Real estate (Res.).(2007 Alaska Forecast)

The year 2007 will bring a return to the late 1990s, which means inventory in balance with sold properties and inflation closer to the consumer price index. Supply of residential real estate in most of the state and specifically Southcentral now parallels 1997, 1998 and 1999. These were excellent years with sustainable sales and inflation of 2.75 percent, 6.45 percent and 2.23 percent. Simply put, "Supply and Demand 101" is now in play. Residential values in most of the state peaked in the first half of 2006. Home prices are moderating as inventory reaches historical averages beginning at the highest price ranges and working downward. Southcentral real estate sales will be affected in the following three groupings.

1.) First-time homebuyers will continue to be the driving force in entry-level home sales as interest rates maintain stability in 2007.

2.) Homes priced between $350,000 to $500,000 will continue to be moderate in pricing as well-priced and presented properties hold value.

3.) High-end homes and vacant land suitable for new high-end development will receive the largest impact to the changing market. Some high-end sellers may choose to take price reductions or hold inventory until current product is absorbed.

Older residential homes in highly desirable neighborhoods will feel a flattening of values. Speculative purchases to remodel and resell or tear down and resell will subside in 2007.

Roy Briley, President, Real Estate Brokers of Alaska

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