Fritz Pfister

It seems the U.S. economy is standing in uncharted waters. The incoming Obama administration is about to take the helm which has stated policies that will take the economy further out to sea. In Illinois the governorship may be about to change hands. Just a few variables that make predictions quite the challenge.

The National Association of Realtors (NAR) economists predict existing home sales to rise to 5.3 million in 2009, up 6% from the estimated 5 million sales in 2008. The median sale price is predicted to increase 1.1% to $200,800. New home sales are predicted to fall to 413,000 (-15%) while the median sale price for a new home is predicted to rise 1.4% to $231,400.

Having had the honor to be asked to provide my predictions for The Capital  Area Association of Realtors (CAAR) broker owner/managing broker meeting in November, here are those predictions for 2009.

In my opinion there will be further contraction within the housing market with home sales declining to around 3100 (-11%) from the 3500 closed home sales in 2008. The 2008 figures are not final, however were down by 13% YTD through December 26. There were 4024 closed home sales in 2007.

The number of new listings will continue to decline, with an estimated 5200 new listings predicted to be added to about 1650 to 1700 home listings to begin 2009. Listings added through the year in 2008 were down by 9.3% (-609), however were offset by a decline of 14.5% (-689) sales pending through December 26. Expect about 45% of available home listings to sell and close in 2009. The median sale price may decline 1% to 3% as a result of home sellers lowering prices to compete for the fewer buyers in the market in 2009.

The market will continue to favor buyers due to the imbalance between supply, and demand. The reasoning for my predictions are based upon trends established in 2008, combined with the projected jobs outlook for the area. With the unemployment rate rising there doesn’t appear to be any job gains in 2009 for the local economy.

The lack of new jobs will be the primary hindrance to the number of home sales in 2009. There is demand that is building within the market following 15 consecutive monthly declines in sales pending listings, and December appears to be the 16th. With  financial uncertainty rampant within the market, mortgage lenders exercising extreme caution, many families prefer to, or must sell their homes before they can purchase another.

The number of new home sales will continue to decline in 2009 while builders work to reduce the inventory of unsold product which stands at an 8.5 month supply at the current rate of sales. Building permits in the city of Springfield for single family homes were down through October 2008 by over 40% from 2007. Numbers from the county, and villages are not available.

With the jobs picture rather dim for 2009, it does not appear there will be a rebound in the housing market until 2010.

Springfield is known nationally as one of the most affordable, and stable housing markets. The 13% decline in the number of home sales in 2008 continues to beat the state of Illinois’ 24% decline. Even in down markets, Springfield performs better than most locals. In my opinion, Springfield was due for a cyclical slowdown in 2008 following four years of home sales exceeding 4000 annually, regardless the economy.

Happy New Year!

Today is December 27, 2008, the day I promised to share with you my predictions for the local housing market in 2009. Before I begin, let me share my predictions for 2008 from one year ago.
 
Quote: The prediction for the local housing market is good to begin the year, however will slow as we approach [...]

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