Real estate correction in Anchorage? (Eagle: 2014, rentals, condos)

[highlife2]

Is anyone else having issues trying to plan for the future in Anchorage with the housing prices the way they are. I have noticed it costs in excess of 400k for a modest single family home with modern construction. Anything in the 200-300k range is either a condo/town house or a really run down house in a sketchy area. Or some combination.

Part of me is hoping they build the bridge in hopes it will result in a 30-40% downward market correction in home prices.

If there is no significant downward correction is anyone else just thinking about renting and investing in a retirement home elsewhere outside of alaska or far away from Anchorage? Or are people just biting the bullet and resigning to work an additional 10 years or more to be able to live somewhere decent in Anchorage?

[AKStafford]

Anchorage will never allow that bridge to be built. Just like they didn't allow the MatSu Borough to build a ferry terminal on the Anchorage side of the arm. They know what it'll do to their tax base.

[highlife2]

Thats what I was affraid of. I guess in that case the world is my oyster for retirement.

[jdhpa]

Or start a business on the side and increase your income...

[highlife2]

Originally Posted by jdhpa

Or start a business on the side and increase your income...

I am for sure going to attempt this as well, but there is no garurentee of a small buisness start up being successful. But I fully agree I am going to try, I have a few hobbies that I would like to try to make some money on so we will see.

Is working full time and then working a small buisness part time how people are affording quality real estate in anchorage? Either that or anchorage is full of old money?

[jdhpa]

If cash weren't being generated / moved into the area I would expect home prices to decline. Most likely either incomes are going up, or people with cash are moving into the area.

[highlife2]

Originally Posted by jdhpa

If cash weren't being generated / moved into the area I would expect home prices to decline. Most likely either incomes are going up, or people with cash are moving into the area.

That is true. I make good money but I look at these housing prices and think there are people here making way more than me (or they are house poor). So I was thinking it might be smarter to leverage my money somewhere there are not a bunch of rich people moving too/at. Competing with rich people can leave you in a bad situation if your not careful.

I am curious what other people are doing to avoid being house poor/living in an undesirable area/run down house/having to work till you die to pay for it IF you are not one of the rich people. Are most people renting as cheap as they can get away with, bank rolling and then leaving or just hoping they can be one of the 1% that have a small buisness that makes it or just realizing they wont be able to retire?

[Dakster]

Some of us have spouses that make decent money too. So when you put two incomes together it works out. About the only way you can afford a $400k house.

You raise good questions highlife2, I ask the same questions where I currently live.

[highlife2]

Originally Posted by Dakster

Some of us have spouses that make decent money too. So when you put two incomes together it works out. About the only way you can afford a $400k house.

You raise good questions highlife2, I ask the same questions where I currently live.

I always seen relying on 2 incomes to make the mortgage a huge huge risk. What if one spouse gets laid off or there is a divorce (50% of marriages end in them and the banks are ruthless if you have a deficancy on the sale). Are people just leaping into this and hoping to God nothing happens?

I am trying to figure out what the mechanism is that is causing Anchorage to remain high. We had the bubble pop in most of the lower 48 and prices went back down to normal market prices (I think the rule of thumb is 3X annual income for the average or median income in a given area which for anchorage I think is 77,000 so average home prices should be around 230k for what costs 400k, the stuff that costs 230k is either run down ghettos or small condos). For some reason Anchorage has not skipped a beat, I wonder if its because people are beat down in the lower 48 so people are not getting involved in bidding wars which is what runs the cost of ..... anything, up.

Or is it that most americans are just being completely irresponsible financially and getting into properties they really cant afford which runs the costs up for everyone trying to be responsible.

My mind always goes to the rich people that must be running up the costs but I seriously doubt "rich people" are out buying tons of random homes just because. 400k homes dont make good rentals.

Its like when I go to mooses tooth to get some pizza and its so crowded I can barely get in the door, are all these people really rich trust fund babies, I highly doubt it.

I am wondering how long this can go on before it pops, 400k for a 1500 sq ft sand lake home, seriously.

The other possibility is banks have still not truely cracked down on lending, interest rates are still artificially low and they have not got hard core on lending. If I were a bank there is no way I would loan hundreds of thousands to a couple who are relying on both their incomes just to make it month to month ......... for 15 to 30 YEARS!!! I dont know what im doing in 2 years lol.

I figure I will hold for another 3 years or so and see what happens. Contrary to popular belief anchorage is not booming, the oil fields are giving out and once they start processing the gas it will go quick, it will only take about 10 years to remove the gas cap which is what is keeping the oil flowing, base is reducing numbers as well but they are doing it in 800 people increments so no one freaks out.

If my theorys are correct it is unfortunate that irresponsible people are keeping the market inflated for those of us who are trying to be smart about things but I will say this I refuse to be the guy holding the bag at the end of the line.

[AK76]

I will give you another perspective. I live in Eagle River with my wife, we purchased this house 18.5 years ago. After ten years the MOA appraised value was double what he actualy paid for it. Our neighbors to each side have been in their respective homes for the same amount of time, within less than one year. One neighbor two houses over was there when we arrived to our home. Observation has revealed that to be the predominate trend in this area, many have been in their homes for a long time, this means that they have paid a considerable amount less than what todays prices/values reflect.

In addition, several years ago, in 2000 I "think", voters passed a law capping the mill. rate for property tax in the MOA. Guess what happened to assesd values? Yep, they began a rapid ascent. Once we were taxed/appraised to all the MOA could get from us the assessed value has remained about 5 - 7%+- since at least 09' according to the records handy atm.

Now, consider that the state economy is isolated rather well from the rest of the country in regard to employment stability and its base.

Add all of that together and one can see that there is no reason for property value to go anyplace but up, or remain somewhat level until, and unless the statewide economy suffers another bust cycle.

So from my point of view, or rather IMO regarding your point of view, is that you are rolling the dice that things here will cave so that you can take advantage of something that may never happen, or maybe not for decades to come. If I were in your shoes and I could afford a house it is better to buy sooner rather than later and get that money invested and working for you. If it is not that high of a priority for an investment, or you have it working in another place and do not necessarily feel the need to get it working by owning a home, then you really are not rolling the dice and do not have a sincere need to own a home.

Overall, I think the greater risk is not buying now and risking that prices/value will continue to rise for the forseeable future.

For reference, my 2014 assessment is $304k on one third of an acre with a creek running through the backyard. If you can afford $300k, I am of the opinion that there are some quality digs in that price range considering what I have and the neighborhood it is in.