Although the outright price for homes is cheaper in Fairbanks, buying a home may be more affordable overall in the Kenai Peninsula Borough.
The average price of a home on the peninsula in the first half of 2015 was $265,912, as compared to Fairbanks’ $239,413, according to a December 2015 analysis from the Alaska Department of Labor and Workforce Development. The most expensive homes are in Anchorage, Juneau and Kodiak.
However, though Fairbanks has the lowest average price for homes, the cost of utilities is a factor, said Alyssa Rodrigues, an economist with the Department of Labor and Workforce Development. In a presentation at the annual Industry Outlook Forum in Kenai on Jan. 28, Rodrigues said Kenai’s relatively low utility cost and cost of living may make it more affordable overall.
“When we look at the affordability index, Fairbanks isn’t necessarily more affordable even though it looks more affordable here, because we don’t look at all at utilities,” Rodrigues said. “Although Kenai looks like it’s less affordable, if we were actually to put in the heating costs for Fairbanks, I would wager a guess that Fairbanks is probably more expensive.”
Rodrigues said the statewide figures take averages for income and housing costs that are “everyone’s average and no one’s average.” The numbers are recalculated every year, she said.
The peninsula’s food costs and construction material costs are higher than in Anchorage, but Anchorage’s housing is so much more expensive that it makes them balance out to make Kenai more affordable to live in, said Melissa Houston, the associate director for strategy at the University of Alaska Anchorage Center for Economic Development. Houston helped assemble the strategic plan for the Kenai Peninsula Economic Development District and presented some of the preliminary findings to the joint Kenai and Soldotna chambers of commerce on Feb. 2.
“Because housing is such a large share of a typical family’s expenses, it frequently offsets higher prices in other categories for some peninsula communities,” Houston said. “The cost of housing in the Kenai Peninsula Borough is less expensive than the Mat-Su Borough or in Anchorage. Overall, the cost of living is less than Mat-Su and significantly less than Anchorage because of the effect of housing.”
Homes in Alaska have become generally more affordable in recent years. After hitting a high in 2007, when it took about a paycheck and a half to pay the mortgage on the statewide average income, home prices decreased statewide to requiring only 1.2 paychecks to pay the mortgage, according to the December 2015 analysis.
This is likely due to “historically low interest rates,” wrote Karen Wiebold, a state economist, in the analysis. The interest rate bottomed out at less than 3.5 percent in 2013 and has climbed again to just below 4 percent in 2015, having fallen from a high at 7.5 percent in 2000, according to the analysis.
Buyer optimism may also be driving the market, said Marti Pepper, a realtor with Redoubt Realty in Soldotna. Young families moving into second homes are common, and the market for second homes is also picking up again after a long plateau, she said.
“Optimism is high,” Pepper said. “With what’s going on in the oil fields, it feels like we have two economies going on. 2016 started off really strong.”
The peninsula has consistently had more affordable homes than the rest of Alaska, Pepper said — that’s nothing particularly new. Most buyers are looking for homes in the $250,000–$300,000 range, she said. Now that gas prices have fallen, buyers are less concerned about longer commute, she said.
The peninsula’s economy is diverse enough that the local real estate market hasn’t felt the cuts the way other areas of Alaska have, but it’s hard to predict what may happen, Pepper said.
The steep drop in the Lower 48 housing market never hit Alaska, but the market flattened out, she said.
“I don’t know what’s going to happen with the continual layoffs in the oil fields, because that’s a lot of our community,” Pepper said. “It is affecting our community, and some of the smaller businesses are being affected by it, and they’re the ones that are catering to the oil fields.”
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