Anchorage home construction market expected to cool down

Posted: Friday, April 01, 2005

ANCHORAGE - Anchorage homebuilders are expecting the construction of new homes to slow considerably this year.

Area builders say the brakes are on because of a lack of suitable land left to build on in the city, which is forcing projects to the Matanuska and Susitna river areas, some 40 miles north of Anchorage.

Anchorage house construction has boomed in recent years, driven by a growing population, favorable interest rates and a strong and stable local economy. Last year, builders put up 796 single-family houses in Anchorage after predicting a year ago they'd construct about 750.

Even with the increase, last year's total was a decline from the 884 new homes built in 2003, members of the Anchorage Home Builders Association said Wednesday.

This year, builders expect to add about 500 single-family houses to Anchorage, which would be a 40 percent decline from 2004 and the fewest built in the past 15 years.

Builders have long talked about a land crunch in Anchorage.

"In 2005, those predictions are becoming a reality," Harley Sudsbury, the association's president and owner of home building company Sudsbury & Sons, said.

The shrinking supply of land has had a marked impact on prices as well, builders said.

In some cases, land costs have risen 300 percent in the past four years, said Lee Baker, owner of Discovery Homes.

There are scattered lots available in the Hillside area on the city's southern edge. But they are large, ranging from 150,000 to 200,000 square feet, and can cost as much as $750,000, Baker said.

There also are a few larger tracts available for about 200 single-family houses total, Baker said.

Even the smaller lots, between 6,000 and 8,000 square feet, are commanding high prices, ranging between $115,000 and $125,000, Baker said.

Compounding the increasing land costs have been rising prices of basic building materials. Prices for lumber, steel, concrete and petroleum-based products such as shingles have all risen over the past year, Baker said.

Given these trends, Baker predicted Anchorage housing costs will rise about 15 percent over the next few years.

Residential real estate values have continued to vigorously appreciate, pushing the average resale price of a single-family house in Anchorage to about $250,000 last year, up 10 percent from 2003.

According to the association, newly built houses drew even higher prices, averaging $303,000 last year.



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