Fritz Pfister

The news this past week on the economy continued to paint a bleak picture with the unemployment rate jumping to 7.6% on the loss of 598,000 jobs in January. That’s not good news for the national housing market. What about the local market? We’ll have to wait to see the unemployment numbers for Illinois, and Springfield. Jobs are the key to how the local housing market will perform this year, as interest rates remain at near historical lows.

It appears the Senate has reached an agreement on a stimulus bill. Nobody knows all the details, however the final bill will not be determined until the House and Senate hammer out their differences. One item reported is that the Senate has included a $15,000 tax rebate for home purchases. Scant details other than the rebate is limited to a maximum of $15,000, or 10% of the purchase price, and is for all home buyers not just first time home buyers.

In 2008 a $7,500 tax credit was instituted for first time home buyers only, and the money had to be paid back over 15 years without interest. If the home were sold before 15 years, Uncle Sam would have his hand out at closing to collect the unpaid balance. A well intentioned program that has had nominal if any impact upon home sales.

If the $15,000 tax credit for all home buyers does not have to be repaid, then that should provide a legitimate stimulus to the housing market. If it must be paid back I would expect little impact upon home sales. We’ll have to wait and see.

We’ll also have to wait and see if President Obama’s plan in fact works. The President is putting his faith in economists that believe in the Keynesian economic theory that government spending can stimulate the economy. All I know is that five Presidents, Harding, Coolidge, Kennedy, Reagan, and Bush the junior utilized tax cuts to stimulate the economy successfully. Keynesian theory has been tried only once under FDR, and following 8 years of massive government spending unemployment was unchanged.

The good news is that reports indicate that 42% of the spending in the Senate’s version are for tax cuts. This indicates a hybrid plan utilizing both tax cuts and spending to stimulate the economy. This type of plan has never been attempted previously. Here’s to hoping that this plan is successful. If it doesn’t work then high rates of unemployment will continue, and the massive spending could stoke the fires of inflation. 

It shouldn’t take long to find out, the average length of the past six recessions is 18 months, and if in fact this recession began in December 2007, if the government had done nothing, the recession would be ending this summer. Perhaps this time is different due to the government having caused the recession, by ordering banks to lower their lending standards, that ended in the mortgage market meltdown, and trillions of dollars in bad paper. In my opinion Dr. Williams assertion that we are sending the arsonists to put out the fire, is spot on. That should make everyone nervous. We shall see.

The local housing market performed quite nicely in January considering the doom and gloom backdrop of the national economy. Closed home sales were down by only a dozen from 2008, or by 6.9%. Due to record low interest rates buyers remained in the market as witnessed by 261 home listings going under contract, down by 25 or by 9% from January of 2008.

To put everything into proper perspective the average number of home sales in January from 2003 through 2008 was 196 home sales. So yes, we continue to see a slow down, however the slowdown remains modest running only 17% below the five year average.

With the supply of homes for sale continuing at record high numbers, the foreclosure phenomena, and weaker demand the median sale price fell 5% in January to $94,950 compared to last January’s $100,000.

The pressure on home prices will continue until the supply shrinks, and foreclosures subside. Unfortunately the number of foreclosures is predicted to increase this, and next year. Although there was a modest drop in the median sale price for the year in 2008 of $500 to $104,000 the trend line for prices is pointed down. Prices fell 2% in the third quarter, and 6.8% in the fourth quarter of 2008, down again in January by 5%.

Home owners that must sell their homes should be aware of these market conditions. With a projected 3100 home sales from 7100 home listings this year, there certainly will be fewer winners than losers in the home selling contest. To improve your chances of selling in 2009 you are invited to register for the free home seller seminar February 19, beginning at 6pm at The Capital Area Association of Realtors building 3149 Robbins Road. The selling process will be covered from beginning to end. This is your opportunity to enter the market fully informed. Call 652-7653 to make your reservations.

Make this a Great week from Fritz and Kristie Pfister and the Pfister Success Team of RE/MAX Professionals Springfield. It would be an honor to serve you, call 652-7653.

The opinions expressed are solely those of Fritz Pfister, and not RE/MAX Professionals of Springfield or RE/MAX International.

This past week was a moment for happiness and sadness for the Pfister family. My wife Kristie’s Great Aunt Ruth Miller passed away and her funeral was on Tuesday. Then Saturday my Aunt Chloe Rehfield passed away and her funeral was on Wednesday. Although expected, still a shock and sadness that these two ladies would [...]