Is the bottom dropping out of Alaska's housing market? Are we in for another bust? Experts say no.

• Author: Barbour, Tracy

The housing market in Anchorage remains robust, despite high prices, escalating building costs and steadily increasing interest rates. However. the pace of home building--particularly with single-family houses--is slowing down. Now some people are wondering if the residential market has peaked and if prices will plummet. But perhaps the million-dollar question is: Will the bottom drop out of Alaska's housing market. as it did in the 1980s?

The consensus among local experts is that the residential housing market is not headed for a drastic downturn. And the boom-bust scenario that played out in the '80s isn't likely to happen again. According to state economist Neil Fried, the economic environment is very different now than in the '80s. And in fact, many of the national housing markets have been hotter than Alaska's, he said.

"Unlike the rest of the country, we had a giant real estate overhang," Fried added. "We had a tremendous amount of inventory that was built in the '80s and was being absorbed in the '90s."

Economic Climate of the '80s

The '80s was a time of tremendous growth, due to an influx of North Slope oil revenue into the state treasury. The era also spawned what Realtor Niel Thomas described as the "perfect real estate storm." Three significant factors converged to throw Alaska's real estate market into chaos. The state was spending massive amounts of money on capital construction projects, including a new library, civic center, sports arena and performing arts center.

At the other end of the spectrum, the Tax Reform Act of 1986 disadvantaged real estate as a form of investment, leading to bank failures nationwide. And faltering world oil prices caused an oil bust in Alaska and elsewhere. The state's unstable economy became rocked by a recession.

"We lost jobs and population at an almost unprecedented level," said Thomas, a Coldwell Banker Fortune executive vice president who has worked in real estate since 1983. "Forty thousand people left town in less than a year."

Teresa Burnett, an associate broker with the For Sale by Owner Assistance Program, referred to those difficult times: "The extreme growth in the '80s led to the overbuilding of new homes," said Burnett, who focuses on marketing and statistics. "I think they predicted too much of a growth from Prudhoe."

At the time, interest rates were great and everyone was buying-creating another set of problems. "Nobody was renting," Burnett explained. "So rentals stood still, and...