Take a deep breath, Anchorage. While you might sense panic in the real estate market, we have been here before. While the names and events that led us here are different, we will survive. Here are a few statistics to help put things in perspective.
Here are some positive indicators for Alaska (they come from a presentation made by Mark Edwards, a senior economist at Northrim Bank):
• Per capita income in Alaska is up 4.8 percent as of the third quarter of 2015, with average income at $56,768.
• Gross state product was up 3.2 percent as of the second quarter of 2015, at $50 billion.
• Inflation for 2015 was down 0.1 percent in Anchorage, while up 0.7 percent for the U.S.
• While the population stayed constant, the number of jobs went up 0.4 percent in 2015.
• As of December, unemployment was 6.5 percent in Alaska, compared to 5 percent nationally.
The following economic issues affect these indicators:
• The sharp drop in oil prices has created uncertainty. Alaska crude prices dropped into the $37 range twice before, in December 2008 and December 2015. Between those two low points, oil prices jumped to $100 during April 2011 and July 2014. While the oil ride will be bumpy as prices go up, and we may not see those excessive highs, as long as we are oil-dependent the need must be satisfied.
• State and federal budget issues create a drag on government jobs and related construction. Regardless of how high the price of oil goes in the next up-cycle, Alaska will still need to make the hard budget decisions ahead and continue to work on diversification.
• Helping offset some of the above is private sector growth in tourism (up 7 percent in summer 2015 for a total of $2 million), along with growth in retail, Native corporations and health care.
• Real estate is stable, aided by low interest rates. Thirty-year conventional mortgage rates are still low, especially for those who remember the 16.6 percent interest rate in 1981. While current low rates will rise, the anticipated increases in the near future are manageable.
Other statistics in the real estate market confirm Alaska's stability:
• Alaska ranked second-lowest (2.7 percent) in total delinquencies in the fourth quarter of 2015, compared to 5 percent nationally.
• Alaska was fourth lowest in total foreclosures in process, with only .07 percent, compared to 1.8 percent nationally.
• Alaska had the lowest percentage of subprime delinquencies at 6.3 percent, compared to 16.2 percent nationally.
• Alaska also had the lowest percentage of subprime foreclosures, with only 1.7 percent, compared to 7.8 percent nationally.
Now let's look a little more closely at the local real estate market (these are statistics we've tracked and compiled ourselves):
During the national financial crisis, the number of Anchorage homes for sale peaked to just over 1,300 in July 2009. Since then, even with the annual seasonal ebb and flow of the real estate market, the number of homes for sale has slowly dropped. With fewer homes for sale, we are well poised overall to weather the current crisis.
Another statistic that shows a decrease from 2009 levels is the housing absorption rate (the current number of homes for sale divided by the 13-month average of homes sold).
As a general rule, an absorption rate of less than four months is a sellers' market (fewer homes for sale); four to six months is a balanced market; and more than six months is a buyers' market (more homes to choose from).
In the current real estate market, properties priced under $499,999 have an absorption rate of less than four months. For properties $500,000 to $749,999 the absorption rate is 4.76 months. The absorption rate is 10.79 months for properties in the $750,000 to $999,999 range and 18.06 months for properties $1 million and above. While a 18-plus month absorption rate may sound high for properties over $1 million, it is much lower than the peak of over 50 months during August through October 2012.
By breaking down the Anchorage residential real estate market further into areas, you see the same decrease in active, new, pending and sold numbers. Since homes for sale are already low, an increase in properties on the market related to low oil prices should be easier to absorb.
So don't panic, Anchorage. Instead, breathe. Over the course of our young statehood, we've survived a number of traumatic events and have always found our way out. The lower number of homes for sale will help maintain stability in the real estate market.
Don't allow the fear that things are worse than before to create a more negative market perception than statistics show.
The real loss to Anchorage is the oil-related friends and neighbors who are leaving. Their contribution to our economy, personally and professionally, will be missed.
Barbara and Clair Ramsey are local associate brokers specializing in residential real estate. They can be reached at info@ramseyteam.com.