Fritz Pfister

Member brokers of the Capital Area Association of Realtors MLS report the first significant slowdown in home sales since 1994. Following four consecutive years of home sales exceeding the 4000 plateau, and primed for a cyclical slowdown, the economy forced the issue.

The year 2008 will be remembered for unprecedented government intervention into the private markets through trillions of dollars in bailout money funded by the tax payers to save Fannie Mae, Freddie Mac, AIG, GM, Chrysler, banks, and the financial services industry.

All were the result of government intervention into the private markets from years earlier. Google New York Times September 1999/ Fannie Mae. It was documented that orders came from the Clinton administration, and HUD to loosen lending requirements so more low income families could qualify to purchase homes, and Fannie Mae and Freddie Mac were to buy these high risk loans to be bundled and sold on Wall Street.

The article predicted that as long as home prices continued to rise there shouldn’t be any problems. However if the housing market began to falter and prices declined you could see a crash in the financial markets, banks, and Fannie/Freddie that would require a government rescue exceeding the cost of the S&L bailout of the 1980’s. How prescient. The unintended consequences of good intentions.

Consumer confidence was rattled by the meteoric rise in the price of oil, followed by record high gas, food, and energy prices. Then came the October surprise that the U.S. financial markets were about to collapse and that we would be headed toward a great depression if the government failed to act using trillions of your tax dollars, to rescue these private industries. Consumer confidence and spending plunged to record lows.

The rest is history. Congress approved the bailout funds, banks received the money, bought other banks with your tax dollars, and now can’t account for where the money went. Along comes the election with Obama  eloquently waxing fear into the hearts of Americans by announcing that if his trillion dollar stimulus plan isn’t passed, the worst economy since the Great Depression would get worse, and fast. The plan will probably pass the Democrat controlled congress and senate adding to the current trillion dollar annual deficit, another trillion.

It appears the remedy for a financial collapse caused by government intervention into the private market, is to have more government intervention into the private market. We’ll have to wait and see how the economy responds to this latest round of government intervention, which will place the shackles of debt around future generations.

In my opinion additional government intervention will make the economy worse long term. There may be some short term benefit, but it won’t last. The government is the solution ideologues in control of all branches of government will be back for more. 

Springfield Illinois is known to be one of the most historically stable, and steady housing markets in the nation. During this period of economic upheaval, not even Springfield, could avoid the impact of the faltering economy. The following are year over year comparisons; 2008 to 2007.

December home sales declined 11.9%, sale pending declined 5.1%, and the median sale price fell a whopping $27,500, or by 24.2%  to $86,000.

The fourth quarter closed home sales fell 16.5%, sale pending fell 18%, and the median sale price fell 6.8% to $95,000.

For the year; closed home sales of 3488 were down by 536 (-13%), sale pending were down 677 (-14.1%), and the median sale price finished down $500 (-.47%), at $104,000. The median price managed a slight decline due to the first half of 2008 price increases. The third quarter fell 2%, followed by the 6.8% drop in the fourth quarter. The trend line for prices is pointed down. The median sale price has declined two of the preceding three years. Total residential closed dollar volume fell over sixty three and a half million. A 13% decline in 2008.

In all property classes which include lot, land, farm, investment, and commercial properties; closed sales fell by 15.8%, sale pending by 16%, and closed dollar volume was down 13% by over seventy-five million dollars.

In my opinion the decline in all property classes was the result of slumping new home sales driving down the demand for lots, and land. Through November year over year building permits reported by the city of Springfield, fell 43.8%, and sales of new homes in the MLS fell by 25%. The 162 new homes listed to begin the year represents a nine month supply.

There are some silver linings in the dark clouds over the economy. We enter the year with the lowest mortgage interest rates since the 1950’s. The price of oil and gas has plummeted, due to weak demand, to five year lows.

For Illinois residents, the future appears brighter with Blagojevich impeached, and hopefully soon convicted. The state of Illinois is a perfect example of what happens when one party controls all three branches of government, and the chief executive is a government is the solution believer. There is now hope in Illinois for the possibility of legitimate, common sense leadership. If Blagojevich isn’t convicted, would the last person out of Illinois, please turn out the lights?

There you have it. A down year in home sales in a historically stable housing market, Springfield Illinois, is proof positive of the slowing economy, and the government intervention that caused the economic meltdown is being followed by more government intervention. Google; Patrick Buchanan, FDR or JFK. This insightful article provides evidence of JFK’s success, and FDR’s failures when attempting to stimulate the economy. It appears Obama prefers the FDR model. Good luck everyone.

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