Alaskanomics

Alaska residential mortgage and delinquency rates remain low relative to 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 second 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 4.3% 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%, while the U.S. average is 7.4% for all loan types.  This is an improvement for Alaska from 4.5% in the second quarter of 2011 and 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 just fewer than 95,000 mortgages in Alaska.  Approximately 6,900 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 3.4% while the national average is 13.6%.  Alaska’s subprime delinquency rate is 9.8% compared to the national average of 20.3%.

Alaska and U.S. residential delinquency rates drop in first quarter; Alaska still third best in nation

The first quarter 2012 survey by the Mortgage Bankers Association shows a decline in housing delinquencies for 1-4 unit residential properties in the U.S. and Alaska. U.S. delinquencies declined from 8.2% to 6.9% while Alaska’s delinquencies declined from 4.3% to 3.7%. Alaska is still third best in the nation for delinquencies.

Foreclosures in progress were flat in the U.S., at 4.4%, and increased slightly for Alaska, from 1.1% to 1.2%. Alaska also retained its third place ranking in this category.

Alaska continues to have the lowest level of problematic subprime residential loans in the country. Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems. The rate of delinquencies and foreclosures on subprime loans is significantly higher. Subprime delinquencies in Alaska declined from 10% to 9.2%, while subprime foreclosures declined from 3.6% to 3.4%. The U.S. figures are much higher, with 19.4% of subprime mortgages delinquent and 14.1% of subprime loans in foreclosure.

The survey covers just over 95,000 mortgages in Alaska. Approximately 7,000 or 7% were considered subprime, compared to 9% nationally.

New housing permits remain low in Alaska for the fourth year in a row

The U.S. Census Bureau’s report on authorized building permits in Alaska shows the number of new housing projects remained under 1,000 units for the fourth year in a row.  In 2011, there were 868 housing units authorized, down from 904 in 2010 and 912 in 2009.

Single-family units accounted for 710 of the permits in 2011.  There were 32 duplexes and 12 triplexes or fourplexes.  Finally, there were 13 permits for structures with five or more units.  These multi-family permits accounted for 114 total housing units.

As can been seen in the graph, new housing activity reached a recent peak in 2003.  The chart goes back to 1980 and highlights the extreme housing boom that occurred in the early eighties following the start of the Trans-Alaska Pipeline.  This was also at a time when Alaska’s population was significantly smaller, so the relative impact of the slowdown in construction after 1983 was more severe.

Less new construction has helped the price of existing homes because there is less competition.  A stable job market and income in Alaska has also kept home prices stable here, despite the national recession and housing market bubble felt elsewhere in the country.

It is important to note that many smaller communities in Alaska do not require permits and are not tracked in this information.  However, it is a consistent data set of Alaska’s largest cities.  Not all of the units permitted are actually built.

Anchorage Inflation Rises 3.6% in 2011

According to the Federal Bureau of Labor Statistics, the Consumer Price Index (CPI) in Anchorage rose 3.6% in 2011.  By comparision, the change for the entire U.S. was 3% for the year.  Anchorage is the only "urban" community in Alaska that is tracked for these national statistics due to its population. 

Anchorage's 10-year average inflation rate has been 2.7% per year.  Average prices have not shown much volitility during the decade reaching a high of 4.6% in 2008 and a low of 1.2% in 2009.  The slightly higher than average inflation in 2011 can mostly be attributed to higher energy prices. 

Energy prices in 2011 were 10.1% higher than the previous year.  Gasoline prices were 14.8% higher and electricity climbed 9.6%.  Food also increased 4.8% in 2011.  After removing these two highly volitile categories, the remainder of the index rose 2.6% over the last 12 months.

The other categories with the largest price increases were seen in Apparel (6.7%), Medical Care (5.8%), Transportation (5.3%), and Housing (2.9%). The price of Recreation showed no change and a decline was measured in Education and Communications (down 0.7%).

Nationwide, inflation has also been most impacted by rising energy costs, up 6.6% in 2011.  Food prices rose 4.7% on average and the U.S. Medical costs rose 3%.  However, housing costs climbed only 1.3% across the county compared to 2.9% in Anchorage.  Housing accounts for the largest share of personal monthly expenses.

