Eagle River and Chugiak markets will experience increases in the number of sales and valuation.  A tighter inventory will bring up the price for the home, and there will be more new homes built this year.  There will be less condos, and more single family homes. Here it is the magic number for our area, we will sell:

501 Homes

I really like the extra one!

 *Based on information from Alaska Multiple Listing Service, Inc. (AK MLS) for the period CY2009 and CY2010 but not compiled or published by AK MLS.  Listing content maintained by AK MLS may not reflect all real property activity in the market.

What should I do?  Is the market ok? Interest rates are really low, should I refinance?

Theses are questions that people ask every time I go out.  The answer varies and is not that simple.  Interest rates are really low, but if you think you will be moving in the next year, then the cost of refinancing is not offset by the lowered payments.  You should speak with an accountant if you are unsure of the true costs.  Sometime the banker giving you money is not looking out for your long term interest.  They entice you with the lower payment and roll the closing costs and appraisal fees into your new loan.  This just raises the payoff on your home and you will have wasted this money if you will be selling in the near future. 

I define the near future as less than two years.  Some loans may charge you a slightly higher interest rate to compensate for the fees and not raise the loan amount.  This might be a better route if you know you will be selling, that is if it lowers your monthly payment.  Also if you've paid 4 years on your loan don't just go into a new 30 year.  set the amortization at 26 years and see what the difference in payment is, why pay interest for an additional 4 years if you do not have to.

Now might be a great time to move up or down into the right sized house.  There are great opportunities on the market.  In our area we will see more properties coming on the market and the perfect home for you might be among them.  There will be more foreclosures.  There is a shadow inventory in our area and it will be coming on the market this winter.  Foreclosures do sell for less than a nice home, you may be able to get a good buy.

You might look at an investment property.  Rentals are in high demand.The stock market is not doing all that well, low returns and lots of uncertainties.  Maybe its time to invest in real estate.  Rates are low and prices are down.  If this is something you might want to do please call me to discuss being a landlord.  It is not for everybody.  You must be disciplined and reinvest your returns into your property or save for that big repair.  It is not a matter of if you will need money for your rental, but when.

I get a lot of questions about real estate and I love to answer them.  Real Estate is local, you should talk with a local expert.

Call me if you would like to talk, 907-360-7471.

Sorry I have been away from my computer over the last couple of weeks and have not had the time to send a virtual update to everyone. 

I did receive a compliment via another Realtor about our company and thought I would tell you about it.  In this case we had a listing next door to the other licensees, and yes they work for a different brokerage.  The sellers were of course friends and spoke to each other on a regular basis.  Our seller was telling his neighbor about the reports we were sending to him on a daily basis, which he then complained to his Realtor about.

The Realtor came to us wanting to know what we're sending and why are we making them look bad (yes we are friends with our competition).  We explained to them that we were just keeping them up to date on the local market.

Here's the real story and why is it important to you.  See here at Prudential Jack White Vista Real Estate we have a great tool called Online Sellers Advantage (OSA).  OSA keeps seller informed of all market activity near their home.  The receive daily updates on price changes and any new competitors that may have come on the market.  They can see when other homes are pended (sold ). This is a vital tool and or sellers really like this information. 

The reports also show how many people have looked for a home in their price range and then it shows them if the prospective buyers actually looked at their home.  This tool shows you when more buyers have entered the market, or if someone really likes your home and has saved it as a favorite.

Our seller was very happy with this information and was very happy with our service as we help prospective buyers find his home.  This eventually lead to a sale and a very happy seller became homeless, which in this case was a great thing.

If you have questions about Online Seller's Advantage please give me a call and I will show you why it is a tool that will work for you.

Where should I invest?  Should I buy stocks, should I buy mutual funds, these are great questions and I ask them myself.  I hear people asking whether they should buy a home or rent, and the answer is simple:

If you are a responsible person, and will be staying stable for the next 7-10 years then Buy!

If you are a responsible person, and would like to be able to move when you want to then Rent!

A lot of home were bought and sold in the last couple of months, we have many new homeowners that took advantage of the First time Home buyers tax credit.  this was a great deal and it help most real estate markets across the country.  There were many sales because of these first timers, resulting in additional sales for move up buyers, that were able to sell their existing home.  We saw many people selling and making the switch to renting, it just made sense for them.

Whether you should buy or not has nothing to do with the strength or weakness of a market.  You do not buy stocks only when their low, No, you buy a little here a little there.  You hold for the long term and sell when it makes sense.

Buying a home is the same way.  look at you present situation and ask your self this.."Do I want to be in this home in five years?".  If the answer is anything other than a big "Yes", then you should take a hard look at renting.  It is cheaper in the short term and allows you flexibility in moving. 

Purchasing a home takes a commitment that we used to say everyone should take.  Maybe not owning a home does not make you more responsible, or more successful.  However for many people this is a wise investment.  If you are stable in your life an career then home ownership is probably the wise choice.

If you would like to receive home updates by e-mail visit www.Eagleriverhomesforsale.com to sign up.

FHA Relaxes Anti-Flipping Rule

Beginning Feb. 1, the Federal Housing Administration will provide mortgage insurance for some purchases in which the seller bought the property and held it for fewer than 90 days.

The agency is changing what is known as the “anti-flipping rule” to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, says FHA Commissioner David H. Stevens.

Waiving the 90-day rule will encourage private investors to buy vacant properties, fix them up, and quickly sell them to buyers who will be eligible to buy them using FHA financing.

FHA's change "is going to be absolutely terrific" for first-time home buyers hoping to take advantage of the tax credit, says Bobby Taylor, an associate with Coldwell Banker Mountain West Real Estate in Salem, Ore.

Source: Washington Post (01/30/2010)