By: Mark Edwards – EVP, Chief Credit Officer & Bank Economist
Earlier this week, we looked at the US economy, tourism and military issues.
Residential Foreclosure and Delinquency
According to the Mortgage Bankers Association, Alaska’s foreclosure rate was 0.66% at the end of 2018, virtually identical to 0.64% at the end of 2017. This ranked Alaska 20th best of 50 states in the country and better than the national average rate of 0.95%. The national rate showed continued improvement from a rate of 1.19% at the end of 2017.
The national survey reported that the percentage of delinquent mortgage loans in Alaska at the end of 2018 was 2.92%, compared to 3.37% for the same period in 2017. This ranked Alaska 10th best in the nation. The 2018 average delinquency rate across the country was 1.4% higher than Alaska at 4.32%.
Alaska’s delinquency and foreclosure levels continue to be better than most of the nation. Alaskans showed resiliency and kept their home payments current despite the local recession. The current levels of problem mortgage loans are even lower than they were pre-recession in 2014. Nationally, the overall delinquency rate and the percentage of loans in foreclosure are improving relatively faster than in Alaska. The majority of the country suffered more during the larger U.S. recession and now economic improvements are being enjoyed more broadly across the country.
Residential Averages Sales Price and Inventory
Despite a three year recession, the average home price in Alaska has been stable. Anchorage Multiple Listing Service (MLS) statistics show the average sales prices for single-family homes in Anchorage in 2018 were up 2.3% to $373,180. The 2017 average sales price declined slightly by 0.35% following a 0.2% reduction in 2016. The 2,774 single family homes sold in Anchorage in 2018 was virtually the same as the 2,800 sold in 2017.
As of March 7, 2019, there were 594 single family homes listed in Anchorage with 220 sales occurring per month over the last year. That results in an average of 2.7 months of supply on the market. All home price ranges under $400,000 have less than a three month supply. Homes priced between $300,000 and $499,000 have the most listings and sales. The average days on market was 55 days for homes that sold in the last year for all price ranges and 64 days for sales in the last six months.
Most of the softening in the residential market has come in the higher priced homes. The highest paying jobs in the State were the areas most impacted; namely oil & gas, construction and professional services. Homes priced $500,000 to $750,000 show 3.6 months supply in inventory. The $750,000 to $999,999 segment shows 5.1 months supply and homes over $1 million have 6.2 months of inventory.
In the Wasilla Core Commute area, the statistics include condominium sales with single-family homes. Average sales prices in Wasilla have grown steadily over the last five years. The average sales price in 2018 was $278,553, which has 2.7% higher than 2017. The preceding year growth rates were 3% in 2017, 2.2% in 2016 and 5.9% in 2015. The number of homes sold in Wasilla increased 2.8% to 1,143 in 2018.
Residential Building Permits
The U.S. Census Bureau reports a total of 1,698 residential building permits for 1 to 5 unit houses were issued statewide in 2018. This compares to 1,539 in 2017, an increase of 10.3%. The growth primarily came from 120 more single family units and 18 more duplexes than in 2017. It is important to note there are many smaller communities in Alaska that do not require the permits and therefore are not tracked in this data. Though this data is not comprehensive, it is a consistent report of activity in larger communities like Anchorage and Fairbanks. Permitted building activity has grown from 868 units at the recent low in 2011 to the current level of 1,698.
Inflation
Inflation picked up in Alaska in 2018. The consumer price index (CPI-U) in “Urban Alaska” rose 3% in 2018. The Federal Bureau of Labor Statistics (BLS) measures the rate of change in prices for a basket of goods and services from year to year in Anchorage and the Mat-Su. Inflation had been very low the last three years, averaging only 0.5% per year. The ten year average for Alaska was 1.75%. Alaska’s 3% inflation rate in 2018 compares to a national average of 1.9%.
The BLS just released a comprehensive report on the spending from typical households in all 50 states in 2016 and 2017. Alaskan households spent significantly more on average of $71,606 a year, compared to the national average of $58,681. The largest expense was housing, which accounted for one third of all spending across the country and 32% in Alaska. Transportation expenses for primarily buying and maintaining vehicles were second and consumed 15.9% of spending in the U.S. and 17.4% in Alaska. Insurance and pension payments were 11.6% of average American spending and a much higher 14.2% in Alaska. Food was the fourth major category, accounting for 12.7% of U.S. spending and 11.6% for Alaskans. Interestingly, health care spending was 8.1% of the national spending budget and only required 6.4% of the average Alaskan’s total for the year. It was also confirmed that Alaskans spent more on entertainment and less on cloths than the rest of the country.
Monday, we will wrap up the discussion with a look at the State Budget.
Written by Mark Edwards, EVP Chief Credit Officer and Bank Economist with Northrim Bank. He was an adjunct professor of economics at Alaska Pacific University. Mark served the State of Alaska as an Economist in the Department of Commerce and the Department of Revenue, and as the Director of the Office of Economic Development. He has a B.A. in Economics from the University of Virginia and a Master’s Degree in International Business from the Thunderbird School of Global Management.
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