Kodiak Dodges Real Estate Crisis

KODIAK, Alaska - The nationwide 2008 real estate crisis has yet to reach Kodiak and as 2009 ends, area real estate experts report it is increasingly clear Kodiak may have dodged the bullet.

Much like 2008, 2009 was not a banner year for Kodiak real estate, but it was a stable year for housing prices and foreclosures.

Realtor Bob Brodie of Associated Island Brokers said Kodiak avoided the brunt of the real estate crisis because it never had the over-inflated prices of the Lower 48 states.

"Where the vast majority of the country has been going up dramatically over the last five years, we've been stable," he said. "And where values have plummeted, we've been flat."

Appraiser and incoming Kodiak Island Borough assessor Bill Roberts said Kodiak has not followed the pattern because lenders avoided what he called "really stupid banking practices."

"You look down south and you see problems because you had people being loaned more money than they could ever expect to pay back," he said. "We didn't see that so much in Kodiak."

Brodie agreed most local lenders did not offer loans to unqualified buyers.

"We had a few foreclosures last year, but it was mostly due to personal reasons," he said. "Kodiak lenders were very responsible. They didn't offer many sub-prime loans. A few people went online and got tangled up in that, but most people stayed in town for mortgages."

Brodie reported that professionals through the multiple listing service sold

"If it was listed at less than $300,000 and was priced appropriately, then it sold quickly," he said.

Roberts said the number of home sales and refinancing of homes during the last two years is similar to previous years. But he also reports high rental prices on the island this year because of low vacancy rates and high fuel costs for landlords.

"We had heating prices go up dramatically in 2008, and they never really came all the way back down," he said.

In what could be a reaction to higher rents, fewer Coast Guard personnel requested permission to live off base this year.

Warrant Officer Jeff Pilkington said most years more than 40 households request a release from living on Base. This year 30 requests were made.

He said a collateral effect of the national real estate scene could also play a role. More Coast Guard families are arriving in Kodiak burdened with properties they cannot sell down south. "A lot of what I've seen is we've had people come up here, and they just can't afford to live in town," he said.

The good news is households usually don't face the same problem when they leave Kodiak.

"I've seen very few not be able to sell properties when they are transferred elsewhere," he said.

On Base, the Coast Guard maintains 406 housing units that are currently at 95 percent capacity. Pilkington said he expects housing will become tighter on Base this summer when the Coast Guard renovates 18 Navy-era units.

Looking into 2010, many new Coast Guard households will receive less money to live off base. Basic Allowance for Housing (BAH) will drop by as much as 9 percent for some pay grades, although other pay grades will receive BAHs as much as 3 percent higher.

In general, families with dependents are eligible for between $1,600 and $2,600 in 2010. BAH is supposed to cover 80 percent of housing expenses.

Families without dependents are eligible to receive a BAH between $1,200 and $2,200.

Pilkington said the E6 (first class petty officer) pay grade was most affected by decreases.

The BAH changes will not affect off-base residents who do not change their dependency status. But the changes will kick in for new transfers that arrive in Kodiak in the summer.

In general, Pilkington said BAH decreases were expected in 2010, because the BAH went up across the board in 2009 due to rising fuel costs.

Even as BAHs drop for most Coast Guard households, at least one other benefit increases.

Overseas cost of living allowances (COLA) rose 4 index points for Kodiak personnel. COLA is based on 150 consumer items not related to housing. It is paid to compensate for the higher cost of living in Alaska compared to the Lower 48 states.

Kodiakans anticipating a property purchase in 2010 should not expect a noticeable increase in housing supply. Ted Hansen at the Kodiak City building department said new home construction has been down since 2008. His office received only 19 requests for permits in 2008 and 20, so far, in 2009.

He said the lack of new subdivisions keeps development down. Record-low interest rates and low construction costs should be favorable for new construction.

As 2009 ends, indicators give mixed messages about the recovery of the national real estate market. The Associated Press reported last week that sales of new homes were down in November, but housing resales hit a three-year high. New government programs to encourage homebuyers likely obscure the real estate markets' indicators.

Kodiak has thus far been shielded from high unemployment, a principal consequence of the real estate crisis nationwide. Kodiak's fisheries and Coast Guard Base also play a role in maintaining real estate values. Unemployment in Kodiak during 2009 was under 7 percent through October.

But, as always, Kodiak jobs tend to be seasonal. Last month, Kodiak's unemployment rate jumped to 11.9 percent. The national unemployment rate was 10 percent in November.

Alaskawide unemployment rates have been consistently lower than national rates since the economic crisis of 2008. In the years leading to the crisis Alaska's unemployment rate was consistently higher according to data from the Alaska Department of Labor and Workplace Development.

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