Fritz Pfister

As predicted here in May, June home sales finished up from the previous June. The 390 closed home sales were up 7.43% from 363 in 2008. Listings going under contract (sales pending) increased an anemic 1.88% to 433 from 425 in 2008. The number of homes being listed continued a downward trend with 502 new listings this year down 14.77% from 589 in 2008.

The first half of 2009 had 6.47% fewer closed home sales with 1647 down from 1761 in 2008. Sales pending were down only 1.2% to 2323 from 2351 in 2008. The eye opener was the number of listings taken, down a whopping 17.73% to 2654 from 3226 in 2008.

The median sale price was up the first half of 2009 to $109,000, a new record high, from $105,000 in 2008 a 3.8% increase. However the average sale price was down to $124,791 from $127,145 in 2008, a 1.85% drop. In my opinion prices are stable, not rising as the median sale price would make you believe.

The question becomes why the dramatic drop in the number of home listings coming to market? From my vantage point there are several reasons.

First new construction is at its lowest levels since 1982. Builders are not building homes on speculation until they see an economic rebound. The market was over built when the economy went south causing many builders to close shop, and the survivors to take big losses to liquidate inventory.

Second is consumer confidence. Many people are seriously concerned about the outcome of the largest expansion of government in history, and the historical amount of federal deficit spending. The outcome of this profligate spending has more downside potential than upside potential. The average American is smart enough to know this uncontrollable urge to spend will lead to higher taxes, and inflation. The recent drop in retail sales, factored with the increased savings rate indicates consumers are playing it safe.

Third, the players are not coming out. In normal to good economies there are always hundreds of home sellers I refer to as ‘players’. These are people that don’t have a legitimate need to sell their home, however if some mope wants to come along and pay them an exorbitant price, they’d move! In my opinion the players don’t see much opportunity in this economy, and are staying off the market. Didn’t need to sell anyway.

What will result from the falling number of homes for sale? Home prices will remain stable or rise with fewer choices for buyers. The level of demand has softened, not by significant amounts compared to 2008, however closed sales are at the lowest level since 2000. If demand weakens much more, then prices would fall.

The Springfield Illinois housing market is changing from a buyer’s into a level market, with the exception of higher price homes. It was reported this week that luxury homes for sale in the nation stood at a forty month supply at the current rate of sales.

In the Springfield Illinois market the overall supply stands at a 6.5 month inventory. If you look at $250,000 and up priced homes that’s a different story. Through July 10, 145 homes had been reported sold and closed while 271 remained available for sale. This translates into nearly a one year supply of homes for sale above $250,000. The $400,000 to $500,000 price point favors buyers more than any other with 19 closed through July 10, while 57 remain available for sale, a whopping one and a half year inventory.

What’s the outlook for July? The anemic increase of eight sales pending June from June would indicate July closings would be close to even. That’s not the case. Although sales pending stagnated in June, on July 10 there were 476 home listings reported as sold pending, up from 417 on July 10, 2008. With the changes in financing regulations it is now taking many borderline buyers more time to close out their purchase. I would bet on July homes sales to be up with this large a number currently sold pending.

What’s the outlook for the second half of 2009? Soft. With unemployment expected to rise into double digits, treasury having difficulty finding buyers for our record debt, which could cause interest rates to go up, pathetic consumer confidence levels, a stalled stock market, and impending legislation that would add trillions in additional living expenses through cap and trade, and government run health care, the consumer is cautious.

Considering those conditions, placing the American family’s income under assault by government taxation, and legislation that will increase everyone’s cost of living, I see no evidence to alter my predictions from December of 2008 for this year. Closed home sales to decline about 11%, and the median sale price to decline 1 to 3%.

The Springfield Illinois housing market has survived the recession in relatively good condition. However the policies implemented and proposed by the Obama administration could cause even this historically stable market to suffer.

The economy could collapse under the weight of this debt and enslave our children and grandchildren to a lifetime of onerous taxation. If either cap and trade, or universal health care are passed into law, we will have sealed their fate.

In the meantime the good old Springfield Illinois housing market keeps chugging along.

Government is the greatest threat to the housing market, and economy.

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