Housing market confidence: National economic crisis affecting Alaskan.

• Author: Barbour, Tracy
• Position: REAL ESTATE

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While Alaska is somewhat isolated from the rest of the country, the national economic crisis is having a psychological and real impact on the state's housing market.

Since the advent of the recession in 2007, Alaska has been virtually insulated from many of the financial woes that hit the Lower 48. The nation's economic crisis was marked by reckless lending practices leading to bank failures, high unemployment and rising prices for food, oil and other commodities. Many markets around the country are struck by record home foreclosures, plummeting housing prices and tightened underwriting requirements for mortgage loans.

In contrast, Alaska's diversified economy has remained overall stable during the economic downturn with relatively few foreclosures, a healthy housing market and a statewide unemployment rate that is uncharacteristically lower than that of the nation's.

But industry experts say the uncertainty of the national economy is eroding the confidence of many Alaskans and impacting the state's housing market in various ways. Home construction is down, while remodeling and refinancing activities are up. Overall consumer behavior and expectations are changing to subtly affect Alaska's housing market.

CHANGES IN CONSUMER CONFIDENCE AND BEHAVIOR

Consumer confidence--or the lack thereof--is like an invisible cloud hanging over the Alaska housing market. Many people are more hesitant to buy and build new homes.

Chuck Spinelli, president of Spinell Homes Inc., attributes the shift in Alaskans' attitude to the national economic crisis. "It's gotten people so afraid to make a commitment to buy a house," Spinelli says. "They're afraid to go in and get a loan because they've heard all this bad news."

Tara Telzlaff, a senior vice president at Northrim Bank, has also noticed a difference in people's perspective. The Alaska housing market hasn't seen the massive depreciation in value like some places in the Lower 48. Interest rates are extremely low, so affordability is not the issue, she says. Consumers are treading very carefully and conservatively before making home purchases. "From my perspective, buyers are taking their time to make decisions," Telzlaff says. "They're shopping around for builders. They think the market is stressed because of what's happened in the Lower 48."

Consumers aren't the only ones who have changed their behavior. So has Northrim, which specializes in providing residential construction loans, mostly to home builders. The bank has modified its approach to handling some of its foreclosed construction projects. In the past several years, when the bank has taken projects back from builders, it has done so in a way that minimizes damage to the market, according to Telzlaff.

"We helped the market to...