The ongoing dialogue on housing costs in Juneau has been worthwhile and raised awareness about an important issue. However, we ought not overlook some of the benefits of increasing property values. On the bright side, rising home prices have helped many locals reach their retirement goals and allowed many others to tap their growing home equity for home improvements, consumer purchases, and college tuition for their kids.
All over town existing buildings are being spruced up with new roofs, siding, and paint. New construction is sprouting like wildflowers on the roadside. It is hard to imagine this flurry of construction (and the associated economic benefits) happening in an environment of stagnant or falling property values.
Rising home values have also allowed many growing families to sell and move into larger homes. Even the city has benefited from rising property values. The assessed values have caught up with market values and filled up our municipal coffers.
But are prices now so high as to outweigh these benefits? Perhaps, but not necessarily. New families and new arrivals face the burden of high prices with none of the benefits. Bear in mind, however, affordable has become a relative term. Juneau is still affordable compared to many places on the West Coast. Been to California lately (home of $2 million mobile homes)?
Our local appreciation rate (the amount real estate increases each year) of 12 percent still lags far behind the so-called bubble cities like Los Angeles (32 percent) Sacramento, Calif. (27 percent), Miami (28 percent), San Francisco (30 percent), Washington, D.C. (23 percent) or Fort Lauderdale, Fla. (32 percent). Yes, Virginia, in many US cities young couples cannot even comprehend "owning" a home, and in Juneau, it is at least possible (and will become more possible, so stay tuned).
Moreover, other than encouraging high density housing, streamlining permitting, and freeing up land, we have to be wary of market intervention by the local government. Many of the factors impacting home prices such as interest rates, topography, geography, commodity prices, and labor rates are well beyond the realm of local officials. What we seem to have in Juneau is a temporary situation where there is far more demand for affordable housing than supply. It is Economics 101.
That said, there are large scale condominium projects in the works in Douglas, Lemon Creek and the Valley, several subdivisions of single family homes are in progress, and dozens of spec homes are coming on the market. Meanwhile, interest rates are creeping slowly upwards. So it is probably just a matter of time before supply catches up with demand. So an increased supply of affordable housing and an eventual cooling in the rate of property appreciation are probably already on the way.
Mike Boyer is an Assistant Professor of Law Science at University of Alaska Southeast, a board member of several condo associations and a real estate investor.