In 2020, a year of widespread financial hardship, Alaska’s housing market was surprisingly strong. As interest rates fell, and many Alaskans began working remotely, the demand for homes soared — along with prices.
Is this a sign of strength amid great economic uncertainty? The answer is complicated, in part because the housing market’s upswing doesn’t account for thousands of Alaskans who are struggling to make ends meet.
Mara Hill knew she wanted to buy a house in Anchorage in 2020. She felt emotionally and financially ready. And then she got an extra push.
“About a year and a half ago I went to a psychic for the first time,” said Hill. “And she told me that I was in a year of my life where I was really well poised to make financial decisions or changes. She said if I was going to buy, sell or trade anything, this would be the year to do it. And that gave me the final little push I needed to dive into buying a house.”
Hill says she was lucky. Despite the pandemic, she had job security and could afford to look for a house. But her search didn’t quite go as planned. She initially wanted to buy a home on the city’s west side, where she grew up.
“I pretty quickly realized that I was not competitive enough for the places that I was initially looking,” said Hill.
Those homes, she says, were selling really quickly, and at high prices. Though her realtor will tell you otherwise, Hill says she felt like she looked at a lot of houses before finding her eventual home. She says that house had been on the market for a while, so the process of buying it was pretty relaxed. There was no bidding war, and not a lot of negotiating. And, Hill says, she feels like she’s found the right home for herself right now.
“It’s a little green house in Mountain View,” said Hill. “It looks right onto a huge park. It’s three bedrooms, it’s two bathrooms, and it’s got a garage, which was not on my must have list, but now that I have it, it’s very nice.”
What Hill saw while looking for houses is similar to many others in Anchorage trying to buy a house in 2020. According to data from the Alaska Multiple Listing Service, average single family home sales were the highest they’ve been in at least the last 10 years. The same goes for average single family home prices. Data from the Alaska Housing Finance Corporation and McKinley Research Group shows the number of home loans and the value of those loans grew statewide from 2019-2020.
“I have never worked in a market where there’s been such a bidding war for properties,” said Connie Yoshimura, owner and broker of Berkshire Hathaway HomeServices Alaska Realty. She’s been in the real estate business in the Anchorage area for about 40 years.
Yoshimura says the market usually slows down in the winter, but not in 2020. She says the competitiveness carried over into the new year, with buyers continuing to outnumber sellers. Buyers who are sometimes offering tens of thousands of dollars more than the asking price. Yoshimura says there are a few things compelling people to buy — historic low interest rates, a few years of under-building in Anchorage and, more philosophically:
“Everyone, I think, emotionally, intellectually, socially, has sort of taken this year to reevaluate their life and where do I want to live and how do I want to live,” said Yoshimura. “Many people are really recommitting to Alaska. Not just Anchorage, but to the Valley, to Palmer, to Homer, to the Kenai.”
Statewide trends look pretty similar to Anchorage, says economist Katie Berry, with McKinley Research Group. Though they do vary from place to place.
While Berry says rising housing prices aren’t necessarily a sign of economic strength, they are a bright spot that provides some insight into the attitudes of buyers.
“What higher sales volumes and what higher prices do reflect is that people in Anchorage, many people buying homes, have personal confidence that they’ll get through the economic impacts of the pandemic,” said Berry. “People wouldn’t be buying these homes if they didn’t have that confidence or hope that they’ll weather this storm.”
Alaska saw record unemployment during the pandemic. While there were significant jobs losses in areas like the oil industry, many of the losses were concentrated among lower-paying jobs. Nolan Klouda, with the University of Alaska Center for Economic Development, says many Alaskans with higher-paying jobs actually ended up in pretty good financial shape.
“They can work from home,” said Klouda. “Their bank accounts are in pretty good shape. The stock market is doing well, so their retirement accounts are doing pretty well. And interest rates are low so it’s easy for them to get financing for larger purchases, like housing if that’s the case.”
At the same time, Klouda says, many Alaskans are really struggling, and experiencing housing insecurity.
“It’s a very strange dynamic to see that homes could sell so quickly at such high prices on one hand and then also that a large number, particularly of renters, are really quite worried about their ability to hang on to their housing,” said Klouda.
Nearly 30,000 Alaskans recently applied for rental assistance from the Alaska Housing Finance Corporation. CEO Bryan Butcher says, while homeowners have been impacted by the pandemic too, there are a disproportionate number of renters facing employment impacts.
Klouda says while the housing trend does indicate confidence in the economy, it’s hard to say for sure whether it really is a sign of economic health.
“I don’t really view it as that good of a sign. The fact that people are buying is a bit of a vote of confidence in the economy. So you can say that is good and some portion of households are doing well,” said Klouda. “At best I think it’s a very mixed bag if we’re trying to look at it as a sign for our economy overall and its health.”
In some ways, Klouda says housing trends like this can actually present a barrier to economic growth. It makes it harder for people to move here, meaning it can be more difficult for employers to fill jobs.
Alaska is seeing a continuing trend of population decline, which can seem contradictory to strong demand for homes. But Klouda says both can be true.
“It doesn’t take a huge percent of the population to buy a house in a given year for the market to really heat up,” said Klouda. “If there’s a small subset of the population, relatively small subset, that’s actively on the market buying, that’s enough to push up housing prices, that’s enough to create the kind of market dynamic that we saw in 2020.”
And that market dynamic isn’t letting up yet.
