Alaska's healthy real estate industry: commercial and residential market status.

• Author: Kenshalo, Rachel
• Position: SPECIAL SECTION: BUILDING ALASKA

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It's been impossible to avoid hearing about the mortgage crisis plaguing our nation's lenders and homeowners for the last several years. It can be seen on the news, on infomercials promising to save the consumer from home foreclosure, and in the partially finished luxury condo developments found in many major cities. According to the Mortgage Bankers Association, the national association representing the real estate finance industry, the delinquency rate for mortgage loans increased to 10 percent of all outstanding loans by the end of first quarter 2010. In Alaska, however, real estate industry leaders and economic experts all seem to have the same message: the current situation may not be ideal, but things could be a lot worse.

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"We just haven't seen the real estate market tank like it did elsewhere in the country," says Bill Popp, president and CEO of the Anchorage Economic Development Corp. Popp attributes Alaska's healthy real estate market to sobering lessons learned during the statewide recession in the late 1980s. During that time, oil prices dropped to less than $10 per barrel and Anchorage saw 14,000 home vacancies, 8,000 foreclosures, and 29,000 people simply packed up and left the state, devastating the economy.

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"Alaskans benefit from having more anticipation and being better prepared for times of economic slowdown," Popp says. "Construction companies, lending institutions and property developers remember those times and therefore are much more cautious than the rest of the United States. The rest of the country didn't experience the recession we had, so perhaps they were more prone to fiscal irresponsibility."

Jim Calvin, principal and senior economist with the McDowell Group, a statewide economic research and consulting firm, agrees. He points out that low oil prices in the 1980s created a drastic decline in employment, which led to tanking real estate values and a decline in construction. "In times of economic change," Calvin says, "the real estate market is the most responsive to that change, and therefore it's a great indicator of overall health of an economy."

If real estate markets are an indicator of overall economic health, then all signs point to Alaska's economy remaining strong.

COMMERCIAL MARKET

On the commercial side, the market is fundamentally sound, with low vacancy rates across all sectors (retail, office and warehouse)...