Alaskanomics

Refinance Activity Slows in First Quarter of 2010

Many Alaskans have benefited from historically low rates

by Mark Edwards

Statistics for the first quarter of 2010 show that the amount of mortgage refinance activity has slowed down after a record setting level in 2009. The Alaska Housing Finance Corporation (AHFC) recently released the Alaska Housing Market Indicators report. It states that 2,127 homes and condos were refinanced in Alaska through March 2010 totaling $461 million. This was down significantly from the 5,786 refinanced loans during the first three months of 2009 amounting to $1.4 billion.

According to the Federal Reserve, 30 year conventional fixed interest rate mortgage loans have been getting less expensive for three decades. In 1981 they peaked at 16.6% and have undergone a slow and steady decline ever since. In early 2009 rates dipped under 5% on average for the first time and a surge in refinance activity began.

As the graph below shows, there was less than $200 million in refinance loans completed per quarter in 2006 and 2007. In 2008, the average rose to $400 million. Then in the first quarter of 2009 the activity spiked to $1.4 billion, followed by $1.2 billion in the second quarter. During this time the average 30 year interest rate declined nearly 1.5% in six months. The refinance pace slowed somewhat in the last half of 2009, but still finished the year with $3.7 billion in refinanced mortgage loans according to AHFC statistics.

If the average refinance completed in 2009 reduced the interest rate by 2%, then the aggregate savings for Alaskans will be approximately $75 million a year. For example, a homeowner with an average priced home of $300,000 would save about $6,000 a year in interest. This is a significant improvement to disposable income in the midst of a challenging economy.

The complete report of data tables can be viewed at: http://www.ahfc.state.ak.us/grants/housing_market_indicators.cfm

Single Family Home Sales Increase 14% Over 1st Quarter 2009, Average Sales Price Up 1%

by Mark Edwards

The Alaska Housing Finance Corporation (AHFC) has released the 1st quarter 2010 Alaska Housing Market Indicators report. It tracks new loan activity for single family homes and condominiums in Alaska. The data is based on a survey representing approximately 95% of mortgage lenders in Alaska and also includes AHFC loans.

It recorded 1,736 loans worth $401 million in the first three months of the year. This was a 14% volume increase over the same period in 2009 and $52 million more in terms of dollars. The sale of single family homes accounted for all of this growth. Condo activity was flat at 315, nearly identical to the 317 loans in the first quarter of 2009.

The average sales price of the homes was $261,161 or 1% higher than the first quarter of 2009. The average down payment was 12%. Down payments averaged close to 20% in 2005 and have been trending smaller over the last five years.

Anchorage accounted for 90% of the condo loan activity totaling $52 million in sales. The average sales price was $188,761 with an average down payment of 10%. Anchorage represented 50% of the single family home sales totaling $196 million. The average sales price was $318,896 with an average down payment of 13%. The Mat-Su recorded 19% of the home sales, with Fairbanks and Kenai at 10% each.

177 units of multi-family homes were financed in Anchorage in through March of 2010. They accounted for 70% of the statewide multi-family loan volume or $18 million. Fairbanks added 96 units with $3.5 million in loans for 13% of the total. The Mat-Su sold 20 units with $1.8 million in loans for 7% of the quarter’s activity.

There were 165 loans for new construction single family homes statewide worth $43 million in the first quarter. This represented about 12% of all home mortgage activity. 40% of the loans were in the Mat-Su and 36% in Anchorage. Existing homes accounted for 1,256 loans and $348 million. 51% were in Anchorage, 16% in the Mat-Su and 11% in Fairbanks.

New construction condos led to 48 loans for $10 million, 88% of which were in Anchorage. This accounted for 19% of the total condo loans valued at $52 million.

The complete report of data tables can be viewed at: http://www.ahfc.state.ak.us/grants/housing_market_indicators.cfm

Video Clip: State of Alaska Oil Revenue and Appropriations

Northrim Bank Economist and Commercial Loan Officer Mark Edwards discusses increased state spending in a period of decreasing oil production and revenues.

Video Clip: Alaska North Slope Average Annual Prices

Northrim Bank Economist and Commercial Loan Officer Mark Edwards looks at average Alaska North Slope oil prices going back to 1988. Prices are up, but what does that mean for the future?

Alaska's Housing Delinquencies, Foreclosures Low

by Mark Edwards

The Mortgage Bankers Association has released the results of the first quarter 2010 national mortgage loan survey. Alaska continues to have some of the lowest levels of foreclosures and delinquent loans in the country. Alaska has improved slightly over the last six months in these important indicators; however the rates are still higher than the levels seen in 2008.

	National Rank	Alaska	U.S.
Delinquencies, total 1Q 2010	3rd best	4.6%	9.4%
Foreclosures, started 1Q 2010	2nd best	0.5%	1.2%
Foreclosures, total in progress	2nd best	1.3%	4.6%
Subprime delinquencies	1st best	11.3%	27.8%
Subprime foreclosures	1st best	4.1%	15.4%

Alaska ranked 3rd best in the nation behind North and South Dakota as having the lowest percentage of mortgage loans delinquent, meaning more than 30 days past due, but not yet in foreclosure. Alaska’s rate of 4.6% was significantly better than the national average of 9.4% and was the second consecutive quarter of small improvements for Alaska. The high was the third quarter 2009 survey at 5.1% for Alaska and the recent low was 2.7% in the third quarter of 2008. Alaska’s rate had deteriorated for four consecutive quarters, prior to the 0.5% improvement seen over the last six months. Nationally the delinquency rate was 6.2% in June of 2008 and increased to 10.4% by the end of 2009. However, the first quarter of 2010 showed a 1% improvement to 9.4%. Alaska ranked 2nd best in both total foreclosures in progress and those started in the 1st quarter of 2010. Alaska’s total foreclosures of 1.3% compares to 4.6% nationally. Alaska’s rate averaged 0.9% in 2008 and then began to rise in 2009 to a high of 1.4% at the 3rd quarter. Since then it has improved slightly for two consecutive quarters to 1.3%. Nationally the foreclosure rate was 2.8% in 2008 and continues to rise each quarter to its current level of 4.6%. Subprime loans, to traditionally unqualified borrowers, were a major source of the mortgage problems that plagued the country recently. However, Alaska continues to have the lowest level of subprime loans delinquent or foreclosed in the U.S. Alaska’s subprime delinquency rate is 11.3% while the national average is 27.8%. The second lowest state is North Dakota at 18.8%. It is important to note that Alaska is still 5% worse than its recent low of 6.3% in the 3rd quarter of 2008.

Video Clip: Alaska Oil Production

Northrim Bank Economist and Commercial Loan Officer Mark Edwards shares a troubling graph in a discussion of declining oil production in Alaska.