Homer Alaska - Business

Story last updated at 12:42 PM on Wednesday, March 14, 2012

Anchor Point tops list of most 'affordable' place to buy home among 11 Southcentral communities



A recent study that compared home prices in 11 Southcentral Alaska communities found Anchor Point was the most "affordable" of the 11 places to buy a home in 2011.

The study, conducted by The Alderfer Group, compared 2011 home sale prices and median household incomes in the communities of Palmer and Wasilla in the Matanuska-Susitna Borough, Anchorage, Chugiak/Eagle River and Girdwood near Anchorage, as well as Anchor Point, Homer, Kenai/Nikiski, Seward, Soldotna and outlying areas on the Kenai Peninsula. The Alderfer Group is a real estate and development firm headquartered in Homer.

According to Philip Alderfer, broker and owner of The Alderfer Group, this is the first-ever study of this type done at the local level.

"Our clients often talk about home 'affordability.' Not just what a home costs to buy, but how mortgage rates, homeowner's insurance and property taxes will affect their family's budget. We wanted to learn how those experiences differed across the communities we serve.

"Because we could not find that information elsewhere we had to do the research ourselves. It was a great opportunity to compare the communities where our clients live — and good excuse to stretch our math skills," he said.

The Alderfer Group first identified median household incomes within each community using U.S. Census data. From that information, the maximum mortgage payment lenders would typically allow at those income levels was calculated. Next, the total monthly payment for each home sold within the 11 communities using 2011 home sales price data and average ownership costs was estimated.

By comparing these two figures, Alderfer calculated a Home Affordability Index (HAI) score that showed how many home sales in a community could have been purchased by a median income-earning family, according to a press release.

"Anchor Point was the most affordable community we studied, with a whopping 82.8 HAI score. It was followed by Kenai/Nikiski at 81.3, Chugiak/Eagle River at 78.9 and Seward at 65.9," said Alderfer.

"Home affordability is a function of three things — sales price, household income and ownership costs. The study showed why they all matter," he said.

Alderfer used Chugiak/Eagle River as an example. There the median home sales price was approximately $322,000, the second highest on the list. While homes of that price could rule out many potential buyers, the average household income in that community was $94,000.

"As a result, our study showed that more than three-quarters (78.9 percent) of all home sales in the area could have been bought by — were 'affordable' — to a family earning the median income," he said.

At the other end of the scale was Girdwood. Although that community's median household income ranked third on the list at $68,000, the median home price was quite high at $330,000.

"It meant that only 32 percent of 2011 sales could have been afforded by a median-earning family. This is not surprising for a smaller community with so many second home and vacation home-type sales," said Alderfer.

In only two communities, Girdwood (at 32) and the unincorporated areas outside Homer (at 47.1) was the Home Affordability Index score below 50.

Alderfer anticipates that the study will be duplicated next year.

"I am anxious to repeat this study and see how HAI scores change over time. We Alaskans have been fortunate to avoid the worst of the economic downturn and concurrent housing crunch. And I hope our run of 'good luck' will last.

"But we will undoubtedly experience higher interest rates in the future. If household incomes keep pace, Alaskans' purchasing power should not be affected. The Home Affordability Index was designed to show us whether that is true," he said.