Rents just keep going up! And it’s going to continue. With the slow down to a halt of new construction in Anchorage over the last several years the availability of rental properties is decreasing. Add the increase of population and the demand outweighs the supply. In fact the Anchorage Economic And Development Corporation says for several years Anchorage has seen at least a 1% growth annually in population and is forecasting the same for years to come.
Recent changes in the lending industry such as a higher minimum down payment up from 2.5% to 3.5% for owner occupied home purchases and higher minimum credit scores has made it harder for some to buy now and take advantage of the awesome interest rates (as of this writing 3.75%) so they’ll have to rent for a while longer. And it will take longer to save while paying a higher rent.
And although we don’t have the foreclosure rates that some states in the lower 48 states have it is still a factor. The 6% of homeowners who’ve lost their homes to foreclosure will have to wait another 7 – 10 years before they’re able to buy again and so they must rent as well.
Increased population plus those that cant buy are creating a huge demand on the shrinking supply of available rentals. Hence rents going through the figurative roof! Too bad for renters and I don’t wish anything bad on anyone but that’s just the way it is and will be for a while.
Now the good part! Prices are down, interest rates are down, rents are high and going up. This is the perfect formula for those who can take advantage of it! Let’s say you own (you & the bank) a small home or a condo. You’ve had it a few years and maybe your family is growing or your lifestyle has just changed to the point that you want to make a move up. Buy that larger more comfortable home with the added features you’ve always wanted (owner occupied so you get the smaller down payment & interest rates) and rent out your current home.
With the higher rents today you could use the tenants payment to buy the first home and have extra cash flow to help pay the new mortgage on your move up home. You might even be paying the same amount out of pocket as your previous mortgage was! And the best part, someone else is now buying your first home for you!
(Continued in part 2)
Mark Mandigo is a licensed Real Estate Consultant and REALTOR® for the State Of Alaska http://www.realestateinanchorage.com/