Alaska Real Estate Market Trends & Analysis


The Alaska real estate market hasn’t been able to follow the same trajectory as the rest of the contiguous United States. Whereas most of the country has seen approximately nine consecutive years of improvement since the depths of The Great Recession, Alaska’s economy experienced an additional setback. Due largely, in part, to statewide job losses (particularly in the oil industry), Alaska’s economy entered into a subsequent recession at a time when the rest of the country was prospering.

As a result, the state experienced net migration losses for the better part of the last decade. Consequently, real estate in Alaska has lagged behind the national average for several years. Whereas the median home value in the continental United States experienced a short downturn in the wake of the Coronavirus, real estate in Alaska suffered for most of 2020 due to higher-than-average unemployment rates.

However, despite recent obstacles, Alaska appears to be recovering, and the real estate market is no exception. Income growth has resumed, and the housing market is starting to heat up. Now, the real estate market in Alaska is starting to look like the national market in 2012, when prices began their historic run. Those interested in Alaska real estate investing could find today to be a great time to buy a house.

The Top Alaska Real Estate Markets


While the best real estate market in Alaska is up for debate, here’s a list of the cities investors may want to pay special considerations to:

  • Anchorage

  • Fairbanks

  • Juneau

  • Wasilla

  • Sitka

  • Ketchikan

Alaska Real Estate Fees & Regulations

Real Estate

Closing Conducted by: Title Companies, Lenders, Private Escrow Companies
Conveyance: Warranty Deed

Foreclosure Procedure

Primary Foreclosure Method: Non-Judicial
Process Period: 3 - 4 months
Notice of Sale: Trustee
Redemption Period: None

Taxes

Income Tax: None
Corporate Tax: 0 - 9.4%
Sales Tax: None
Estate Tax: No
Inheritance Tax: No
Median Property Tax: 1.04%
Property Taxes by County: http://www.tax-rates.org/alaska/property-tax#Counties

Average Transactional Costs

Closing Cost: $2,897
Transfer Fee: No Fees
Origination Fee: $2,195.00

Alaska Housing Market Overview


  • Median Home Value: $301,673

  • Average Sales Price Of A Single-Family Home $371,671

  • 1-Year Appreciation Rate: +4.0%

  • Number Of Foreclosures (Q1): 78

  • Job Growth: +5.6%

  • Unemployment Rate: 6.6%

  • Wage Growth: +3.2%

  • Median Rent Price: $1,369

  • Price-To-Rent Ratio: 18.36

  • Population: 731,545 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $77,640 (latest estimate by the U.S. Census Bureau)

Alaska Median Home Prices


Real estate in Alaska hasn’t had the luxury of riding nearly nine consecutive years of appreciation rates like its contiguous counterparts. That’s not to say prices haven’t increased exponentially since the end of The Great Recession, but rather that the Alaska real estate market ran into a few obstacles along the way. Whereas the majority of markets across the continental United States saw consistent increases in prices for the better part of a decade, the Alaska real estate market experienced a subsequent recession that actually saw prices drop on a few occasions, which begs the question: What is the average cost of a home in Alaska? Are houses cheap in Alaska? Despite recent turbulence, prices in our northernmost state are actually higher than the national average.

The median home value in the Alaska real estate market now rests at approximately $301,673. About ten years ago (August 2011), real estate in Alaska had a slightly more modest price tag: $235,000. Since then, median home values in Alaska increased 28.3% to get to where they are today. To put things into perspective, the median home value in the United States increased approximately 82.3% over the same period. Today, after a decade's worth of appreciation, the median home value in the United States is $298,933.

However, it is worth noting that the introduction of the Coronavirus forced Alaska to take a different trajectory over the last year and a half. Whereas median home values across the United States suffered a negligible setback upon the spread of COVID-19, Alaska home values depreciated for the better part of 2020. In fact, it wasn't until the third quarter of last year that home values started to appreciate (a whole six months after the rest of the country).

