Fritz Pfister

As reported here for the past several months there has been a shift in the local housing market with some very favorable trends, and primarily due to the $8,000 first time home buyer tax credit, and historically low interest rates. Following a down right miserable first five months in the local housing market resulting from the stimulus plan, bailout plans, private industry takeovers, the omnibus spending bill, a federal budget that quadrupled the previous years record annual deficit, and skyrocketing unemployment, caused consumers to pull their horns in, and consumer confidence and spending plummeted.

Although the tax credit was available, and interest rates were at historic lows, home sales in the local market plunged over 20% in May, and were down over 10% for the first five months of the year. My how the market has changed since then. I have sounded the warning for everyone that would listen to take advantage of this window of opportunity to buy or sell a home, because when the tax credit ends this year and interest rates go up, it may be decades before another opportunity like this will come along, and many have.

June, and July home sales were up, and August looks to finish higher as well. With the number of home listings under contract with Realtors today up by nearly 30% over last year on this date, September may finish up as well. How long will this last? Who knows, but you are on notice the window of opportunity to buy or sell a home remains open.

Here’s why you should act now. Just like the people who moved up their plans to buy a car due to the government giveaway of taxpayer funds, the first time home buyer credit will end for everyone that doesn’t close before December 1. You have 99 days remaining. Due to the new truth in lending laws we shared with you on Let’s Talk Real Estate, that have the potential to create delays in closing, I recommend that you have a home purchase under contract no later than October 15. That is only 54 days away. The clock is ticking.

There are significant economic danger signs on the horizon. The government just reported the 2010 through 2019 deficit is two trillion dollars more than projected, not counting the deficit from 2009 adding to our outstanding balance. What does this mean? The risk for hyper inflation just went up, which will result in a weaker dollar, consumers having weaker purchasing power, and will result in significantly higher interest rates. Significant danger #1 inflation followed by high interest rates.

Significant danger #2 is repayment of that debt. The Congressional Budget Office predicts the interest on the national debt will rise to $774 billion dollars a year by 2019, and that was based upon two trillion dollars less debt. The interest payment just went up. The CBO says the burden of this debt will cause the economy to shrink. This means more unemployment. Significant danger #2 repayment of the national debt.

Significant danger #3 is Cap and Trade legislation pending in the senate passed by the house. The Heritage Foundation predicts Illinois consumers will be hit hard if the Waxman Markey legislation is passed. By 2035 electricity prices will rise by $844.43, and gasoline prices by $1.30 a gallon solely because of Waxman Markey. Much higher than the postage stamp a day cost predicted by the bill’s authors. Nationally millions of jobs will be lost, energy costs will skyrocket, household incomes will fall along with economic activity, all for negligible changes in the global temperature. Significant danger #3 unnecessary Cap and Trade costs.

Significant danger #4 is the health care reform bill that the CBO estimates at a cost of one point two trillion dollars will add $285 billion to the deficit, only if taxes on the rich, small businesses, and half a trillion dollars is cut from Medicare spending is implemented as proposed in the bill. That’s only for the first decade, costs in the second decade will grow exponentially as baby boomers reach their seventies and eighties. Regardless your position on health care reform, the financial burden of this plan adding to the already unsustainable debt could cause economic catastrophe. Significant danger #4 the costs of health care reform as proposed.

Significant dangers #3 Cap and Trade, and #4 health care reform are avoidable, the horse is already out of the barn on the profligate spending by this and the past administration. Contact your representatives and tell them not to pass either of these bills, unless of course you believe they will be worth you to be one one hundreth degree cooler while standing in line at the unemployment office, or waiting your turn to be able to see a doctor.

Significant danger #5 is unemployment which hit 10.4% in Illinois in July. Fed Chair Bernanke said yesterday the economy is near recovery and growth should start soon, however it will be a slow recovery as unemployment continues to rise, and consumer spending remains low. I translate this to mean we have hit the bottom which is good news. The reality is if unemployment remains high for the next four years as predicted, there are two things, people without jobs don’t buy homes, and don’t pay taxes. They add to government spending, and deficits. Significant danger #5 the high cost of unemployment.

Significant danger #6, the real threat of higher taxes for everyone. The administration is shocked by their revenue estimates falling below projections. Reality is setting in that taxing only the wealthy can’t pay for their exorbitant spending. The middle class will either pay the price through higher taxation, or through the loss of jobs as the wealthy who produce jobs, have to spend their money on taxes instead of payroll. Significant danger #6 higher taxes for everyone.

Significant danger #7, foreclosures. Although it was reported home sales across the nation increased 5% in July with only 30% of home sales being foreclosures, down from 50%, July set a new record number of foreclosures. The foreclosure rate is projected to increase with rising unemployment. The high rate of foreclosures will depress new construction, and prices. Significant threat #7 foreclosures hampering recovery in the housing market.

Ladies and gentlemen the opportunity to sell your home, or your opportunity to buy a home is probably the best it will be for the foreseeable future. First time home buyers that want some of the free taxpayer money the government is giving away must act now. For everyone else the time to act is now because when inflation takes hold some day you’ll be sitting around the coffee shop telling an incredulous youngster about the days when interest rates were below 6%, and tax rates were below 50%, just as the old hippies told their stories of Woodstock this past week.

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