Residential riding high.

• Author: Gerhart, Clifford
• Position: Housing developments in Alaska - Industry Overview

Alaska's real estate brokers are finding ready buyers for homes. Development costs are high, but good interest rates and faith in the economic future have boosted the market. In Anchorage, the first new condos in almost a decade are being built; in Fairbanks and Juneau, mining projects have spurred construction.

In Alaska's housing market, the mood is optimistic. Brokers are busy as increasing numbers of people look for homes. Contractors are building new homes as the surplus from the 1980s vanishes.

Lucille Stietz, senior vice president at National Bank of Alaska, says, "The housing market's not a barnburner, but it's going right along. Interest rates are down. They've been bouncing around 8 percent to 8.25 percent, but a year ago they were 9.5 percent. People are willing to buy."

All over the state, but especially in Anchorage, realtors and developers say that as Alaska's economy swaps high-paying oil company jobs for lower-paying retail work, there's increased demand for less expensive "starter" homes. The problem in Anchorage is that increased lot prices and cost of materials make it almost impossible to make a profit building such houses.

"Most people don't think it pencils," says Sue Fison of Anchorage's planning department. "There is a high demand for lower-income housing. What has happened is that the developers snapped up all the foreclosed properties, and now we're seeing the true cost of development."

The big story for the state's housing market came when the Alaska Housing Finance Corp. (AHFC) launched its 5 percent home loan program in early December of last year. Originally budgeted at $50 million, the loans were designed for low- to moderate-income families. The popular program's funding was increased to over $92 million - with $11.5 million set aside for rural areas - as eager home-buyers applied for the loans.

By mid-May, over 900 loans were approved, with the average loan running at $103,000. The low-cost financing, about half the going rate, varies according to location and family size.

Sherrie Simmonds, AHFC's corporate communications officer, says that although the program was designed for lower-end housing, it sent waves throughout the market.

"One thing we found is that it (5 percent financing) opened things on the high end, as people who couldn't sell their houses before did sell them and then moved up," she says.

"This program was designed to be a one-time thing," Simmonds adds. "Because of the number of units, we...