Alaska Economic Trends August 2016

The following are my highlights from the August edition of Alaska Economic Trends. If you would like to read the whole magazine [Go Here]

Alaska's Rental Market

By Karinne Wiebold

Our 2016 annual residential rental survey shows that Alaska rents are essentially level with last year (see Exhibit 1) and the overall rental vacancy rate has fallen slightly.

Statewide, rents have increased just seven-tenths of a percentage point, or $9, since last year, bringing the average rent for all unit types to $1,238 including utilities. Rents went up faster in some areas, such as the Kenai Peninsula Borough (up 7 percent), Valdez-Cordova Census Area (6 percent), and the Ketchikan Gateway Borough (4 percent). Anchorage, Kodiak, and the Matanuska-Susitna Borough rents each increased by less than 1 percent. Fairbanks was the only surveyed area whose rent fell, dropping 1 percent to $1,199.

Vacancies go down slightly

The survey-wide vacancy rate of 5.8 percent was down nine-tenths of a percentage point from 2015, but equal to the 10-year average.

Vacant units say a lot about the rental market. When vacancies are low, the market is "tight” and the demand for units is high, indicating the potential for rents to rise. Because renters are competing for a limited number of units, landlords can charge more. In the long term, low vacancies may be incentive for developers to create more housing.

High vacancies show there are more rentals on the market than there is demand for, and landlords are under pressure to lower rents or offer incentives to attract tenants. Changes in vacancy rates can also mean renters are being attracted to or priced out of homeownership, or that the population is shifting.

When a community’s vacancy rate changes, the important questions include: Has there been an influx of new residents? Have home prices fallen, making ownership an attractive alternative? Has a new industry come or gone, affecting jobs and wages? Has credit become easier or harder to come by, affecting the feasibility of ownership?

How we spend our money (Data on Alaskan's personal consumption available for the first time)

By Neil Fried

Personal consumption spending by state was released for the firs time last year, and it showed Alaskans consumed $34 billion in goods and services in 2014. These statistics are important nationally because personal consumption expenditures represent about two-thirds of U.S. economic activity. It’s a closely watched economic indicator with the power to move the stock market and affect economic policy.

Personal consumption is often considered the nation’s broadest measure of how consumers feel about the economy — the prevailing wisdom is that if we’re spending more, things must be good, and vice versa. Although what we can conclude from the state data alone is limited (see the sidebar for more information), it can help paint a more comprehensive picture of the state’s economy when combined with other economic indicators, such as employment and income.

Services include not just what we spend in obvious places such as the barbershop or mechanic’s garage, but what’s spent on our behalf. The biggest piece is in health care, which includes what employers, Medicare, and Medicaid contribute. The other 30 percent is for “stuff ,” which is broken down into durables and nondurables. Durable goods include items that last at least three years, such as cars, furniture, and many appliances. Nondurables include not just food but clothing, gasoline, and medication — things that typically come to mind when we think of consumables.

Alaska’s health care costs are higher than anywhere else in the country, at an average of $9,303 per person in 2014. In contrast, the national average was $6,128. Alaskans also spent more on food, both at the grocer and at restaurants, as a share of total consumption as well as per capita.