Alaskanomics

Anchorage is the 23rd Most Expensive City in the US

Last week, the Anchorage Economic Development Council (AEDC) released its first Cost of Living Report for Anchorage.  The report is based on the findings from the national Cost of Living Index (COLI) survey, which was developed by the Council for Community and Economic Research. Each participant's index is a percentage of the average for all prices. The index does not measure that change of prices over time, but rather the relative cost of living compared to the national average. The survey measures prices of goods and services in 306 cities throughout all 50 states. There are six categories for the survey: housing, health care, miscellaneous goods and services, grocery, transportation and utilities. In 2013, Anchorage ranked as the 23^rd most expensive city in the US. The cost of living in Anchorage was 126.2 percent of the national average.

2013 was the 2^nd lowest reading on the past five years for Anchorage. There was a 3.4 point decrease from 2012 in the overall composite, and four of the six indices decreased in 2013. The two that rose shouldn’t be a big surprise to anyone, housing and healthcare. Anchorage ranks fourth in the nation for the cost of healthcare. The only three cities in the nation with higher costs are Fairbanks, Juneau and Kodiak.  Illustrating, Alaska has the highest healthcare costs in the US. The cost for housing in Anchorage kept rising as well. Anchorage ranks 20^th in the nation in relation to the cost of housing. We are ahead of Chicago, Portland, Seattle and Philadelphia in housing costs. As we have noted in previous posts, it is alarming that Anchorage has a higher cost of housing than large, densely populated areas. The average sales price for a home in Anchorage in 2013 was nearly $347,000, up 2.9 percent from 2012 and 7.8 higher than 2011.

The four other factors decreased between 2012 and 2013, and the only index that was below the national average was utilities. The average cost of utilities sat just below the national average at 99. Even though Anchorage’s cost for natural gas was 126.4 percent of the national average, electrical was only 77 percent of the average. Grocery saw a large decrease, going from 129.1 to 113 between 2012 and 2013. In a recent Anchorage Daily News Article, AEDC CEO Bill Popp, noted that he felt the decrease was due competition in the grocery business. Several new Wal-Mart superstores, Sam’s Club and the remodel and expansion of existing groceries have resulted in more local competition and reduced the cost of groceries for Anchorage residents.

Popp feels that it is possible to lower Anchorage’s cost of living by encouraging new businesses to come to Alaska and aggressively growing existing businesses. This will lead to more competition and will lower prices for many goods and services. He is also careful to note that it will take the efforts of not only policy makers, but the entire community. If the city decides to make the cost of living a priority, solutions to the rising costs can be found and implemented for Anchorage.

To read the full report, visit http://aedcweb.com/phocadownload/2013%20coli%20report%20final.pdf

Housing Challenges for Anchorage

It is no secret that housing in Anchorage is tight. Whether you are looking to rent or purchase, your options are often very limited. A household must earn more than $50,000 a year to be able to afford to rent the average two-bedroom apartment in Anchorage. For many, this is not a reality.

The housing market for those looking to purchase a home in Anchorage is also tricky. Individuals and families who have outgrown smaller apartments and homes are having a hard time being able to afford the next step up in housing. In Anchorage, the average sale price of homes is rising. In 2013, the average single home sold for $346,977. This is 7.8 percent higher than the average price in 2012. The average in Anchorage is much higher than the national average, which was $211,312 in 2012.

The McDowell Group has estimated that Anchorage will need 18,200 new homes in the next 20 years to accommodate the projected population growth. Due to the geography of the municipality, there is not enough land for nearly 50 percent of the new homes needed. Zoning regulations will have to be altered to allow for higher density neighborhoods to fill the housing gap.

Multifamily rental units are another way to help supply housing. It is an expensive venture for a developer and Weidner Apartment Homes is leading the way in this type of development in Anchorage.  Weidner Apartment Homes plans to expand its Country Lane Apartments and add 250 units to the midtown location. This will be Weidner’s first new development in years and will bring new units to Weidner, whose current units are 97 percent occupied. This is a small step in the right direction for people looking for rental property in Anchorage.

These are only a couple potential solutions to the housing problem in Anchorage. It is becoming harder for companies to attract and retain qualified workers because of the high cost of housing in Anchorage. Lack of affordable housing affects everyone and can be addressed if we all work together to find viable solutions.

