Weekly Observation for November 26, 2011 Slow but Steady in the Springfield Illinois Housing Market.
November 26th, 2011Last week The Capital Area Association of Realtor’s member brokers reported the most home listings going under contract in seven weeks. Then along comes the holiday week and the brokers reported the second fewest in any week this year with fifty. That two week average brings us back to normal with around sixty home listings going under contract weekly dating back to the first week of October.
To date in November closed home sales are up slightly by 3.35% while listings going under contract are down about 11%. It appears November will fall short of the five year average for November sales between 2006 and 2010. The trend I identified continues to be slow and steady, running about 23% below the high sale marks of the mid 2000’s. In 2011 we are on track to end with the fewest home sales since 1998.
In economic news this week not much has changed. The government’s second estimate of GDP growth for the third quarter was revised down from 2.5% to 2%. The first half of the year came in below a 1% growth rate placing the nation on a pace for half the growth necessary to meet the demands of new entrants into the jobs market for the year.
Good news on the weekly initial unemployment claims. Although they rose modestly they remained below 400,000 for the third week in a row, however well above the 375,000 mark that indicates solid job creation that would lower the unemployment rate.
This week the vaunted super committee failed to come to agreement on a debt reduction plan to lower the deficit by $1.2 trillion over ten years. It didn’t matter because annual $120 billion reductions during a time of $1.3 trillion annual deficits still would keep America on path to exceed $23 trillion in debt by 2020 and into insolvency.
The Democrats continue to insist on repealing the Bush Tax cuts on the wealthiest tax payers. This too won’t accomplish what is stated. This is estimated to raise $80 billion in revenues a year while government spends $1.3 trillion more than it takes in. Raisng taxes on the rich would have about as much impact on annual deficits as taking a squirt gun to a five alarm fire.
The two political parties are at odds which has created gridlock. The president and senate insist on raising tax rates, while the house insists on raising tax revenue. The administrations jobs bill is a smaller version of the Stimulus which failed to come close to projections for economic growth and job creation. The CBO reported last week that not only did the Stimulus fail to create jobs, it only sustained 700,000 jobs, and that the Stimulus will become a drag on GDP holding down annual growth by one half to one percent a year as the debt is repaid.
The Republicans on the super committee proposed tax reform that would have raised revenues by $300 billion over ten years. The right direction however still insufficient to scratch the dent of out of control government spending. At least someone understands the difference between raising tax revenues and raising tax rates. Just what was proposed by the presidents debt committee, lower tax rates combined with the elimination of deductions. The president rejected both the debt commission and super committee proposals by insisting on raising taxes on the rich instead.
This stalemate will continue until resolved by the American people in the 2012 elections. Voters will decide if bigger government, more deficit spending, more stimulus spending, tax increases, and massive new laws and regulations is their choice. Or if tax reform raising revenues, cutting spending, and repealing massive laws and regulations shrinking the size of government, lifting the burden off the private sector is their choice.
Until that decision is made the local housing market will be slow but steady. This is not a down market cycle, this is an evolved new economy. Local home sellers who are waiting for the up cycle will probably be disappointed for not taking advantage while interest rates remain at historical lows. What do home sellers expect to happen when interest rates increase?
Home buyers who are waiting shouldn’t wait for the very same reason, historically low interest rates. Some buyers say they are waiting for prices to come down. I say this isn’t Las Vegas, or Chicago, we are already affordable. How smart is it to wait for home prices to fall $10,000 then turn around and pay $50,000 more in interest when rates go up?
Nothing will change in the economy, except the possibility of getting worse, as long as businesses wait to see the results of the election. Until there is certainty on regulations and taxation there won’t be enough job growth to help the housing market. Home buyers and sellers who decide to wait are forfeiting the one known certainty they have at this moment, record low interest rates.
Like my grandfather used to say; if you wait for all the lights to turn green before heading to town, you’ll never get there.
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.