Home lending activity slows, but refinance activity remains high due to historically low interest rates

The Alaska Housing Finance Corporation (AHFC) released their fourth 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, including AHFC loans. It reported 7,350 loans were originated statewide for single-family homes and condominiums for a total amount of $1.8 billion in activity. This is compared to 8,827 loans for $2.1 billion in 2010. 2011 loans were done with an average downpayment of 7% compared to 10% the prior year.  This is likely a result of more people taking advantage of government programs that require a smaller downpayment.

Single-family homes accounted for 86% statewide mortgage lending activity in the 4^th quarter of 2011.  54% of those loans occurred in Anchorage, the Mat-Su contributed 16% of the volume, 10% in Fairbanks, 7% in Kenai, 5% Juneau, 2% Kodiak, and 1% in Ketchikan.

Condominiums accounted for 8% of the loans, with 89% of condos being financed in Anchorage. Juneau accounted for 7% of condo loans, with the Mat-Su and Fairbanks at 1% each. Additionally, there were 541 units of multi-family housing financed by 61 loans in the fourth quarter of 2011.

There have been 610 new construction single-family homes financed in 2011, compared to 5,727 existing homes.  There were 120 new construction condos financed versus 893 existing condo loans. Therefore, one in ten loans has been for new construction versus sales of existing homes or condos.  35% of the new construction was in Anchorage and 41% in the Mat-Su. Fairbanks accounted for 10% and Kenai 7%.

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, to under 4% in 2011, sparking a surge of refinance activity the last few years.

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. Interest rates actually increased in the first part of the year, but have since declined again. According to the Federal Reserve, conventional 30-year mortgage rates nationwide averaged 4.76% in January of 2011 and fell to 3.96% in December.

Click here to view the full report.

Alaska Ends 2011 with the Lowest Subprime Foreclosure and Delinquency Rates in the U.S.

The fourth quarter 2011 survey by the Mortgage Banker’s Association shows that Alaska continues to have the lowest level of problematic subprime residential loans in the country. The report also indicates Alaska has comparatively low levels of delinquencies and foreclosures for all types of mortgage loans in the United States.  Alaska ranks third best out of all 50 states in both categories.

For the last two years in Alaska the percentage of foreclosures started in a given quarter were about 0.5%, compared the national average of 1%. The total inventory of foreclosures in process is only 1.1% in Alaska, while the country has a much larger lingering foreclosure inventory at 4.4% due to higher rates during the recession and longer resolution times.

Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska is third best out of 50 states, behind North Dakota and South Dakota, in the overall level of delinquent loans.  Alaska’s delinquency rate is 4.3%, while the U.S. average is 8.2% for all loan types.

Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems.  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 in this important category. Subprime foreclosures in Alaska are at 3.6% while the national average is 14.5%.  The survey covers just under 95,000 mortgages in Alaska.  Approximately 7,200 or 8% were considered subprime, compared to 10% nationally.  Alaska’s subprime delinquency rate is 10% compared to the national average of 22.2%.

Video Clip: Construction industry in Alaska helped by legislators’ support of Home Energy Rebate

Residential Construction and the Home Energy Rebate are discussed by Executive Director of the Associated General Contractors (AGC) John MacKinnon at the AGC Alaska Construction Forecast in February 2012. Click here to view the full report.

 

Home Loan and Refinance Activity Slows in 2011; Still Higher Than Historical Averages

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. They surveyed mortgage lending activity the first nine months of 2011. It reported 5,538 loans were originated year-to-date statewide for single family homes and condominiums for a total amount of $1.3 billion.  This is compared to 6,756 loans totaling $1.6 billion in the first nine months of 2010.  2011 loans were done with an average downpayment of 10%. 

In the third quarter, 52% of single family home loans occurred in Anchorage. The Mat-Su contributed 16% of the volume, 13% in Fairbanks, 8% in Kenai, 6% Juneau, 2% Kodiak, and 1% in Ketchikan.  85% of condos were financed in Anchorage. Juneau accounted for 8% of condo loans with the Mat-Su and Fairbanks at 2% each.

