Residential real estate bounces back: the recovery is not yet complete, but Alaska's residential real estate market continues to improve.

• Author: Collins, Gloria

The recovery is not yet complete, but Alaska's residential real estate market continues to improve.

The horrors of the residential real estate market's collapse in Alaska are essentially old news. But they're not forgotten. Despite renewed activity in the housing market, fueled by increased economic activity and population growth in the state, the not-so-distant real estate crash still casts a shadow on the industry.

Alaska's recession, instigated by the mid-1980s drop in oil prices, forced job layoffs. Unable to meet mortgage payments, many people defaulted on mortgages or gave their homes back to lenders, leaving thousands of vacant units. The lending institutions' portfolios of uncollectable loans grew so burdensome that several banks and savings and loan organizations folded.

The housing market found itself with too many units available and not enough takers. Property values continued to drop as supply exceeded demand. To dispose of the excess housing units, special institutional sales programs were developed.

For instance, the state's Alaska Housing Finance Corp., which sells bonds and buys mortgage loans, reported that by 1989 it held more than 4,600 foreclosed properties, including single-family, condominium, zero-lot line, multifamily and mobile homes. By July 1990, special programs had helped to reduce AHFC's inventory to 2,504 properties. Two other prominent institutional players were Mortgage Guaranty Insurance Corp. and the federal agency Housing and Urban Development.

As people left the state, "overbuilt" was one term often used to describe the residential real estate situation, especially in Anchorage. Industry experts don't deny that the market became flooded with offerings. But many believe that, instead of too many housing units having been built in the early 1980s, too many people left. According to Bill Swain, chairman and broker of Jack White Co., an Anchorage real estate brokerage firm, "More people left than the economy dictated."

Certainly there was a glut of housing, resulting in a buyer's paradise for a time. But the institutional efforts to liquidate the excess foreclosure inventory itself helped to stimulate the plunge in residential real estate prices. As that inventory has shrunk recently, prices are moving upward again.

Kert English, president of K.R. English and Associates Inc., an Anchorage real estate appraisal and consulting firm, explains, "Part of this (market recovery) can be attributed to lack of institutionally held properties. The resale value of these properties appears to have been strongly influenced by incentives toward time-measured marketing - conditions requiring that a property had to be sold and closed within 90 days, for example. They (institutions) no longer have that incentive, so they're allowing the price to adjust now."

In addition to reduced inventory, recent population increases are helping establish a healthy housing supply and demand balance. One reason people are coming to Alaska reflects the historically observed pattern of Alaska and the Lower 48 being at opposite ends of the economic cycle. Jack White's Swain says, "For some unexplainable reason, Alaska runs countercyclical to the Lower 48, and people come here when the economy goes down there."

Also, many of the people who left during the recession are returning. Mark Korting, broker at Anchorage's Re/Max Properties, a real estate brokerage firm, explains that many former residents like Alaska and are coming back as they gain confidence in the state's economic activity.

Alaska's economy is experiencing a resurgence right now. The state received a boost from the Exxon Valdez oil spill cleanup, which brought a healthy cash infusion in 1989 and 1990.

Facility expansion, primarily projects aimed at increasing oil recovery, continues on the North Slope. It's been reported that approximately 600 to 800 new Slope-related jobs are expected within the next one to one and a half years. Also...