Anchorage is Alaska’s most populous city and contains nearly 40% of the state’s total population. It is the fourth largest city in the U.S. by area and is almost equidistant to several major cities, such as New York, Tokyo, and Frankfurt, Germany. Due to its strategic location, one of Anchorage’s major airports, the Ted Stevens Anchorage International Airport (ANC), has become a common refueling stop for international cargo flights. FedEx also has a major hub in ANC, which the company describes as a critical part of its global services network. The city also plays a crucial role in the Olympics. In the 2020 Summer Olympics, the U.S. gained its first gold medal in the women’s swimming event through Lydia Jacoby, who had to train in Anchorage when her local swimming pools closed down early in the pandemic. Several winter athletes lived and trained in Anchorage, including cross-country skier and Olympic gold medalist Kikkan Randall, and figure skater Keegan Messing, who is representing Canada at the 2022 Winter Olympics.
The Coronavirus pandemic forced businesses and schools to implement remote communication. As restrictions slowly eased, people started to seek better homes. Nationally, 28% of millennials who have never owned a home began actively looking for one in 2020 due to COVID-19, with Gen Z following at 20%. In 2021, Porch ranked Anchorage 34th out of 150 for Best Cities for Single Millennials. The Trust for Public Land (TPL) also places Anchorage on the 43rd spot of ParkScore, which ranks the biggest cities in the U.S. based on the availability of parks in the area. According to the TPL report, 76% of the city’s residents live within a 10-minute walk of a park, which is greater than the national average of 55%. Around 82% of the city land is used for parks and recreation, whereas the national average is 15%.
With this information, future residents and developers ask: how much does it cost to build a home in Anchorage?
The Cost of Building a Home in Anchorage
According to Forbes, the average cost of constructing a 2,000-square-foot home in Alaska is $421,080, or around $210.54 per square foot. On Zillow, the average listing price for homes in the state is $311,083, which is seasonally adjusted, with a year-over-year increase of 3.4% as of December 2021. For Anchorage, the median home price on Realtor is at $330,000 as of the same month, with the average listing price per square foot at $199. As of January 2022, single-family homes in Anchorage saw an increase of 8.6% in residential property values. The change was caused by the high demand for homes, high building costs, and low inventory in the previous year.
The cost of a new custom home in Anchorage varies with the labor, resources, and professional services needed to construct it. Some of these costs are factors that fluctuate independently from each other, such as foundation, framing, exterior, and interior. It also includes various fees, including architecture and design, permits, land, plumbing, and others. All of these may fall on either the hard or the soft costs of building a home.
A home’s hard costs are expenses that fund the physical structure and construction of the house. These costs include the materials, labor, and even the total building value. According to HomeBlue, building a basic or value-conscious custom home costs around $130 per square foot. A middle-tier custom home starts at $180 per square foot, while an above-market or luxury custom home is at least $230 per square foot.
In 2022, the average cost of framing a home in Anchorage is around $6,397 and typically ranges from $1,279 to $11,515. Hardwood flooring cost somewhere between $9,912 and $12,222, with the material costing around $8 to $10 per square foot. This cost also includes the labor fees for installation, surface preparation, machinery, and cleanup. Material costs, including plywood, studs, and other basic building components, skyrocketed nationally, with lumber reaching a record increase of 200%. This delayed numerous construction projects, with home prices in Anchorage going up by $25,000 to $50,000.
The climate in Anchorage can be described as subarctic, with long, freezing winters, and mostly cloudy summers. Warm weather can be experienced in the area from late June to early August. While Anchorage may be cold most of the year, temperatures in recent years are getting warmer, with December of 2021 reaching a record high of more than 60 degrees Fahrenheit for the winter season. In preparation for the possibility of even warmer temperatures, installing a heating, ventilation, and air conditioning (HVAC) system may be beneficial in the long run. According to Manta, air conditioning installation ranges from $2,782 to $13,913. This cost includes the labor costs, materials, equipment, site preparation, and cleanup.
Soft costs are expenses associated outside of the physical structure of the home, such as architectural design, pre-construction land development, building permit fees, plumbing permit fees, HVAC permit fees, and other miscellaneous expenses.
Cost of the Land
Getting the perfect lot is crucial in the process of home construction. Generally, prices may vary with several factors like distance from metropolitan areas, view, amenities, and even land topography. According to Redfin, residential lots in Anchorage range from $38,500 for a 12,632-square-foot area, to $235,000 for 7,000 square feet. This is roughly $3.05 to $33.57 per square foot. The average listing size in the city is 8,950 square feet, with a median price of $12.37 per square foot. This value may still increase depending on the development status of the land, since some listed properties may be underdeveloped for residential purposes.
Permits and Other Fees
In Anchorage, a permit is required on the following occasions: excavating or filling a property, constructing or adding 100 square feet on a building, or changing the use of an existing structure. Applications shall be filed at the Building Safety Division, while permit application status can be viewed online. Land use in the area, for properties valued at $25,001 to $50,000, also requires a permit, which can be seen in the table below:
For zoning, the pre-application meeting for any land use entitlement, which includes, but is not limited to, rezoning, platting, conditional use, and major plan site review applications has a fee of $130.
Architecture and Design Fees
The architecture and design fees vary with the size, scope, and complexity of the project. The client’s preferences, needs, and lifestyle also contribute to the overall or final design. Some projects may be simple and straightforward, while others may require extensive research, attention to detail, and consultation with industry professionals. Typically, the cost of architecture and design is calculated using a percentage of the total project cost, but some architects and firms may charge a fixed rate. In the U.S., the national average of architect rates ranges anywhere from 5 to 20%. In Anchorage, the cost of interior design ranges from $1,129 to $16,938 according to HomeYou.
How do the custom home building costs in Anchorage compare to other nearby cities?
According to Redfin, homes in Anchorage spend an average of 24 days in the market before it gets sold. As of December 2021, the median home price is at $330,000, and on average sells for about 1% below the listing price. Redfin also considers the Anchorage housing market as somewhat competitive, with some homes receiving multiple offers from buyers, and in-demand properties selling after pending for six days. Compared to Anchorage, other cities in Alaska are very competitive. Home prices in Wasilla increased by 1.9% as of December 2021, with the median price at $320,000. Homes receive multiple offers, with in-demand properties getting sold at 2% higher than the listing price. Palmer has a slightly higher median selling price than Wasilla, at $323,500 as of December 2021. Homes spend an average of 10 days in the market, with many receiving multiple offers with waived contingencies, and even selling at 2% higher than the original listing price.
The Future of Anchorage’s Residential Construction Industry
This autumn, a new, low-fare airline will be launched, linking five airports in the U.S. to four locations in Japan and Korea with a stopover in Anchorage. ANC will be the northern Pacific hub that will connect Los Angeles, San Francisco, New York, and Orlando to Tokyo, Nagoya, Osaka, and Seoul. This development is expected to boost tourism in not only Anchorage but possibly Alaska, too. The January 2022 Alaska Economic Trends predicts that construction, healthcare, and federal employment are the only industries that will end the year with or above pre-covid levels. Double-digit growth is forecast for leisure and hospitality, with the anticipated return of cruise ships and independent travelers to benefit airlines, hotels, restaurants, and bars. Eating and drinking are expected to bring in two-thirds of employment in the leisure and hospitality industry, which may bring the housing demand up in Anchorage for this year. However, with 298 housing units permitted last November, it is expected that 2022 will be Anchorage’s sixth year with modest activity in new home construction. In November 2020, the number of housing units approved for permitting was 415.