AEDC 2014 Economic Forecast

Each year, 1500 business professionals gather to hear the results of the Anchorage Economic Development Council’s (AEDC) Business Confidence Index Survey and Forecast for the upcoming year. Wednesday, luncheon attendees also had an opportunity to hear from Anchorage Mayor Dan Sullivan, regarding property tax assessment. Mayor Sullivan reminded the audience that 55 percent of the Municipality’s revenue comes from property taxes. The tax base is composed of 65 percent residential property, 27 percent commercial, and 8 percent personal property. In 2013, the value of property in Anchorage was approximately $37 billion. The Mayor went on to explain how the assessors worked year-round to answer questions and verify that properties were fairly evaluated. Sullivan concluded that Anchorage was doing well financially and this was the fifth consecutive year with a budget surplus for the Municipality.

Bill Popp, AEDC President and CEO, took over the presentation and reported on this year’s annual Business Confidence Index Report (BCI). Full details of the report can be found at www.aedcweb.com. Popp gave a highlight of the results of this year’s survey. Many indicators were flat but business leaders are fairly confident that the economy will continue to rebound in 2014. Over 70 percent of survey respondents felt that the state economy and national economy were barriers for growth in Anchorage. These factors were slightly higher than the availability of a professional and technical workforce. Low unemployment numbers in Anchorage make it difficult to find and keep good employees. Popp stated that he felt that Anchorage is shifting from a workforce development problem to a workforce traction issue. More than half of people surveyed felt that the housing crunch in Anchorage was making it difficult to retain and recruit employees. The overall message for the BCI was that the sense of optimism was high in Anchorage but the state and national concerns weigh heavily on the minds of Anchorage business owners.

A quick look back at 2013 reminded the audience that there was overall job growth in Anchorage. There were 1,000 new jobs and an average unemployment rate of 4.9 percent. The private sector added 1,900 jobs in 2013 but the total number was reduced due to the loss of 900 government jobs. Popp outlined the expectation for various industries in 2014. Oil and gas is expected to continue to grow with an addition of 150 jobs. Throughout Alaska, there are more than 15,000 oil and gas jobs. Health care will continue its steady increase at a similar level to past years. Transportation will see a modest growth, as well as professional and business services. Construction will continue its growth from the drop after 2006. Growth has been steady in construction for the past few years and will continue in 2014. Retail should see a new growth of about 250 jobs. New retailers entering the market promote that they will create 800-1000 new jobs, but many will shift from other retailers and affect the total number. It could be difficult for new retailers to find qualified individuals to fill the positions that are new to the market due to the low unemployment rate. Government is expected to see a decline again this year, but not as drastic. The total loss for government jobs is expected to be about 400. With other sectors included, the total growth for jobs in Anchorage is expected to be 1,200 with 1,600 coming from the private sector.

It is generally felt that while tough times may be coming, the immediate future is looking strong. Industries that saw decline during the recession are rebounding and continuing to grow.  For the full report, visit www.aedcweb.com. There will be a mid-year
look at the numbers at the end of July.

August 2013 Employment Report

The Anchorage Economic Development Corporation (AEDC) recently published the August 2013 Employment Report for Anchorage. The August employment numbers show a bit of a slowing from the forecast presented earlier in the year, but Anchorage and the state are both ahead of the National average when it comes to employment.  For the past 23 years, the August unemployment numbers have averaged 0.3 percent lower than the annual rate at the end of the year, so August is typically a good indicator of where the numbers will be at year-end.

An encouraging piece from the report shows that the private sector has grown by more than 1,950 jobs, or 1.6 percent. The industries with the largest year to date growth are mainly in the goods producing category, including oil and gas, manufacturing and construction. The oil and gas sector has seen an 11.8 percent increase in jobs over last year. Three positive factors are, Eni expanding its operations at their Nikaitchuq unit, Cook Inlet Energy’s announcement of $20 million in new financing, and increasing interest in LNG exploration to the Far East.

In the Municipality, the largest decrease in jobs was seen in the government sector, Federal and Local government both saw decreases over 4 percent YTD from 2012. Statewide, Federal Government jobs are down almost 9 percent, from where they were in August 2012. The private sector has offset the loss of government jobs in Anchorage and Alaska as a whole, but the average employment in Anchorage has not grown at the same speed as it was forecast to do.

