Fritz Pfister

Another week with a mixed bag of news in the local real estate market. The official report for home sales in February will be released on March 26. Here’s what that report will show.

Closed home sales for February totaled 198 down 18.1% from the 242 in 2008, however pending sales, the indicator of future closed activity was up to 342 from 318 in 2008, an increase of 7.5%.

The median sale price for February jumped to $100,000 an increase of 1.8% over 2008, however on fewer closed sales. End of month closings saved the day as earlier month closings had prices down by nearly 9%. The February increase pulled the first two months median sale price up to $96,000 down 2.8% compared to $98,750 in 2008.

This is an important trend that hopefully continues resulting in a reversal of falling prices within our housing market. My prediction for prices to fall a modest one to three percent this year is back on course. Let’s see if it stays that way.

The best news from February was the increased activity in sales pending. The best since the last two weeks of August 2008. The spurt in activity raised the number of sales pending to finish 4 ahead of 2008, a meager six tenths of a percent, however in this economy, that’s like winning a gold medal at the olympics! Congratulations to all the hard working Realtors in our community.

On the national front it was reported yesterday that the jobless rate hit a 25 year high at 8.1%. We won’t know the local unemployment rate until it is reported, however jobs is the key to how our local housing market will perform in 2009. The eight thousand dollar tax credit for first time home buyers will be helpful, dependent upon the number of first time home buyers.

The Obama administration released the details for their foreclosure rescue package this week. I still haven’t seen the details, however what I could discern from the business channels, it appears to be a voluntary program that encourages lenders to modify loans for those in trouble. The price tag is set at two hundred seventy five billion dollars. Those reporting had mixed views as to the potential of the program.

The more important news regarding foreclosures is the cramming bill before congress that would allow banckruptcy judges the authority to ‘cram’ down the principal owed on a loan so the person filing can keep their home. This certainly would become the leverage for lenders to voluntarily modify the loans in the foreclosure bailout plan, however I don’t believe this is a good idea.

Tax payers are already getting hammered with excessive debt obligations for all the bailouts, TARP programs, the stimulus package, a budget proposal that would increase debt more than all eight years of the Bush administrations financially irresponsible spending combined. Now responsible homeowners will be bailing out troubled home owners that qualify. 

To add insult to injury, if this cramming legislation is passed mortgage lenders will be faced with potentially billions in losses annually. This would result in the lenders raising interest rates on everyone to cover potential losses in the bankruptcy courts. By how much is not known, however the actuaries will be hired to find out how much.

Here’s an example of cramming that is being proposed. In our example a family files for bankruptcy and has a $200,000 mortgage. This family was fine as a two income family, however they lost one of their jobs due to the economy. The judge determines the family could afford a $100,000 mortgage based upon their current income, and orders the bank to modify the loan by $100,000, which would be a loss absorbed by the bank.

This is just one example, take that times hundreds of thousands that could potentially seek relief through the bankruptcy courts. Once again anyone that plays by the rules, if this legislation were passed, would pay a substantially higher interest rate to cover the banks losses. This is simply not good legislation.

For the economy to rebound the housing market needs to stabilize. Home prices must stop falling.  The market will correct itself even if the government did nothing. Government interference with well intended programs only delays the correction and eventual rebound.

The actions by the government with the tax credit for first time home buyers is an example of tax money being spent that can expedite the time to recovery, however the cramming legislation neuters the impact of the tax credit, and causes what all markets fear; uncertainty.

This week contained good news, rising numbers of sales pending, a slowdown in the rate prices are falling, and the bad news growing unemployment, and the proposed cramming legislation. I’ll take a combination of good with the bad, until we reach the point where it’s all good news.

Make this a better week from Fritz and Kristie Pfister and the Pfister Success Team of RE/MAX Professionals Springfield. Want to buy a home? Protect yourself by reserving your spot today for the free Home Buyer seminar March 19, 6:00pm at 3149 Robbins Rd. Springfield by calling 652-7653.

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