The lack of appreciation is most likely the result of a weaker-than-average economy. Demand drove up prices in most parts of the country, but Alaska didn't have the financial resources to pour into the real estate sector. In particular, the relatively high 6.6% unemployment rate prevented many buyers from participating in the market. Low demand capped competition in the Alaska real estate market, and prices have only increased about 4.0% in the last year. On the other hand, the national average increased upwards of 16.7% because of a historically competitive marketplace and a lack of inventory.

On the surface, real estate in Alaska may seem tempered. However, the state's lack of activity in recent history may serve as a blessing in disguise. While the rest of the country has priced many buyers out of the market, the Alaska real estate market appears more fairly valued. Instead of prohibitive increases in the last year, purchasing a home in Alaska is much more manageable for the average buyer.

Alaska Median Rent Prices


Alaska's home prices impact the entire state's housing sector, and the rental market is no exception. The latest increase in home prices has impacted the rental market, albeit modestly. If for nothing else, higher home values and a lack of listings prevent a large population of prospective buyers from participating in the market. A large contingent of people want to buy but can’t, which lends itself to another issue: the same supply and demand crisis facing would-be buyers is impacting renters. Since more people are priced out of the buying market, we see more renters than average competing over fewer available properties. As a result, landlords in Alaska are free to charge more than in the past.

According to the latest data released by Apartment List, the median rent in Alaska has increased 5.8% in the last year and now sits around $1,369. The latest increase in rents has actually outpaced home values. Following the increase in rental rates, tenants can expect to pay the following for each unit size in Alaska:

  • Studio: $907

  • 1-Bedroom: $1,022

  • 2-Bedroom: $1,362

  • 3-Bedroom: $1,869

  • 4-Bedroom: $2,295


To put things into perspective, the national average rent price is $1,219, or 12.3% less than Alaska's going rate.

Alaska Foreclosure Trends & Statistics


According to Attom Data Solutions’ Midyear 2021 U.S. Foreclosure Market Report, a total of 65,082 U.S. properties received a foreclosure filing (default notices, scheduled auctions, or bank repossessions) in the first six months of the year. “That figure is down 61 percent from the same time period a year ago and down 78 percent from the same time period two years ago,” according to the report.

For what it's worth, the lack of foreclosures is due primarily to government assistance and forbearance programs put in place to combat the impact of COVID-19. Several government safety nets allowed distressed homeowners to remain in their homes, despite not keeping up with mortgage obligations. Foreclosures in Alaska are no exception, as filings are down about 42.7% over the first six months of 2021 from the same point in the previous year. In all, Alaska saw a total of 161 properties file for foreclosure from January to June. At that rate, only 0.05% of the state's housing units are considered distressed. At that rate, foreclosures in Alaska are pretty much in line with national averages.

Despite the recent decline in foreclosures, the Alaska real estate investing community should expect to see an influx of filing sooner rather than later. Once forbearance programs expire, distressed homeowners will be expected to come current on their payments. Those who are able to will appreciate the assistance, but those who aren't will likely need to file for fourscore. Therefore, investors who line up financing now may be able to simultaneously help distressed homeowners while securing their next deals sometime soon.

Alaska Real Estate Investing


It is true: the Alaska real estate market is lagging behind the rest of the country. In particular, real estate in Alaska appears to have been less insulated from the impact of the Coronavirus than the rest of the country. Coming off the heels of its second recession in a decade, COVID-19 interrupted what was expected to be a period of economic growth. Instead, the pandemic continued to drag down local fundamentals. As a result, high unemployment and continued losses in net migration are weakening demand for real estate.

Due, in large part, to a slightly weaker economy and lower demand for housing, real estate in Alaska hasn't experienced the same run as the rest of the country. For example, the median home value in the United States has increased 16.7% over the last 12 months. The increase is directly correlated to demand which has greatly outweighed supply. Thanks to increased savings, government stimuli, and historically low interest rates, more people in the United States are interested in buying than in years past. Still, supply remains nowhere near where it needs to be. Demand has led to increased competition over the few listings on the market, ultimately allowing homeowners to demand a premium.

