Alaska Homeowners Cashing In: High demand, low supply creating chaotic residential real estate market.

• Author: Orr, Vanessa
• Position: REAL ESTATE

The word "unprecedented" was tossed around a lot in 2020, and it can also be used to describe what's been happening in the residential housing market since the pandemic hit. A mix of low interest rates, lack of inventory, and more time spent at home has resulted in a real estate boom unlike any other.

According to Redfin, a national real estate brokerage, home prices nationwide were up 16.7 percent year-over-year in March. At the same time, the number of homes sold rose 13.4 percent and the number of homes for sale fell 52.5 percent. And Alaska's not immune from this housing frenzy.

"I've been in business for forty years, and I've never seen such a high demand for homes and lack of inventory," says Connie Yoshimura, broker/owner of Berkshire Hathaway HomeServices Alaska Realty. "What we're seeing here is very much like the housing market in the Lower 48 with multiple offer situations, bidding wars, and escalation clauses in purchase and sale agreements. And this is happening at all price points because of historic low interest rates."

The Perfect Storm

There are several reasons why the housing market has exploded. Low interest rates are allowing people to get more house for their money--and staying cooped up during the pandemic has made a lot of people realize that their space isn't suitable for their current lifestyle.

"Even if interest rates went up 1 point--and historically, they go up in smaller increments--at the end of the year, an interest rate of 4 percent is still an incredibly low rate," says Yoshimura. "Rates like this bring more buyers into the marketplace."

It also causes a domino effect: when someone buys a condo, the condo owner may move to a single-family home, causing that homeowner to move into a larger, more luxurious home or a place with more land, or to divest and buy a second home or cabin.

According to Karen Wright, past president of the Southeast Alaska Board of REALTORS and a realtor with Southeast Alaska Real Estate, because of low interest rates, what homebuyers can afford now is drastically different than what they'll be able to afford when rates go back up.

"If you're paying 4.5 percent on a 30-year loan, your mortgage payment on a $490,000 home is $2,482 per month," she explains. "Reduce that to 3.5 percent, and you're paying $2,200 per month. You can put $10,000 more toward a home with that lower interest rate for the same monthly mortgage payment."

Matt Dimmick, founding member of Keller Williams Realty...