There have been 428 new construction single family homes and 93 new condos financed statewide through September of 2011. Therefore, 1 in 11 loans has been for new construction versus sales of existing homes.

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. 

 

According to AHFC statistics there was less than $200 million in refinance loan activity 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, but this is still far above historical levels.  In the first nine months of 2011the volume has been lower at $1.2 million with three months to go.  Rates actually increased in the first part of the year, but have since declined again. According to the Federal Reserve, conventional 30-year mortgage rates nationwide averaged 4.76% in January and have fallen to 3.96% in December of 2011.

 

Housing Problems Relatively Low in Alaska

The third quarter 2011 survey by the Mortgage Banker’s Association shows that Alaska continues to have the lowest level of problematic subprime residential loans in the country. The report also indicates Alaska has comparatively low levels of delinquencies and foreclosures for all types of mortgage loans in the United States. For the last two years in Alaska the percentage of foreclosures started in a given quarter were about 0.5% of the total number of mortgages outstanding. This improved to 0.4% in the second quarter of 2011, where it remains and is less than half the national average of 1.1%. The total inventory of foreclosures in process is only 0.9% in Alaska, while the country has a much larger lingering foreclosure inventory at 4.4% due to higher rates during the recession and longer resolution times. Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems.

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 in this important category. Subprime foreclosures in Alaska are at 4.2% while the national average is 14.8%.  The survey covers just over 95,000 mortgages in Alaska and approximately 7,400 or 8% were considered subprime. Of those 7,400 subprime loans, Alaska’s subprime delinquency rate is 10.8% compared to the national average of 23.1%. Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska’s rate is 6% lower than the second place state Colorado at 16.5%. Alaska does trail North Dakota, South Dakota and Montanta in the level of overall delinquent loans, ranking fourth best out of 50 states. Alaska’s delinquency rate is 4.5%, while the U.S. average is 8.2% for all loan types.

Mortgage Lending, Refinance Activity Slows in Quarter Two; Increase Expected as Interest Rates Fall

The Alaska Housing Finance Corporation (AHFC) released their second quarter report on Alaska housing indicators.  They surveyed mortgage lending activity the first six months of 2011.  It reported 3,381 loans were originated statewide for single family homes and condominiums for a total amount of $820 million.  This is compared to 4,340 loans for $1.02 billion in the first half of 2010.

2011 loans were down with an average downpayment of 10% compared to 12% at mid-year 2010. 

Single family homes accounted for 85% statewide mortgage lending activity with 53% of those loans occuring in Anchorage.  The Mat-Su contributed 16% of the volume, 10% in Fairbanks, 8% in Kenai, 6% Juneau, 2% Kodiak and 1% in Ketchikan.

Condos account for the remaining 15% of the loans with 87% of condos being financed in Anchorage.  Juneau accounted for 8% of condo loans with the Mat-Su and Fairbanks at 2% each.  Additionally, there were 377 units of multi-family housing financed by 81 loans in the first half of 2011.

There have been 282 new construction single family homes financed statewide through June of 2011.  Therefore, one in ten loans has been for new construction versus sales of existing homes.  Roughly one third of the new construction was in Anchorage and one third in the Mat-Su.  The remainder was in Kenai, Juneau and Kodiak. 

63 new construction condos were financed in the first half of the year.  This means one in eight condo loans were for new construction compared to existing condos.  91% of the new condos were in Anchorage with 7% in Juneau and 2% in Kenai.   

Refinance activity declined for the second straight quarter as interest rates moved higher at the beginning of the year.  There was $264 million of refinances completed in the second quarter of 2011 after $500 million in the first quarter and $947 million in the 4^th quarter of 2010. 

 

According to the Federal Reserve, conventional 30 year mortgage rates nationwide averaged 4.76% in January and have fallen to 4.11% in September.  An increase in refinance activity is expected when the third quarter results are calculated.  The two variables are inversely correlated.  There has historically been a spike in refinances when rates drop more than a half percent in a short period of time.

A copy of the complete report and other housing related data can be found at: http://www.ahfc.us/grants/housing_market_indicators.cfm