Legislative

2015 Session Begins
Legislative Consultants in Alaska (Wendy Chamberlain)

January 18, 2015

What a difference a year makes.

If you spend a day in the Legislative building you will probably hear the same question asked numerous times -“How low did oil prices fall today?”    For many legislators, balancing next year’s budget seems like a daunting task.  The latest estimates show the state facing a $3.2 billion deficit in the next fiscal year.   However, before legislators can tackle next year’s financial challenges they must appropriate more than $3.5 billion to pay for the current year’s operating/capital budget deficit.  This year’s budget was based on a per barrel oil price of $104.

Governor Walker asked his department heads last month to give him a “quick initial assessment” of the implementation and impact of two levels of budget cuts, one of 5 percent and one of 8 percent.  The reports will not be made public until after Governor Walker releases his new budget plan due no later than February 18, 2015.  Governor Walker has made it clear; all options are on the table.    In a departure from recent years Governor Walker will deliver an extra speech to lawmakers at the start of the legislative session next week, a Thursday address on the state budget that will follow the traditional State of the State speech Wednesday.  The Governor wants to make the public aware of the dire fiscal problems facing the state and allow the public time to absorb the possible impacts. Past governors have delivered separate State of the Budget speeches, but none have done so since Frank Murkowski in 2006.  I will provide a budget impact analysis in my next report.

What options are available to lessen the impact?

The state has $12 billion in its’ budget reserve account, however unless significant reductions are made to existing programs the state’s reserves will be depleted within three years.  On a more positive note Governor Walker recently presented estimates to the Anchorage Chamber of Commerce that include stretching existing reserves through 2021 with a static budget.  By 2022, education spending will increase from $1.78 billion this year to $2.26 billion in FY 2022; Medicaid will grow from $760 million this year to $1.337 billion in FY 2022.  A static plan will put pressure on areas such as Education increases; rising health care costs and State Employee pay raises.

Most budget cutting scenarios center around “making it through” until 2024 when the gas pipeline is projected to be operational.  Estimates show the large gas pipeline and liquefied natural gas project will generate around $4 billion a year in new revenue.  Alaska is well positioned to make it through these challenging times.

Six megaprojects halted

Last week Governor Walker ordered a spending halt on six (6) megaprojects.  The projects include Knik Arm Crossing, Juneau Access Road, Ambler Road access, Susitna Watana hydroelectric dam, the small diameter pipeline and the Kodiak rocket/missile launch complex.

On January 9, 2015 the Dept. of Transportation released a proposed amendment to the State’s Surface Transportation Improvement Project. $50 million will be reallocation from the Knik Arm bridge project and $104 million from the Juneau Access Project.  The amendment requests authorization to spend this funding on 20 smaller projects in Whittier, Kenai, Prince of Wales, Anchorage and Mat-Su.

Pat Kemp, former Commissioner of the Dept. of Transportation was fired recently after he signed a letter stating that stopping these two projects would “trigger a financial penalty” from the Federal Highway Administration. Total money spent so far amounts to $72.9 million for the Knik Arm Bridge and $25.7 million for the Juneau Access Road.

 Industry spending continues on the North Slope

Despite falling oil prices state economists are optimistic oil companies will maintain or increase current capital spending levels.  State petroleum tax law requires producers to submit a three-year capital spending projection to the state.  These projections indicate spending could increase to almost $5 billion next year.  Cook Inlet producer’s investments have increased sharply.  In 2015 capital investment in the Cook Inlet will have doubled since 2011.

 Minimum Wage goes into effect

Some Alaskans will see an increase in their paycheck beginning February 28, 2015 when the new $8.75 minimum wage goes into effect.  Ballot Measure 3, which voters approved overwhelmingly sets the Alaska minimum wage at least $1 dollar above the federal minimum wage.

Worker Compensation rates see a reduction

The Dept. of Labor and Workforce Development recently announced workplace injuries dropped 46 percent last year. As a result of this decrease Workers’ Compensation premiums for Alaska employers dropped 2.6 percent this year.  An aggressive safety-training program implemented by seafood processors significantly reduced workplace accidents.

Medicaid expansion a high priority for Governor Walker

Newly appointed Health and Social Services Commissioner Val Davidson has a huge task, implementing Medicaid expansion in Alaska.  Davidson remains optimistic enrollment will begin in July, 2015, however the department must overcome significant technical problems that have plagued the system resulting in years of delays.  Governor Walker and Commissioner Davidson will need to persuade the Legislature to give the agency authority to accept federal Medicaid funds.  Legislators are open to considering Medicaid expansion but have expressed concerns over the start up costs ($8-12 million) that must be paid for by the state.

A look at the House of Representatives

This session there are eight (8) new faces in the House of Representatives.  The House comprises 23 Republicans, 16 Democrats and 1 NP.   Four (4) rural Democrats joined with Republicans to form a 27 (twenty-seven) member Republican led coalition.

