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Thread: Oil prices and real estate

  1. #101

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    The problem with this strategy is that if i am laid off as a result of a down turn there is no way I want to be on the bad end of a fire sale as I would be packing my uhaul to leave the state with a forclosure on my record. If I am not in a position to buy in a fire sale due to a lay off then I simply leave and possibly still buy fire sale property from down south and come back to a paid off home later on. It would take me a decade to save for those numbers unless I went to a bank and got in way over my head. I know some people have military pensions and work for the state/feds so their set up pretty good if things start breaking apart but I work directly for oil and gas so it would be incredibly dumb for me to pay prices like that with no gauarenttee of longgevity here.

    If I can hold on as a top employee as things break up that is where I could come out smelling like a rose, but i am still competeing against the pensioners/fed job guys.

    It is also not unheard of for people to rent their entire career up here and then just buy an entire dream estate somewhere down south to retire.

    Quote Originally Posted by Paul H View Post
    The dynamic today is totally different than the mid 80's. In the early 80's the state was coming off of massive construction work on the slope for expansion of Prudhoe Bay and the Kuparuk field. Any time you have a massive construction project like those end, you're going to have work force shrinkage. The last time we had significant construction work on the slope, and nowhere near what occurred in the early 80's was in the mid 2000's with pipeline repairs/replacements and pigging module construction. I don't know the percentage of oil field workers in Anchorage in the mid 80's vs. today but my guess would be they were a much higher in the early 80's.

    Whether you like it or not, petro dollars are what run Alaska. If things stay the way they are, everyone is going to suffer and if we have a repeat of the mid 80's crash there is no guarantee you'll be in a position to take advantage of real estate fire sales.

    If your dream is to by land in Anchorage and build a house, then learn the Anchorage real estate market and put yourself in the financial position to build a house. While Anchorage real estate is expensive, it's really not out of line with other major West Coast cities.

    Having recently purchased a lot in Anchorage and building a house on it l know that deals can be found on lots as we purchased our lot for ~70% of market price. It was a combination of knowing what we wanted in a lot, watching the market, being in the financial situation to buy a lot and jumping on it as soon as we found out about it. We'd also been outbid on three previous lots.

    As a rule of thumb, a lot that can be built on with no issues is worth $50k, and the acreage is worth ~$100k/acre. That's the going rate and good properties do not stay on the market for long. Building permit is $10k, if you're on well and septic figure $30-40k depending on soil and well depth.

  2. #102
    Premium Member kasilofchrisn's Avatar
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    The real estate crash in the L48 was in part due to loans being granted by banks to people who shouldn't have had the loans to begin with. Or should have had smaller loans.
    Owning a house is not a right.
    If it doesn't pencil out then you can't be a homeowner.
    That's life.
    Hard to believe someone working in the oil and gas industry is liking the prospect of an oil and gas industry crash.

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  3. #103

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    Depends how deep the lay offs go, but with the way things are now I wont be owning a home for some time, as you said its not penciling out. This is due in part by other people being willing to leverage themselves out pretty far because I know I make quite a bit more than the median.

    So I am not really hoping for a 1985 style crash but we are due for a non trivial correction, we never got to see a correction back in 08 here in anchorage, high prices stayed proped up all the way through it. It would just be nice to see some sane prices, even if its the nicer parts of east anchorage.

    Quote Originally Posted by kasilofchrisn View Post
    The real estate crash in the L48 was in part due to loans being granted by banks to people who shouldn't have had the loans to begin with. Or should have had smaller loans.
    Owning a house is not a right.
    If it doesn't pencil out then you can't be a homeowner.
    That's life.
    Hard to believe someone working in the oil and gas industry is liking the prospect of an oil and gas industry crash.

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  4. #104
    New member Paul H's Avatar
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    As I said before, compared to other major West Coast cities, Anchorage real estate is on par. The reason prices didn't tank after the 2008 correction is we didn't have the same economic drivers and prices hadn't made a huge run up prior to 2008. But when you factor in inflation, in the past seven years house prices have only risen 5-10% which really is a drop in prices against inflation.

    The challenge in the Anchorage market is entry level homes are generally not in nicer neighborhoods. Nicer neighborhoods generally have larger homes, or mid size homes with lots so small you can reach out your window and touch your neighbor. Older homes that need major remodels don't sell enough a discount to justify the cost of a remodel.

    It's still a sellers market with not much inventory and historically low interest rates have people stretching themselves to lock in those low rates. I figure when our economy finally picks up and the fed starts ratcheting up interest we're going to see inflation hit and current house prices will look like a bargain in 10 years.

    Buying a home like any investment is a risk. If you're highly risk adverse than the rewards won't be worth the risk to you.

