Fritz Pfister

It appears 2010 will be the year of the turtle and the rabbit. In spite of the most favorable market conditions for buying a home, the first half of January is playing the role of the turtle.

Fortunately the 71 closed sales through the first half of the month are 12 more than the first half of January last year, up by 20.3%. Then you scratch your head when looking at the 80 home listings that have gone under contract which are 32 fewer than the 112 last January, a 28.5% decline.

Not only did the government extend the first time home buyer tax credit, they expanded the tax credit to include repeat home buyers. The government even raised the amount of income to $125,000 for singles, and $225,000 for couples to be eligible for the credits. Interest rates continue to run at historic lows. Conditions couldn’t be better to buy a home.

So why the drop in listings going sold pending compared to a year ago when there was infinitely more economic uncertainty than today? Can consumers have less confidence today than a year ago? Perhaps the lousy weather played a role in people not getting out to shop for a new home. But I seriously doubt the weather is the primary reason sales pending are down.

Let’s review the economic news from the first two weeks of the new year. Unemployment nationally is at 10%, with the unemployment, underemployment, and those who quit looking for jobs at 17.3% according to the Department of Labor Statistics. Illinois unemployment is at 11%. Ok, maybe people are worried about their jobs. This certainly impacts confidence.

The city of Springfield released a proposed budget with the potential of 55 jobs being cut. Fifteen immediately, and 40 later in the year if the economy doesn’t improve. The state sent out 31 layoff notices at EPA. One could see why local families working for the government would be concerned. Probably not many of those folks with enough confidence to be out shopping to buy a home.

In other economic news it was reported this week that the budget deficit in December set a record $91.85 billion, adding to already record deficits. Then it was reported retail sales fell in December. Then it was reported the number of newly laid off workers rose more than expected last week. Then it was reported that buying power declined because workers saw inflation adjusted weekly wages fall 1.6% last year. The biggest drop since 1990.

That’s not exactly a week full of confidence building news. It doesn’t appear anything is really improving in the economy. Higher deficits, falling consumer spending, rising unemployment, and falling wages. What could be causing these types of results?

It was reported by AP this week, and verified by independent economists from five universities that the Stimulus spending on infrastructure projects has had zero impact upon unemployment rates whether a county received stimulus funds or didn’t receive any stimulus funds. More evidence the bill that was to create 3.5 million jobs by the end of 2010 is not working. Not inspiring news.

Now the Obama administration is proposing a second stimulus plan called The Jobs for Main Street Act. I don’t know about you, but when I try something in my business that doesn’t work, I don’t double down on it, and most Americans understand that too. Not much of a confidence builder when your government proposes throwing good money after bad.

Poll after poll shows the American people don’t want the Health Care reform bill that is being proposed. Study after study shows the bill will not achieve the goal of insuring the uninsured, will not lower the cost of health care, will not improve the quality of health care, and will be budget busting expensive, to the tune of $2.5 trillion dollars. For congress and the administration to ignore the wishes of the American public by pressing forward with this bill, they will drive confidence in the economy and government even lower.

Then the most bizarre economic story of the week president Obama is asking congress to impose a new tax on big banks that will total $90 billion the first 10 years. The reason to impose this tax the president said is; we want our money back. The only problem is these banks have already repaid the TARP money with interest. If you wanted to get taxpayer’s money back wouldn’t you tax GM, Chrysler, or AIG who who still owe money to TARP?

This makes absolutely no sense when one week the president calls bankers to the White House and scolds them for not loaning more money to small businesses, and then the next week threatens banks with massive taxes. Will these banks have more capital to lend small businesses, or less capital to lend small businesses if their taxes go up billions of dollars a year?

Although populist sounding, with the average working families mad that these banks are paying big bonuses while families struggle, this drives down confidence in the business community. Now small businesses already threatened with massive tax increases if the health care bill is passed, will either have less capital available to borrow from these banks, or the banks will simply pass along the cost of new taxes by increasing their fees or interest rates.

Everything the Obama administration has done has had the opposite result intended. Small businesses account for 60% to 70% of all new jobs in a given year. Right now small business people are frightened with the daily assault upon their livelihoods with the threats of higher taxes, mandatory insurance purchases, and penalties all contained in the proposed health care bill.

No wonder it was reported this week that economists predict a slow recovery, however the jobless rate will increase through the year, with most predicting unemployment rising to 11% nationally.

The weather may have played a role in the slow start in home sales this year, however I believe that government intervention into the market, failing economic policy, and proposed legislation driving up taxes costing even more jobs, is adding to a crisis of confidence in government.

The good news is we live in Springfield Illinois. Our market is surprisingly resilient. After the dust settles on the widely unpopular health care bill, the weather improves, and we get closer to our normal seasonal home buying kick off date on Valentines Day, the rabbit will take over from the turtle.

With the deadline to qualify for the tax credits on April 30, we will see how many families remain in the market to take advantage of the credits and record low interest rates. How many home buyers are left over following the first tax credit causing the boom in sales at the end of last year will be seen. But for now the turtle is in charge of the market.

Here’s to hoping the rabbit shows up soon. If we could just get government from throwing road blocks into the path of recovery, the economy would take off. Entrepreneurs and small businesses have always led the way to recovery, and they will again this time. The natural recuperative powers of this economy are powerful. You can have unlimited confidence in American workers, entrepreneurs, and small business. Folks still want to earn a living, and prosper in spite of the government.

Make this a great week from Fritz and Kristie Pfister and the Pfister Success Team Inc. of RE/MAX Professionals Springfield. Let’s hope the economic news is better the next week.

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