Weekly Observation for March 17, 2012: Springfield Housing Market Happy (on) St. Patrick’s Day!
March 17th, 2012Happy St. Patrick’s Day! May the luck of the Irish be with you.
Realtors continue to be happy with the start to the year, the best in four years as far as the number of home listings going under contract, closed sales not so much. The number of sales pending fell back slightly from the previous week, however still at what would be considered a normal pace for this time of year. A relief because last year the spring market never materialized.
The joy is being tempered due to gas prices with some stations in Springfield at $4.10 a gallon only eight cents shy of the record high set in July of 2008. Last years run up in prices stopped short of the $4 mark however leveled off at high levels ending the year with the highest average annual cost per gallon in history. At the current pace that record will be shattered.
In my annual forecast for the local housing market I predicted gas prices as the greatest threat to home sales in 2012. It hasn’t had a significant impact yet. Why? People’s fear of loss is stronger than their desire for gain. What do people have to fear? Rising interest rates, inflation, and a return to more job losses. After four years of holding back, people recognize the economy, although improving is anemic, and doesn’t look to get better anytime soon.
This rush in sales is due to pent up demand. Once this demand is satisfied the party is over and Realtors know it. Not helping matters it was reported this week that unemployment in Springfield was up to 8.8%. My column at TownHall.com yesterday: The Assault on a Housing Market Ally; Disposable Income, addresses not only the impact of rising gas prices, but also the 67% tax increase, food prices, water, sewer, electric rate increases, and school bond referendums coming this year. All told families once again see their money disappearing.
People intuitively know interest rates are going to go up, which they did this week. What will be the cause of rates to increase? Inflation. The government is lying to you that there’s no inflation. When you have record high gas and food prices you have inflation, but the miscreants in our government tell you differently.
Then there’s the debt crisis exacerbated by a broken administration and congress. February set an all time record for monthly deficits. Obama promised to cut deficits in half, and the Tea Party wave of candidates run by a Republican house promised to stop the spending. Both have failed. The debt ceiling raised to $16.4 trillion, after the president inherited a $10.7 trillion deficit, will be exceeded by November.
Why would this cause the interest rate on your mortgage to go up? If the debt ceiling is increased by another $2 to $3 trillion, which it will because nobody has the political will to do the right thing, legitimate cuts to spending, the credit rating of America will go down again. This could lead to a bond crisis. The only reason rates didn’t go up after last summer’s debt ceiling debacle was Europe was in such bad shape that investors continued to loan us money. Worse was the Federal Reserve bought 70% of our bonds in 2011. Printing money when there’s no demand always leads to inflation. It becomes inevitable.
If investors slow their purchase of our debt, or if the Fed continues to print money to buy our debt, either way interest rates will have to go up to fight the ensuing inflation. When interest rates go up on bonds, interest rates will go up on the money you borrow for everything you buy. Credit cards, cars, houses, everything. The truth is our government is lying to us about inflation, unemployment, and have built our financial system and stock market upon a Fed printing press house of cards that will fall with the slightest shock.
Back to gas prices. Not only are these inflationary they will throw cold water onto an already slow jobs recovery. The vicious cycle will return. All on purpose because the Obama administration is pressing for a green economy that isn’t market viable dooming it to failure as with Solyndra and many other bankrupt green businesses funded with your tax money.
We have newly discovered oil and natural gas reserves, new technology to extract those reserves, but are being prevented from doing so by executive order and bureaucratic rule. Thank God we have increased production coming from private land where the government doesn’t control the leases, in spite of Obama policy driving down production on land where they do control the leases.
New EPA regulations being prepared will cut domestic production by 37% according to a study released Thursday by The American Petroleum Institute. Higher gas prices for you compliments of Obama energy policy and radical environmentalism at EPA are coming soon. The last thing consumers need.
No wonder we are seeing a rush of home buyers. Just like animals rushing for shelter when nothing is apparently wrong to us, they have already sensed the earthquake. People sense now as the time to buy a home, guarantee the cost of their housing going forward, and be prepared for the economic earthquake.
An economic shock caused by irresponsible energy policy, deficit spending, debt, and business suppressing laws like Obamacare, which the CBO now says will cost twice as much as estimated when passed, and Dodd Frank which is throwing sand into the gears of the housing and banking industries.
Let’s ride this wave of pent up demand as long as we can. How long will it last? Hard to say but this I know for certain; rising gas, food, electricity, water, sewer prices will slam the brakes on consumer spending. There is after all, only so much the American consumer can take.
Please don’t ignore my warnings as simply pessimistic, or because you believe I don’t like the Obama administration. It’s true, I don’t like them for what they are doing to our economy, our nation, and to the people. It’s all unnecessary. I’m being realistic and fulfilling my duty to warn you. Everything that I predicted would result from Obama economic policy has proven true. Why would results change now? Believe me I wish it weren’t so, I love the first legitimate rush of home sales activity in four years. But it is what it is.
At least this November the people can have a say and change course to sound energy policy, and free the economy from the shackles of Obamacare, Dodd Frank, and an environmentally radical EPA together preventing a real recovery. The current recovery is nothing more than political spin the media reports as truth without challenge.
Too bad nothing can be done about state government this election, excepting the minute hope the house could be taken away from the Chicago machine. What are those odds?
Regardless this Thursday will be your last chance to attend a free home seller seminar this year. You better believe you’ll need this information if you want to succeed, especially after this current pent up demand is satisfied. The second half of this year will hit a brick wall if gas prices keep going up. Thursday at 6:00 pm at The Springfield Hilton Garden Inn. Reserve you seat for the last home seller seminar of the year by calling 652-7653, or Facebook Fritz Pfister, or by email fritz@springfieldhome.com.
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.
