Fritz Pfister

The most favorable conditions for home buying has not produced large numbers of home buyers in Springfield Illinois. Fifty year low interest rates, tax incentives, grant programs, affordable prices, and abundant inventory for sale. The 287 closed home sales in April were down 11.4% from April 2008, and fell one sale short of March sales. Sales pending fell 13.5% April from April.

The good news is the 475 new listings were down 28.5% from 665 in April of 2008. The 1671 homes listed for sale with local Realtors are the lowest since 2006. Through the first four months the 1691 new listings were down 16.5% from 2035 in 2008. Good news for home sellers that must sell; less competition. The bad news; weaker demand.

Closed home sales through April are down 5.94% to 935 from 994 in 2008. The fewest during this time frame since 2001. Sales pending of 1444 were down 4.4% from 1511 in 2008. Remember 2008 was the first year the number of home sales declined significantly year over year since 1994.

The 1066 listings that did not sell and either had their listing contracts expire or withdraw from the market were up from 1036 from 2008. In fact 131 more listings expired or withdrew than sold and closed.

April unemployment figures are not out for Springfield, or the state, however the national rate jumped to 8.9%. The last reported numbers for Springfield were 7.3% while the state was at 9.1%. Springfield continues to fare better than most communities.

Jobs are the key to home sales in 2009. If you don’t have new jobs adding new buyers to the market, home sales will be reduced to the ordinary transfer in/out, death, divorce, out/under grew the home type sales. Very few moves for convenience are taking place.

Interest rates have bumped back up, and lenders have revised their forecast that these record low rates would hold through the fall to rising by this summer. This is a once in a lifetime opportunity for most folks to get these rates. The 1.3 trillion dollars the Fed pumped into treasuries has artificially lowered rates. Rates are not market driven. When the impact of the Fed money wears off expect rates to climb back into the 6% range.

The concern of many is inflation due to the gamble the government is taking with the largest deficit spending in history. If the Obama administration is wrong in their calculations that taxing the wealthy (who’s incomes are declining during the contraction), combined with projected growth of 3.5% in the GDP in 2010 will increase tax revenues to pay for their unprecedented spending; then the government will have to raise taxes, borrow, or print the money to pay the bills.

There are two serious concerns facing the Springfield housing market. Record numbers of refinances in the 4% interest range will stifle future demand when interest rates rise. The second is the real threat of inflation. The probability to see double digit interest rates in the next couple of years is high. If this occurs people will be looking back to the good old days of 2009. Demand will be suppressed, and home prices will fall.

The people being hit hardest in the local market are home builders. The ten building permits for single family homes issued in March brought the first quarter total to fourteen. The fewest since 1982. The builders are stuck with fixed costs for materials, labor, and land. Although the inventory of speculative homes for sale is down by about 80% from last year, those that remain on the market have been sitting for up to two years.

The home builder can’t compete with the seller of an existing home when the market contracts. The seller of a home that has built up equity due to years of ownership loses equity when they drop their price in order to get sold. The builder loses hard money out of their pockets.

The result of home builders building fewer homes has dramatically impacted developers, and land sales. Through the first four months this year land sales are down 50% to 33 from 66 in 2008, and the $1.4 million in closed sales is down 74.5% from the $5.5 million in 2008. Residential development is grinding to a halt. This is not good news for the owners of 556 lots, and parcels of non-farm ground that are listed for sale. These listings average 315 days on the market, and that’s just for this listing.

Yes the most favorable conditions ever for home buying has not produced large numbers of sales. In my opinion consumers in general are scared about jobs (unemployment), the threat of inflation, rising gas prices, utilities, and food.

The $4 a gallon gas in 2008 was the shock that killed consumer spending. The financial crisis drove the stake into the heart. The governments gamble with their children’s future with insane amounts of spending has closed the lid on the casket. The cost for universal health care will dig the grave. Cap and trade will lower the casket into the grave.

Consumers are simply going to be extra cautious with their money until they can get a sense that the economy is turning around, and that they can expect some stability in the cost to support their family.

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