Is Alaska’s pandemic housing market burning out or getting hotter?

A house for sale in Anchorage’s South Addition neighborhood in May 2020 (Lex Treinen/Alaska Public Media)

For many Alaskans, trying to buy a house this year has been an exercise in frustration. It’s a seller’s market; homes are going fast and at high prices. If you’re looking for a place to settle in Alaska, should you even try to buy a house right now? Experts say there isn’t one straightforward answer.

Alaska Public Media’s Casey Grove is one of those Alaskans who’ve been having a hard time buying a house in Anchorage. He says the process is emotionally draining.

“You are going to be literally invested in this house and then it doesn’t work out because the market is so tight that people are bidding way above what your offer is going to be, or offering cash,” Grove said.

Grove and his wife have looked at a lot of homes and made offers on two. For one, they offered $35,000 more than the asking price. And even that wasn’t enough.

“Somebody came in and made an offer to pay $350,000, $360,000, not totally sure — cash,” Grove said. “So an offer above ours, and they just had that money.”

There were 14 other offers on that house. The other house they bid on had 21 offers.

Those high prices are in line with state trends. Alaska Department of Labor economist Rob Kreiger said that in surveying lenders the department noted a 6.4% increase in 2020 average home sale prices compared to the year before.

Nolan Klouda is Executive Director of the Center for Economic Development at the University of Alaska Anchorage.

“It’s always hard to actually time the market right, as far as ‘If I buy a house now, is it going to be cheaper than it will be in six months?’ Those kinds of decisions are always really tough to make, even for experts,” said Klouda.

For instance, no one predicted the 2020 pandemic would create the seller’s market we’re seeing now. Klouda says supply was down and demand was up.

“A lot of it also had to do with the low interest rates, too,” said Klouda. “So all of that sort of combined to make this really strange market where prices went really quite high and it was a very hot market.”

And while Alaska saw record job loss in 2020, some Alaskans actually had more money to spend: Overall, personal income increased in the state.

But just because both demand and prices are high doesn’t mean Alaska is in a housing bubble. And while can be hard to know you’re in a bubble until it pops, Klouda says, there are none of the classic warning signs right now — lots of new construction or risky lending.

State Department of Labor economist Neal Fried agrees. Alaska’s housing market doesn’t have the makings of a bubble right now, he says, and he’s not expecting a crash.

“That doesn’t mean the value of homes couldn’t go down,” said Fried. “I’m not going to try to even guess that. And that sales might go down. But it’s not going to be — we just are not in the environment, sort of the bubbly environment, or sort of the potential boom/bust environment.”

By comparison, Fried points to the housing crash the state did see in the 1980s.

“That was our last, and probably only housing bust Alaska and Anchorage has ever really experienced,” said Fried.

A big difference in the 80s, Fried says, was development. The number of homes being built eventually exceeded demand.

“There were just brand new, empty houses that probably took 10 years to absorb that incredible inventory that we had,” said Fried. “We have very little inventory right now.”

Despite high demand for homes, building activity is really low right now.

“Aggregate statewide level, building activity in 2020 was at its lowest level that we’ve seen,” said Kreiger. “That’s been the trend, probably for the last seven years, building activity has been on a slow decline to its current level.”

Both Fried and Klouda say it’s impossible to know exactly where the market is headed, but both also say they would buy a house in this market if they needed one. Klouda says he expects to see interest rates increase which could slow rising home prices. And there are other factors at play too, such as the state economy.

“If confidence in our in-state economy got worse or if we saw more of an economic downturn or prolonged economic downturn because of oil being at lower prices in the future or concerns about state government, then those are things that could impact our housing prices in a negative way,” said Klouda.

So, should you buy a house in Alaska right now? That’s something Casey Grove is thinking a lot about.

“That’s one of the biggest, hardest questions I guess, is this the right time to do this? And I don’t know,” said Grove.

He’s not giving up yet, but is considering the possibility of renting a while longer.

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