    There are also always going to be deals on real estate with short sales and foreclosures. You're not going to get a home for free, but if you know the market and are in a position to take advantage of a deal a 10-20% discount isn't unreasonable.
    Those that are successful in Alaska are those who are flexible, and allow the reality of life in Alaska to shape their dreams, vs. trying to force their dreams on the reality of Alaska.

    If you have a tenuous grasp of reality, Alaska is not for you.

  5. #105

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    And this is kind of what I am thinking, we don't have to live in south anch and if bones are good I am not adverse to doing my own work or finding good contractors to do small projects that don't need permits/licencing/bonding (which is where the cost run ups come in) and you can generally get paint and spackle done or respraying attic insulation etc. I am thinking a 30% discount if the lay offs keep coming which they are because the lay offs are hitting disproportionally higher income people in oil and gas. those are the jobs that are going to hit the real estate market not people working at best buy.

    I don't anticipate buying a east anch home for 20k but if you have been tracking the MLS lately you will notice that prices of entry level homes are slipping from 300k or more to 270 and down as low as 255 and if merril hangars start taking a hit then I can buy them at the same time and not over spend.

    Quote Originally Posted by Paul H View Post
    As I said before, compared to other major West Coast cities, Anchorage real estate is on par. The reason prices didn't tank after the 2008 correction is we didn't have the same economic drivers and prices hadn't made a huge run up prior to 2008. But when you factor in inflation, in the past seven years house prices have only risen 5-10% which really is a drop in prices against inflation.

    The challenge in the Anchorage market is entry level homes are generally not in nicer neighborhoods. Nicer neighborhoods generally have larger homes, or mid size homes with lots so small you can reach out your window and touch your neighbor. Older homes that need major remodels don't sell enough a discount to justify the cost of a remodel.

    It's still a sellers market with not much inventory and historically low interest rates have people stretching themselves to lock in those low rates. I figure when our economy finally picks up and the fed starts ratcheting up interest we're going to see inflation hit and current house prices will look like a bargain in 10 years.

    Buying a home like any investment is a risk. If you're highly risk adverse than the rewards won't be worth the risk to you.

    There are also always going to be deals on real estate with short sales and foreclosures. You're not going to get a home for free, but if you know the market and are in a position to take advantage of a deal a 10-20% discount isn't unreasonable.

  6. #106

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    Still not much movement on the housing prices, I am thinking perhaps the spring early summer we might see the correction.

  7. #107
    Member akriverunner's Avatar
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    I don't think the prices will be dropping too much, houses are still moving at the current prices


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  8. #108

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    I am noticing homes are sitting longer, some are moving at inflated prices but I am noticing more houses sitting longer. Also a new round of Ch2 lay offs is coming down the pipe. Something is going to eventually give.

    Quote Originally Posted by akriverunner View Post
    I don't think the prices will be dropping too much, houses are still moving at the current prices


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  9. #109
    Premium Member kasilofchrisn's Avatar
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    Quote Originally Posted by rppearso View Post
    Still not much movement on the housing prices, I am thinking perhaps the spring early summer we might see the correction.
    I'm still confused on what this correction is?
    The market sets itself does it not?
    If you want a cheap house move where cost of living is cheap.
    That's not in Alaska by the way.
    My (now ex) brother in law had many job offers across the country after he graduated college as an electrical engineer.
    He chose Iowa over California because cost of a house was less than 1/3 of the price in Iowa for a nice place.
    Even though he started at a smaller salary it made better sense financially.

    As for CH2 layoffs which group are you talking about?
    Point Thompson? Or ???
    I can't see enough layoffs left from CH2MHill to effect the housing market significantly.
    Please enlighten me as I do have some first hand knowledge.
    I also know they do have a few small projects starting up soon on the slope.
    That and there is another company about to start a major slope project who will be hiring a bunch of workers.
    Not enough to fix this state's financial crisis but at this point anything helps.
    "The closer I get to nature the farther I am from idiots"

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  10. #110

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    That's why this would be real estate speculation. Also interest rates are already rising which will squeeze low income people completely out thus reducing any sort of bidding wars with people who don't actually have money. But your right it is speculation, but not speculation without merit and I am willing to wait and see if the market corrects to reflect the current events.

    Quote Originally Posted by kasilofchrisn View Post
    I'm still confused on what this correction is?
    The market sets itself does it not?
    If you want a cheap house move where cost of living is cheap.
    That's not in Alaska by the way.
    My (now ex) brother in law had many job offers across the country after he graduated college as an electrical engineer.
    He chose Iowa over California because cost of a house was less than 1/3 of the price in Iowa for a nice place.
    Even though he started at a smaller salary it made better sense financially.

