Homer Alaska - Business

Story last updated at 5:11 PM on Wednesday, December 21, 2011

Housing market gets stronger

BY Hal Spence
For the Homer News

Encouraging trends suggest Homer's housing market is enjoying a modest rebound from the downturn of 2008, a local appraiser said Monday.

Certified appraiser Kirk Olsen said the median sale price of a single-family home is rising, the number of days listed property remains unsold is shrinking, and there has been noticeable uptick in the number of sales this year — all "encouraging signs" that he thinks should continue.

"I predict gradual improvement" in Homer, Olsen said.

For Olsen, the local market comprises Homer proper, East End out as far as McNeil Canyon, Diamond Ridge and Skyline Drive — all areas a relatively convenient commute from downtown.

In discussing the single-family real estate market, Olsen restricted his focus to homes from $100,000 up, thus avoiding including such things as recreational cabins in the equations. He also uses the median instead of an average price, saying median was "a more stable way to look at it."

Essentially, average is obtained by adding up a list of figures and dividing the result by the number of figures. The median is the middle number in a series arranged in order of size. For example, the median in the group of 50, 55, 85, 88 and 92 is 85; while the average is 74.

"The median is less affected by one outlying number than the average is," Olsen said.

Homer's single-family real estate market certainly felt the pinch when the so-called housing bubble burst. But prices did not collapse as badly as they did in other parts of the country, Olsen said.

"The median sales price in 2007 was on the rise, but it fell in 2008," he said. "But since then, it's been stair-stepping up every year, and this year there was a bigger step, putting us almost back to 2007 levels; within 2 percent."

The median price of single-family homes in 2007 locally was $239,300. That price dipped to $219,400 in 2008, but this year has hit $235,700, Olsen said.

The length of time a property remains on the market is a factor of concern for most sellers. Market times began lengthening significantly in 2008. According to figures Olsen provided, market time in 2007 averaged 54 days. That jumped to 85 days in 2008, 109 in 2009, 115 in 2010.

"That trend broke this year," he said. "It has reversed and is shortening. It's showing a first step back at least."

This year, market time is averaging about 100 days.

Overall, total annual sales of single-family homes have been fairly consistent over the last five years, averaging in the mid-70s annually during 2007 through 2010, but rising to 80 this year to date. That there have been slightly more sales this year is an encouraging sign, Olsen said.

Entry-level and modestly priced homes are a little less affected by downturns because demand for this level of housing tends to remain steady, even in bad times. It is a different story in the higher-end and luxury markets.

For the five active listings at $500,000 and above in the Homer market area, the median number of days on market sits at 279, according to Olsen. Only two sales above $500,000 have been recorded in the past 24 months, only one in the last 12, Olsen said.

Those figures exclude luxury condominiums where the slump appears worse. None of the seven luxury condos on the market at or above $500,000 has sold during the last 12 months. In fact, the median days-on-market for luxury condos is 560.

"When I see market times exceeding a year that tells me things are not happening in that market," Olsen said.

While demand for modestly priced homes softened during the recession, sales did not disappear. The drop in the median price in 2008 was driven largely by the decline in high-end sales, because those buyers, who might otherwise have pulled the trigger on a purchase, tended toward caution in an uncertain economy.

"It's just that most of the high-end sales went away, so the median dropped," Olsen said. "High-end sales, sales in the $400,000 to $500,000 became scarcer."

Homes that did sell sometimes did so because sellers cut their prices, he said.

While the existing home markets suffered to varying degrees depending on price range, it's also been a mixed experience for builders of new homes, Olsen said.

"Construction costs, in general, are rising because of things like the costs of steel, copper, and oil," he said. "But framing costs (the lumber and plywood to build the shell of a home) are below the five-year average because housing starts nationally are way down and there is plenty of supply."

Bruce Turkington at Spenard Builders Supply confirmed the rising prices of building materials.

"It used to be the shell was the most expensive part, but now it's about how do you go from there inside?" he said. "Sheet rock has almost doubled in price."

Thus, while framing has become more affordable, prices are climbing for roofing, wiring, carpeting and all the other paraphernalia necessary to complete a home, driven up, in part, by the high cost of fuels, Turkington said. For many, the price of new construction is pretty daunting, which makes the existing home market that much more alluring.

"When you're not sure you've got to look at it and make choices, Turkington said.

Meanwhile, at the top end of the housing price scale, the pace of construction seems largely unaffected by rising costs, Olsen said.

"It is not on the radar for a lot of people, but we have a trend that bucks the national news," Olsen said. "We have a lot of high-end construction going on around Homer. We have had a dozen or so really high-end homes built or being built in the last couple of years. That's kind of fascinating. People are not shy about building their trophy home. It's counterintuitive, but it is happening. Local builders have most of these projects."

Seeing promise ahead for 2012, Olsen noted, "There is some sense on the national level of a gradual growing confidence in the general economy, and I think that will continue."

An improving national economy should have local impacts, including in the housing and construction arenas. Olsen said he knows some local builders who already have projects lined up for next year. His own business, Kirk Olsen, Certified Appraiser, has had work, in part, because of the very low interest rates.

"There has been a boom in refinancing," he said.

Homer's extraordinary vistas, its generally acceptable weather patterns, access to recreation and institutional infrastructure also are appealing. That people like living here, and perhaps more importantly, want to move here, has helped keep Homer's housing market more or less stable even as those in other parts of the nation, as reported by national news, suffered horrendous declines.

"We did experience a definite downturn, but not as severe as in other places," Olsen said. "Homer is an attractive place to live."

Hal Spence is a freelance writer who lives in Homer.