Fritz Pfister

When the Olympics were held in Atlanta there was a bombing and a fellow named Jewel was reported as the prime suspect. For 88 straight days the national media ran stories about Mr. Jewel. In the public perception, based upon the stories being reported, they had Mr. Jewel convicted in their minds, didn’t they? As time always reveals the truth, Mr. Jewel was not only not guilty, but a hero. Never has there been an apology from the media. If it bleeds, it reads media mentality in this case, and in the reporting of the housing market the past 2 years. Now Mr. Jewel has passed away, and it’s too late for an apology.

At the end of 2006 the former chief economist of the National Association of Realtors reported that the media had created a negative psychology in markets that were performing well. The constant reporting of the “Bubble” markets bursting carried over into non-bubble markets, as the consumer, just as in the Jewel reporting, arrived at the wrong conclusion. Damage done.

In 2006 the Springfield real estate market was on a record pace for the numbers of homes being sold when in the fourth quarter home sales slowed to a crawl. This following months of the local media running the national story about the “Bubble” bursting.

You don’t hear the term “bubble” market much anymore, do you? It would be a safe bet six months ago most people never heard of sub-prime lending. Have they now? Due to the current daily reporting about the credit crunch caused by the melt down in the sub-prime market, the housing market continues to reel. The sub-prime meltdown is being presented as a larger problem than it is in reality. If you were to realize the total mortgage market capitalization in relation to sub-prime loans, sub-prime is a minuscule portion of the market.

The sub-prime issue has turned into a politcal issue. Investors that lost billions are looking to the government for bailout money. Sorry, you took the risk, you should suffer the loss. Hedge fund investors weren’t complaining when they reaped billions from these types of loans before the tide went out. Homeowners playing victim, I was fooled by those evil lenders, are looking for government handouts. Sorry, if you didn’t know what you were signing, you should have. You signed the mortgage, not any other taxpayer. This plays into the hand of the Democrat, handout taxpayer money to build a constituency, and buy votes machine.

Where are the most problems with sub-prime lending foreclosures? The previously mentioned “Bubble” markets, where investors gobbled up homes as prices were escalating at unsustainable rates. When the pool of well qualified buyers (demand) had been satisfied, the market turned to lesser qualified buyers to sustain the boom. Lesser, and lesser qualified buyers, utilizing ARM loans, interest only, 40 year amortized programs, started to default. Most of these people could barely afford the house payments at the beginning, now that loans are adjusting they can’t afford their homes. Now the media plays up the story that foreclosures are up 93% over last year adding to the negativity, creating more doom and gloom in markets without those sub-prime/foreclosure issues. The foreclosure rate should be up in bubble markets, those loans should never have been made to begin with.

The Springfield Illinois market continues to defy the national trend in home sales, and home prices. The Capital Area Association of Realtors (CAAR) MLS member brokers reported sales of homes in August of 2007 of 409 closed were 1 ahead of August 2006’s 408. For the year home sales are down only about 3.3%, compared to double digits nationally.

The most perplexing thing is home prices. Nationally the median sale price of a home has fallen for a record 12 straight months. CAAR brokers report the median sale price is up 4.7% for the year, and up 6.5% in August. This at a time when there are a record number of unsold homes in inventory. Doesn’t make sense. In fact there are 400 more homes available for sale today than have sold in the preceding four months; and prices are rising?

Locally home sellers have their biggest challenge of the year ahead of them, as the market heads toward the historically slower selling seasons of fall and winter. Based upon the current number of homes for sale added to the average number of new listings taken by CAAR the final four months, there will be an estimated 4000 home listings available for sale. Historically, about 1200 will sell and close. Those that don’t sell will have to wait until the spring market returns, along with the perennially largest buyer pool of the year. Good luck to these folks, because time is the enemy of the home seller. The longer a home is on the market the less valuable it becomes. Sellers are better to lower their price now, in order to compete with this record inventory, than pay the holding costs another six to eight months and still have to lower their price in the spring.

There is a slight glimmer of hope that the Realtors of CAAR can break the all time record for the number of homes sold this year. There are many factors that will affect home sales. We could see major job growth (doubtful with an anti-business governor). We could see lower interest rates that would add more buyers to the market. The only thing guaranteed is, if a record for home sales is to be set, it will have to happen in the face of the media’s incessant negative reporting. Realtors locally are working hard to overcome this negative psychology. If a record is not set, Realtors need not apologize for their efforts, the media should. Local home sellers can thank the media for being a part of any slowdown, just as happened during the fourth quarter of 2006. Of course the financial harm caused to these sellers, just as the harm to Mr. Jewel’s reputation, will be unwarranted. Local home sellers can count on the same apology from the media that Jewel received. None.