The final four months of the year will show whether there will be an increase of 1-1.5 percent as forecast by AEDC. Low unemployment and the high cost of housing continues to make it difficult to find and keep strong employees. Anchorage’s unemployment continues to go down, but the labor force is shrinking, which affects the overall unemployment numbers. To read the full report, please visit, www.aedcweb.com

Make it Monday Forum Re-cap

Yesterday’s Anchorage Chamber of Commerce’s “Make it Monday” forum was titled A Good Home is Hard to Find. Bill Popp, President of Anchorage Economic Development Council, began the panel discussion by discussing the current economic conditions in Anchorage, including Anchorage’s ranking in the annual Cost of Living Index. Out of 307 cities in the national survey, Anchorage ranks 20^th in both cost of living and cost of housing.  

Art Clark, Vice President of Real Estate Brokers of Alaska, continued with the historical trends for home prices and numbers of listings. The average number of homes listed in a year is lower than it was in 1995, and the average list price has doubled during that same time period.

Jerry Weaver, community development director for the Municipality of Anchorage, and Daniel Delfino, with Alaska Housing Finance Corporation, concluded the discussion by noting that Anchorage has a strong rental market, but new construction of unrestricted multi-family rental housing is relatively modest.

The Anchorage Housing Market Analysis shows that there is not enough buildable land to accommodate future housing demand (2010-2030) under historical development patterns, current land-use policies and development options. It also notes that building mid-rise residential and mid-rise mixed-use rental development is not financially feasible in current market conditions. The full report, written by the McDowell Group and ECONorthwest can be found at http://www.muni.org/Departments/OCPD/Planning/Documents/Anchorage%20Housing%20Market%20Analysis%20Summary%20Report.pdf

The panel agreed that Anchorage is facing a significant challenge for affordable housing and that there is no easy answer. Not only is there a problem, but the outlook is getting worse and housing affordability impacts overall economic growth and business opportunities. Luncheon attendees were asked to become more educated about the problem; become involved in potential solutions, work to collaborate with others and join the conversation to bring light to the challenge of affordable housing in Anchorage.

The slides from Monday’s presentation can be found at http://prezi.com/_mfpwboermpx/make-it-monday-a-good-home-is-hard-to-find/

Alaska residential mortgage foreclosure and delinquency rates remain some of the lowest in the U.S.

The recently released survey by the Mortgage Bankers Association shows that Alaska continues to have some of the lowest levels of foreclosures and delinquencies on residential mortgage loans in the United States.  In the first quarter of 2013, Alaska ranked 3^rd best in the nation out of 50 states in foreclosures and 4^th lowest in mortgage delinquencies of all loan types.

The total inventory of foreclosures in process is 1.1% in Alaska, while the country has a much larger lingering foreclosure inventory at 3.6% due to higher rates during the recession and longer resolution times.  These rates are the same as a year ago in Alaska, but nearly a 1% improvement for the U.S. as whole.

Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska is fourth best, slightly behind North Dakota, South Dakota and Montana in the overall level of delinquent loans.  Alaska’s delinquency rate is 3.7%, while the U.S. average is 6.8% for all loan types.  The rate is virtually unchanged in Alaska from a year ago, but is a 1.3% improvement from the worst delinquency level of 5% in the third quarter of 2010.  The U.S. delinquency rate has also been trending downward from its worst point of 10.4% at the end of 2009 to its current 6.8% rate.

Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems.  The survey covers just over 93,000 mortgages in Alaska.  6,650 of these mortgages, or 7%, were considered subprime, compared to 10% nationally.  The rate of delinquencies and foreclosures on subprime loans is significantly higher.  However, Alaska is in a far better position and again leads the nation as having the lowest level of foreclosures and delinquencies in this important category.  Subprime foreclosures in Alaska are at 2.5% while the national average is 10.8%.  Alaska’s subprime delinquency rate is 10.3% compared to the national average of 20%.

 

Alaska foreclosure and delinquency rates remain low through 2012

Alaska continues to have some of the lowest levels of foreclosures and delinquent residential mortgage loans in the United States according to the Mortgage Bankers Association fourth quarter 2012 survey. Alaska ranked third best in the nation in both foreclosures and delinquencies of all loan types.

The total inventory of foreclosures in process is 1.1% in Alaska, while the country has a much larger lingering foreclosure inventory at 3.7% due to higher rates during the recession and longer resolution times. Alaska foreclosure rates remain unchanged year-over-year, while U.S. foreclosure rates have dropped from 4.4% one year ago.

Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska is third best behind North Dakota and South Dakota in the overall level of delinquent loans. Alaska’s delinquency rate is 3.7%, while the U.S. average is 7.5% for all loan types. This is an improvement for Alaska from 4.3% one year ago. The U.S. delinquency rate has also come down from 8.2% last year.

Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems. The Mortgage Bankers Association survey covers 94,347 mortgages in Alaska. 6,670 or 7% were considered subprime, compared to 10% nationally. The rate of delinquencies and foreclosures on subprime loans is significantly higher. However, Alaska is in a far better position and again leads the nation as having the lowest level of foreclosures and delinquencies in this important category. Subprime foreclosures in Alaska are at 2.9% while the national average is 11.9%. Alaska’s subprime delinquency rate is 10% compared to the national average of 21.3%.

New housing permits increase after several years of decline, up 16% as of November

According to the U.S. Census Bureau, the number of building permits for new, privately owned housing of 1 to 5 unit buildings is remaining low for the fifth straight year.  It has been under 1,000 units since 2007.  Through November of 2012 there have been 979 permits reported.  This is 138 permits or 16% more than last year at this time and the most since 2007.  This is a positive sign for the construction sector that we may have reached the low point in previous years and a recovery has started.

Home Loan and Refinance Activity Increases as Interest Rates Continue to Fall

The Alaska Housing Finance Corporation (AHFC) released their third quarter report on Alaska housing indicators. 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 reported 6,014 loans were originated statewide for single family homes and condominiums for a total amount of $1.5 billion. This is an increase compared to 5,538 loans for $1.37 billion in the first nine months of 2011. 2012 loans were done with an average down payment of 10%, in line with the last two years. Single family homes accounted for 89% of statewide mortgage lending activity, with 55% of those loans occurring in Anchorage. The Mat-Su contributed 14% of the volume, 11% in Fairbanks, 7% in Kenai, 5% in Juneau, 1% in Kodiak, and 1% in Ketchikan.

Condos account for the remaining 11% of the total loans with 90% of condos being financed in Anchorage. Juneau accounted for 3%, while Fairbanks and the Mat-Su accounted for less than 2% each. Additionally, there were 362 units of multi-family housing financed by 66 loans in the first nine months of 2012.

30 year conventional fixed interest rate mortgage loans have been getting less expensive for the past 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. 

According to AHFC statistics there was less than $200 million in refinance loans completed per quarter in Alaska 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. 

In 2010, the refinance volume declined to $2.4 billion, followed by $2.1 billion in 2011.  This is still far above historical levels.  Through September of 2012 the volume has been higher at $2.2 billion in only nine months.  According to the Federal Reserve, conventional 30-year mortgage rates nationwide averaged under 4% for the first time in November of 2011 and has fallen to 3.35% in November of 2012.

Alaska foreclosure and delinquency rates remain low compared to the rest of the U.S.

The recently released survey by the Mortgage Bankers Association shows that Alaska continues to have some of the lowest levels of foreclosures and delinquencies on residential mortgage loans in the United States. Through the third quarter of 2012, Alaska ranked 3^rd best in the nation out of 50 states in both foreclosures and delinquencies of all loan types.

The total inventory of foreclosures in process is 1.2% in Alaska, while the country has a much larger lingering foreclosure inventory at 4.1% due to higher rates during the recession and longer resolution times. These rates are nearly the same as the second quarter of 2011, but a small improvement from two years ago when Alaska’s rate was 1.4% and the U.S. foreclosure rate was 4.6%.

Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska is third best behind North Dakota and South Dakota in the overall level of delinquent loans. Alaska’s delinquency rate is 4.1%, while the U.S. average is 7.6% for all loan types. This is an improvement for Alaska from 4.8% two years ago. The U.S. delinquency rate has also come down from 9.4% at this time two years ago, to 8.4% last year.

Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems. The survey covers 94,339 mortgages in Alaska. 6,781 or 7% were considered subprime, compared to 9% nationally. The rate of delinquencies and foreclosures on subprime loans is significantly higher. However, Alaska is in a far better position and again leads the nation as having the lowest level of foreclosures and delinquencies in this important category. Subprime foreclosures in Alaska are at 3.2% while the national average is 12.4%. Alaska’s subprime delinquency rate is 10.4% compared to the national average of 21.1%.