The Senate organization

14 Republicans and one rural Democrat (Lyman Hoffman) will lead the Senate.  The Senate membership has a lot of budget experience; this will be very helpful given the budget challenges.

We look forward to seeing you all in Juneau soon.  If you have any questions please call our office in Juneau at 907-230-4308.

Existing-Home Sales Maintain Solid Growth in July

WASHINGTON (August 20, 2015) — Existing-home sales steadily increased for the third consecutive month in July, while stubbornly low inventory levels and rising prices are likely to blame for sales to first-time buyers falling to their lowest share since January, according to the National Association of Realtors®.

Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent to a seasonally adjusted annual rate of 5.59 million in July from a downwardly revised 5.48 million in June. Sales in July remained at the highest pace since February 2007 (5.79 million), have now increased year-over-year for ten consecutive months and are 10.3 percent above a year ago (5.07 million).

Lawrence Yun, NAR chief economist, says the increase in sales in July solidifies what has been an impressive growth in activity during this year’s peak buying season. “The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now,” he said. “As a result, current homeowners are using their increasing housing equity towards the downpayment on their next purchase.”

The median existing-home price2 for all housing types in July was $234,000, which is 5.6 percent above July 2014. July’s price increase marks the 41st consecutive month of year-over-year gains.

“Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand,” adds Yun. “Realtors® in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains.”

Total housing inventory3 at the end of July declined 0.4 percent to 2.24 million existing homes available for sale, and is now 4.7 percent lower than a year ago (2.35 million). Unsold inventory is at a 4.8-month supply at the current sales pace, down from 4.9 months in June.

The percent share of first-time buyers declined in July for the second consecutive month, falling from 30 percent in June to 28 percent — the lowest share since January of this year (also 28 percent). A year ago, first-time buyers represented 29 percent of all buyers.

“The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face,” adds Yun. “Rising rents and flat wage growth make it difficult for many to save for a downpayment, and the dearth of supply in affordable price ranges is limiting their options.”

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage climbed to 4.05 percent in July from 3.98 percent in June — the first time above 4 percent since November 2014 (4.00 percent) and the highest since September 2014 (4.16 percent).

Properties typically stayed on the market for 42 days in July, an increase from June (34 days) but below the 48 days in July 2014. Short sales were on the market the longest at a median of 135 days in July, while foreclosures sold in 49 days and non-distressed homes took 41 days. Forty-three percent of homes sold in July were on the market for less than a month.

All-cash sales increased slightly to 23 percent of transactions in July (22 percent in June) but are down from 29 percent a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in July, up from 12 percent in June but down from 16 percent in July 2014. Sixty-four percent of investors paid cash in July.

Representing the lowest share since NAR began tracking in October 2008, distressed sales4 — foreclosures and short sales — declined to 7 percent in July from 8 percent in June; they were 9 percent a year ago. Five percent of July sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in July (15 percent in June), while short sales were discounted 12 percent (18 percent in June).

NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says the housing market is in a much better place and has come a long way since the depths of the recession. “Five years ago, distressed sales represented 33 percent of the market in July,” he said. “For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments.”

Single-family and Condo/Co-op Sales

Single-family home sales increased 2.7 percent to a seasonally adjusted annual rate of 4.96 million in July (highest since February 2007 at 5.08 million) from 4.83 million in June, and are now 11.0 percent above the 4.47 million pace a year ago. The median existing single-family home price was $235,500 in July, up 5.8 percent from July 2014.

Existing condominium and co-op sales fell 3.1 percent to a seasonally adjusted annual rate of 630,000 units in July from 650,000 units in June, but are still up 5.0 percent from July 2014 (600,000 units). The median existing condo price was $221,800 in July, which is 3.2 percent above a year ago.

Regional Breakdown

July existing-home sales in the Northeast decreased 2.8 percent to an annual rate of 700,000, but are still 9.4 percent above a year ago. The median price in the Northeast was $277,200, which is 1.3 percent higher than July 2014. In the Midwest, existing-home sales were at an annual rate of 1.32 million in July, unchanged from June and 10.9 percent above July 2014. The median price in the Midwest was $186,500, up 6.6 percent from a year ago.

Existing-home sales in the South increased 4.1 percent to an annual rate of 2.29 million in July, and are 9.6 percent above July 2014. The median price in the South was $203,500, up 7.0 percent from a year ago.

Existing-home sales in the West rose 3.2 percent to an annual rate of 1.28 million in July, and are 11.3 percent above a year ago. The median price in the West was $327,400, which is 8.4 percent above July 2014.

# # #

NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.

1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample — about 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

2The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.

3Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).

4Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at Realtor.org.

NOTE: The Pending Home Sales Index for July will be released August 27, and Existing-Home Sales for August will be released September 21; release times are 10:00 a.m. EDT.

Contact Information

Alaska Association of REALTORS®
4205 Minnesota Drive
Anchorage, Alaska 99503

Phone (907) 563-7133
FAX (907) 561-1779
Toll-Free (800) 478-3763

joinus@alaskarealtors.com

Registration Open

2015 Convention