Weekly Observation for May 12, 2012: Housing Market Improving Springfield Illinois
May 12th, 2012The local media when reporting area home sales and prices for the first quarter went a little overboard in my opinion. Is it good news that sales were up 5.4% in the first quarter? Absolutely, sure beats going the other direction. However using terms like skyrocketing was a bit much.
To put this good news in perspective the 5.4% increase was compared to a first quarter in 2011 that had the fewest homes sales since 1997. The record median sale price of $113,000 is more indicative of record low interest rates giving buyers more purchasing power than to rising prices.
The final numbers for April changed by one closed sale to 311 up by 11.46% over 2011, the sales pending at 453 were up by 6.33%, the median sale price of $110,000 was up 4.76%, and days on market to contract were 114. However again being compared to an unusually slow April in 2011.
Comparing the first quarter up over 2011 by 5.4% you find that compared to the five year average closed sales were down 9.4%. Not exactly skyrocketing. April closed sales were up 11.46% compared to 2011, however down 6.8% to the five year average.
We are improving which is great news, but we are not back to normal activity yet, and we won’t be until there is real, significant, and legitimate job growth. Regrettably job growth is anemic at best.
In addition to the lack of significant job growth that will impact the local housing market, a bill was passed this week by the house and senate and is ready for Governor Quinn’s signature that will force retirees to begin paying for a portion of their health care.
This too will impact the local housing market. Many of those retirees have stayed in Illinois, and in Springfield. We all know it was not the retirees who caused this disaster, it was legislators and governors who spent retiree’s contributions on the general fund, but that’s not the point. That horse is already out of the barn.
Promising an employee through contract that they based their life’s plan upon, and then not keeping that promise is immoral. A client who is a state employee said to me this week, I took my state job at less money than I could have made in the private sector because the benefits made up the difference. Now thirteen years later they are going to take those benefits away. Why am I working for them?
Another real problem besides the high probability that this law will be ruled unconstitutional and turn out to be a huge waste of time and money the state doesn’t have, is nothing has been determined other than retirees will have to pay a portion of their health care.
This is similar to when Obamacare was passed. We were told we have to pass the bill to see what’s in it. The same will be true for the state retirees. A board will determine in the future how much retirees will have to pay. Welcome to the world of government induced uncertainty.
It was interesting that AFSCME’s John Cameron said; “It’s no different than assessing a huge tax increase on those individuals.” Now Mr. Cameron knows how the taxpayers felt when he supported the largest tax increase in state history. Of course Cameron’s solution is to raise taxes on business which would cost more jobs and simply make the situation worse. I would suggest to Mr. Cameron instead of donating millions of dollars to your political cronies, make these new payments out of union dues for these retirees until you win in court.
Here’s the problem; uncertainty, and higher costs. Neither the federal government or the state government has produced an environment that will allow recovery. There is and has been an assault on the private sector with laws, regulations, dictates, mandates, taxes, and debt upon debt. It is fiscally impossible for recovery with these big government agendas.
Businesses have refused to spend and hire because of this situation. Now state retirees understand the meaning of uncertainty. Their family budgets are now in the hands of political appointees to a board who will determine what is fair for them. Will these people be rushing out to spend? Will current state employees who face the same future rush out and spend?
No. This will have a direct impact upon the Springfield housing market due to the large number of state employees and retirees living in the community. Sad it is turning out this way. We need to relieve the private sector from the unbearable burdens our out of control federal and state governments have placed upon it.
Not until businesses have certainty will they begin to hire in earnest. Not until there is certainty for people they will not begin to spend in earnest driving up demand for business products and services.
Until then what can we expect in the local housing market? Ebbs and flows of activity predicated upon pent up demand, and record low interest rates. For now the market is improving as a result. For how long is the question. Until job growth adds buyers to the market we will just be trading spaces.
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.