    As for CH2 layoffs which group are you talking about?
    Point Thompson? Or ???
    I can't see enough layoffs left from CH2MHill to effect the housing market significantly.
    Please enlighten me as I do have some first hand knowledge.
    I also know they do have a few small projects starting up soon on the slope.
    That and there is another company about to start a major slope project who will be hiring a bunch of workers.
    Not enough to fix this state's financial crisis but at this point anything helps.

  11. #111

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    Lay offs are field wide. Yes you will see affects soon enuff. I am one of lucky ones that is still employed at time. But I know many who aren't working. I can tell this none of guys up who are working are spending money on anything.


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  12. #112
    Premium Member kasilofchrisn's Avatar
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    Quote Originally Posted by akmike30 View Post
    Lay offs are field wide. Yes you will see affects soon enuff. I am one of lucky ones that is still employed at time. But I know many who aren't working. I can tell this none of guys up who are working are spending money on anything.


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    I know this all too well as I was laid off from the slope in April of 2015 after 10 years with the same company.
    Fortunately I found another slope job for now.
    It will end eventually though.
    But there are not a lot of positions left to cut anywhere in the oilfield and still keep them running.

    I guess for me I never thought of the market downturn as a "correction" though.
    Just a drop in the housing market as it falls with our economy.
    That's what I was getting at.
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  13. #113

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    I guess I consider it a correction becasue anchorage housing is well over 2.5 times the average annual income. That means there is too many people in a small space driving up the price. I dont know if that counts as an official "correction", but I feel the anchorage housing market has been inflated for quite some time.

    Quote Originally Posted by kasilofchrisn View Post
    I know this all too well as I was laid off from the slope in April of 2015 after 10 years with the same company.
    Fortunately I found another slope job for now.
    It will end eventually though.
    But there are not a lot of positions left to cut anywhere in the oilfield and still keep them running.

    I guess for me I never thought of the market downturn as a "correction" though.
    Just a drop in the housing market as it falls with our economy.
    That's what I was getting at.

  14. #114
    Premium Member kasilofchrisn's Avatar
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    Quote Originally Posted by rppearso View Post
    I guess I consider it a correction becasue anchorage housing is well over 2.5 times the average annual income. That means there is too many people in a small space driving up the price. I dont know if that counts as an official "correction", but I feel the anchorage housing market has been inflated for quite some time.
    Reading your posts would lead one to believe that you feel someone or some government agency is causing our real estate prices to be artificially inflated.
    I think we live in a state with a high cost of living and high housing costs.
    But it is also a state with a higher average income at least until this oil price drop occurred.
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  15. #115
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    When the lay offs happen it won't do much to housing prices, because a lot of the slope workers don't live in Alaska. If we have more reductions in the military in the Anchorage area it would cause a bigger drop in prices. Rentals will take big hit too at that point.
    Quote Originally Posted by rppearso View Post
    I am noticing homes are sitting longer, some are moving at inflated prices but I am noticing more houses sitting longer. Also a new round of Ch2 lay offs is coming down the pipe. Something is going to eventually give.

  16. #116
    Premium Member kasilofchrisn's Avatar
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    Quote Originally Posted by MGH55 View Post
    When the lay offs happen it won't do much to housing prices, because a lot of the slope workers don't live in Alaska. If we have more reductions in the military in the Anchorage area it would cause a bigger drop in prices. Rentals will take big hit too at that point.
    I believe the last numbers I heard was ~33% live out of state.
    And for the record the layoffs en masse started in late winter/early spring of 2015.
    While they are still ongoing it's getting slim at a lot of camps including both the Conoco and BP sides.
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  17. #117

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    The costs are caused by market forces. but the market has been much higher than I have wanted to pay, until now. Prices are slipping as we speak, I have been closely watching prices.

    Rentals have not been effected but house prices have because the jobs that are being lost are higher paying jobs. Most military jobs are low pay (but they still get BAH) other than for higher ranks as well as the various service jobs. Also interest rates are rising (http://www.bankrate.com/finance/mort...est-rates.aspx) which will prevent low income people from bidding as they wont qualify anymore without a substantial down payment.

    Quote Originally Posted by kasilofchrisn View Post
    Reading your posts would lead one to believe that you feel someone or some government agency is causing our real estate prices to be artificially inflated.
    I think we live in a state with a high cost of living and high housing costs.
    But it is also a state with a higher average income at least until this oil price drop occurred.

  18. #118
    Premium Member kasilofchrisn's Avatar
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    Best of luck to you.
    Don't wait too long or your dream house may get snatched up by someone willing to pay the going rate for it.
    I paid slightly more than I wanted to for my house.
    But I knew after looking at it that I would not need to buy another in my lifetime.
    And after some haggling we came to a price we could all agree on.
    I wasn't willing to settle for another house or wait years for prices to drop.

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