The Alaska real estate market, on the other hand, hasn't witnessed the same level of demand as the rest of the country. Consequently, the median home value in Alaska has only increased 4.0% in the last year. However, it is worth noting that Alaska's tempered appreciation may actually be a blessing in disguise for investors. Whereas investors are watching profit margins on deals shrink with each passing month, Alaska real estate investors still have room to work. As a result, almost any of today's most popular exit strategies remain in play for real estate investors in Alaska.

While prices in Alaska are testing new highs each month, local real estate isn't as prohibitively expensive as the rest of the country. Therefore, there's still plenty of room for real estate investors in Alaska to "flip" homes. Homes are selling for more than ever, and investors who can land a good deal below market value could benefit immensely.

In addition to rehabbing, local investors are starting to pay more attention to long-term rental properties. If for nothing else, new indicators created in the wake of the Coronavirus have made long-term investments more attractive than their short-term counterparts. In particular, it's never been cheaper to borrow institutional money. With interest rates below three percent, Alaska real estate investors may simultaneously offset higher prices and increase monthly cash flow from properties placed in operation. At the very least, lower mortgage payments suggest investors can pocket more of the rent they collect each month.

Alaska Housing Market Predictions


Predicting the housing market without any degree of error can be difficult. There’s always going to be at least a slight margin of error, especially in a state as unique as Alaska. The Alaska real estate market is unlike any other market in the country, which makes spotting trends much harder. Nonetheless, it is good practice to make well-informed, educated guesses. Maintaining a pulse on where the market currently rests, and where it’s going, will help real estate investors in Alaska maintain an edge over the competition. With that in mind, here are some of the Alaska housing market projections which are more likely to pan out:

  • Median home values will continue to appreciate: Not unlike every other market across the country, the Alaska real estate market has seen prices increase on the heels of inventory shortages, increasing demand, and low interest rates. While prices haven't risen as fast as the rest of the country, they are still on the upswing, and they will continue to rise as long as inventory remains tight.

  • Supply and demand will continue to shape the real estate landscape: Real estate in Alaska is currently in the middle of a unique predicament: More people are leaving the state due to the latest recession, but the strengthening economy has improved job growth. As a result, the Alaska real estate market has seen a drop in demand. However, more people should return to the market and boost real estate activity as the economy grows. It’s only a matter of time until people realize Alaska has gotten its feet back under it and start to migrate back. Once that happens, the real estate market should take off.

  • Net migration will stabilize: Alaska real estate trends continue to be hampered by net migration losses. More people have moved out of Alaska than people who have moved to Alaska because of the relatively poor job sector. As a result, the housing industry hasn’t been able to realize its potential. That said, improving economic conditions should stabilize migration patterns, stimulating housing activity across the state.


Alaska real estate trends aren’t set in stone, but they can give great insight into what may transpire soon. At the very least, they are a good tool to use for minding due diligence. Only those that can anticipate AK real estate market trends with a high level of accuracy will stand a better chance at realizing success.

Summary


The Alaska real estate market has faced more adversity than just about any other market in the country. While the rest of the continental United States has seen its confidence in the real estate market grow for the better part of a decade, real estate in Alaska experienced quite a significant setback approximately six years ago in the form of a subsequent recession. It wasn’t until the beginning of 2019 that real estate market trends in Alaska instilled confidence in residents. Thanks, in large part, to simultaneous increases in job opportunities and wages (primarily in the oil industry), many housing indicators are simply better off today. All things considered, Alaska appears poised to mimic the same recovery witnessed across the entire country in 2012. Everything appears to be in place for the Alaskan housing market to sustain growth for the foreseeable future.

Sources:



http://labor.alaska.gov/trends/sep19.pdf
https://www.zillow.com/ak/home-values/
https://www.zillow.com/home-values/
https://www.attomdata.com/news/most-recent/attom-mid-year-2021-u-s-foreclosure-market-report/
https://live.laborstats.alaska.gov/housing/index.cfm
https://www.apartmentlist.com/research/category/data-rent-estimates
https://labor.alaska.gov/trends/aug21.pdf
https://www.census.gov/quickfacts/AK
https://www.bls.gov/regions/west/alaska.htm#eag
http://laborstats.alaska.gov/trends/aug19art1.pdf

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