More on The Springfield Housing Market 2011: Stunning Information!
January 15th, 2012On Saturday the 14th of January John Stites owner of Hasara Construction, and local home builder for 33 years appeared on Let’s Talk Real Estate (streams live at 10:00am central at Wmay.com). When I invited John to the program it was because I was curious what the numbers looked like on building permits for Sangamon County outside of Springfield.
John did more than asked, and it’s not pretty for the local economy in 2011 going into 2012. In a related story The University of Illinois Springfield released the Springfield Economic Index (SEI). On the 28th of January we are honored to have Patricia Byrnes of UIS, Economics Department, Center for State Policy and Leadership join us. The SEI is forecast to go from 98 in October of 2011 to 62 by July before rebounding to 88 in October of 2012. A reading under100 represents below normal economic activity.
Here are the final numbers for building permits for Springfield as reported by the Department of Building and Zoning. December single family permits issued: 0, two family: 0, multi-family: 0, commercial 0. Simply stunning.
The year 2011 building permits compared to 2010: single family 103 (includes 28 issued to The Springfield Housing Authority for public housing), down by 3, two family 21 down 14; multi-family 6 down 2; commercial 25 up 5. Not pretty.
If you deduct the public housing permits that leaves 75 single family permits issued to builders, the fewest since 1982. Here’s what John Stites reported for the surrounding communities single family building permits: Sherman 22 down 10, Rochester 7 down 3, Chatham 40 down 9, New Berlin 2 up 2.
What is the eye opener is the comparison to the number of permits to the height of the market in 2006 only five years removed. John went further however and reports on population growth between the 2000 and 2010 census.
The first number is the percent of population growth, then the comparison to 2006 single family building permits. Springfield population up 5.9%, permits down 53%. Sherman population up 34.9%, permits down 50%. Rochester population up 12.2%, permits down 85%. Chatham population up 26.1%, permits down 74%. New Berlin population up 10.4%, permits down 50%. Population is up 5.9% to 34.9% while single family permits are down 50% to 85%. Stunning.
This comes on the heels of home sales in the local MLS falling to their lowest level since 1998. Perhaps my prediction for further declines in home sales of 2% to 4% are optimistic again. We’ll see.
The challenge for local home builders are numerous. Mr. Stites says in the past two years government regulations have driven up the cost to build a home by 7% to 8%. That he used to be able to predict activity out a minimum of six months, now he can’t predict out six days, because OSHA has implemented and will be implementing a plethora of new regulations that are to be released soon. Stites says this makes business planning a nightmare. He has no idea what his costs will be this year.
To make matters worse traditionally there are enough new homes being built to support existing home prices. The combination of the weakest demand for homes since 1998 with foreclosures and short sales pulling existing home prices down, new homes are extremely hard to sell.
In normal markets the spread between the price of a new home and an existing home could be between 7% to 10%. Many families opt for a new home for only 7% more in price than the used home. When combining government mandates driving up building costs, with the drag foreclosures and short sales are pulling down existing prices, Stites says the spread is now almost 30%. Most families won’t pay 30% more in an uncertain economy for new over used.
This doesn’t bode well for the future until the foreclosure inventory and short sale inventory is absorbed by the market, and government stops adding to building costs.
The big government central planning and control by the Obama administration is preventing recovery and job growth with their constant barrage upon business and industry. The new regulations added to small business according to the NFIB is up to $50 billion a year in just the past two years, with more coming.
Please don’t believe the President’s photo op yesterday when announcing he’s now a deficit hawk and wants to streamline government by consolidating agencies. His proposal affects 32 bureaucracies that will save $300 million a year. That’s a rounding error in a budget Obama has increased to $3.8 trillion a year, and the man who created 150 new bureaucracies with Dodd Frank, and Obamacare adding hundreds of billions in costs and thousands of bureaucrats.
This is merely a political ploy to have film for deceptive Democratic propaganda campaign ads. Sadly millions of Americans don’t pay attention until we are close to the election. Funded with a billion dollars from Wall Street friends, and unions this propaganda may be all these folks see. Obama thinks the American people are fools, those who believe the propaganda are.
Mr. Stites and I both agree, it is fiscally impossible for an economic recovery if President Obama is reelected and continues to grow the government and saddle small business with higher regulatory costs, fuel cost, energy costs, and taxes that he is proposing. Impossible.
From international economist Nouriel Roubini comes this as reported on Project Syndicate via The Business Insider [quote]:
At the same time, even after six years of a housing recession, the sector is comatose. With demand for new homes having fallen by 80% relative to the peak, the downward price adjustment is likely to continue in 2012 as the supply of new and existing homes continues to exceed demand. Up to 40% of households with a mortgage – 20 million – could end up with negative equity in their homes. Thus, the vicious cycle of foreclosures and lower prices is likely to continue – and, with so many households severely credit-constrained, consumer confidence, while improving, will remain weak. [end quote]
The economy can not recover until housing recovers.
This doesn’t bode well for the area housing market, homeowners, home values, and the ability to sell a home when necessary. President Obama needs to change policies, which won’t happen, or we need to change presidents for any hope to put people back to work, and begin a real recovery, not a pretend one that the media and administration would have you believe.
The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International.
