Weekly Observation for February 18, 2012: Springfield Housing Market Up YTD, Can This Be Sustained?
February 18th, 2012The sales activity to begin 2012 has been brisk. I am cautiously, but not overly optimistic that this activity is sustainable. YTD closed home sales are up 6.61% and listings going under contract are up 26.3%.
I am cautiously optimistic, because like every real estate agent, I want sales to increase. After all it’s my livelihood. The reason I’m not overly optimistic is because we are up over the slowest first quarter for home sales since 1999.
There’s little question that the first quarter home sales will be up over last year because not only did we have weak demand, we also had a real winter that kept people from getting out. That’s why last year I was optimistic that we would have our normal crazy rush in the spring. That didn’t materialize. The 951 closed home sales in the second quarter were off from the tax incentive year of 2010 by 22%.
With 274 closed sales the first seven weeks of 2012, and with six weeks remaining in the first quarter, it appears we are on pace to come in slightly below the five year first quarter average of 686 from 2007 through 2011. Actually average would be good.
I want to caution you about economic reports during an election year. Those in power will make the reports sound better than they are, which we witnessed last week on January unemployment, and the opponents will make economic reports appear worse than they are, typically. This year the opposing party doesn’t have to make things look worse than they are because frankly economic conditions are bad.
We did have a glimmer of good news this week when initial claims for unemployment fell to a four year low at 348,000. The four week average of 365,250 is the lowest in years. Economists say first time claims below 400,000 indicates jobs are being added, claims under 375,000 means a significant number of jobs are being added. We’ll have to wait and see if this is true in this jobless non-recovery.
My greatest concern when predicting sales for 2011, and again in 2012 was the price of gas. The Obama administration imposed bans and moratoriums in the fall of 2010 which I lamented because limiting the supply of oil always drives up the price. Sure enough the price of gas in December of 2010 set a new record high. Then came the Arab spring and gas surged past $4 a gallon in the spring.
It was predicted by the Federal Reserve in 2011 that GDP would grow 3.4% to 3.9%, and 3.5% to 4.4% in 2012. Just as I predicted if gas went to $4 a gallon consumers would pull back and slow growth. The final revision for 2011 GDP is not yet reported however the latest is 1.7%, half what the Fed forecast.
Due to the slow growth in 2011 the Federal Reserve has adjusted their forecast for 2012 from 3.5% to 4.4% to 2.2% to 2.7%. I’m fearful they are being hopeful again, and heaven forbid they miss their forecast by half again. A reason I’m not overly optimistic.
Disposable income is vital to consumers feeling confident enough to buy a home. With the Obama administrations rejection of the Keystone XL Pipeline keeping our supply of domestic oil limited, and more dependent upon Mid East oil, which is a powder keg ready to explode, oil experts are forecasting $4 to $5 a gallon gas. This following an annual record high for the average cost per gallon in 2011 that resulted in 1.7% GDP growth. If forecasters are correct about gas prices, then the Fed will be wrong about GDP growth again this year.
It’s been about jobs the past four years. The BLS reported to us that unemployment in January was 8.3%, but that is predicated upon formulas to make the rate sound good, while not reflecting reality. The reason the rate declined was due to the BLS comparing the number of unemployed to fewer jobs. This week Gallup, who doesn’t have a dog in the electoral hunt, reported mid February unemployment at 9%, and the real unemployment when including those working part time, or who have given up looking, at an astounding 19.2%. Back to one in five Americans out of work, or working part time.
The economy cannot recover until housing recovers. Housing cannot recover until the jobs market recovers. None can recover unless we have a confident consumer. If gas goes over $4 a gallon taking food prices up with it, you won’t see any significant increase in consumer confidence.
People don’t feel wealthy when they are having their disposable incomes reduced by high gas, food prices, and the 67% income tax increase. Add to that now CWLP needing a 9.5% rate increase or there will be scores of more good paying jobs lost harming the local economy.
The front page headlines tells you all you need to know about borrowing to pay today’s bills but will have to pay back in the future. In 2004 the city began raiding CWLP for millions to balance the city budget. As Alderman Simpson said that was preferable to tax increases. Looks like city residents are going to get one or the other now. A 9.5% increase in their CWLP rates, a tax increase, or scores of jobs eliminated.
What will that do to Springfield families disposable income? What will that do to consumer spending for other goods and services? What will that do for consumer confidence?
Yes I am cautiously optimistic about increasing home sales because that’s what butters my bread. Then reality sets in. We have oppressive economic policies coming out of DC, and worse coming out of Springfield. How the private sector businesses managed even a 1.7% increase to GDP in the face of irresponsible energy policy, anti-business laws like Obamacare, Dodd Frank topped off with a good dose of costly regulations is a miracle.
This election will determine the fate of our economy. If we continue to follow the Obama fundamental transformation of America wealth redistribution, crony capitalist formula then expect perpetually high unemployment. It is fiscally impossible for prosperity with federal central planning oppressing the private sector. Or we can choose to dismantle the Leviathan Obamacare, Dodd Frank, regulatory oppression, limit the size and scope of government turning the private sector free to create jobs and return to prosperity. It’s that simple.
You’re invited to join us for the free home buyer seminar this Thursday beginning at 6:00pm out at the Springfield Hilton Garden Inn. On Thursday it was reported that the Consumer Price Index was up .2% in January. Why? Rising gas, food, clothing, and rent prices. Rents are increasing today due to increased demand as millions have lost or will be losing their homes to foreclosure. Inflation will cause even higher rental prices. If you are renting this may be one of your last chances to lock in a low cost for your housing for your future. Call us at 217-652-7653 to reserve your seat.
The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International.
