Weekly Observation for October 16, 2010 Hello? Is Anybody Out There?
October 16th, 2010At the beginning of August I shared with you that sales would be ho hum until around Labor Day when we would see a bump in sales activity. How could that prediction be made, because as a student of this market, history told me so. As a result of that bump in sales pending in September closed sales the first half of October are down, but only by 15.2% from last October, the closest to even in four months.
Don’t break out the party hats just yet. I also shared with you that the sales activity this quarter would appear worse than they actually are because last October Realtors and buyers were scrambling to get a home under contract to close by the deadline for the first, first time home buyer tax credit date of November 30.
The 128 home listings reported sale pending through the end of business Friday are down 117 or by 47.76% from last October. This report is actually worse than I expected considering interest rates have fallen below 4% for the first time since Dwight Eisenhower was president. More evidence of the underlying weakness in the labor market, and economy.
If this trend continues it will be a very long winter for local home sellers. The 53 sales pending this past week represents only 3% of available listings, which of course means 97% of home owners didn’t receive an acceptable offer. Historically October is the last hurrah in any given year as sales slow in November and December. Ought oh.
How can sales be so slow when interest rates are so low? Jobs, jobs, jobs. Without new jobs being created the buyer pool cannot be replenished.
Let’s face it folks it appears as if we haven’t seen the worst yet. That’s not good news I know, but you need to know especially if you have to sell your home. On what do I base this prediction? Bear with me, there’s a lot of reasons why.
Nationally the unemployment rate went up to 9.7% in September not counting those who have given up looking. Weekly first time claims for unemployment which appeared to be heading in the right direction did an about face jumping 13,000 to 462,000 after finally falling below 450,000 the prior week. Not good.
The Thomson Reuters/University of Michigan’s preliminary index of consumer sentiment unexpectedly decreased to 67.9 in October from 68.2 a month earlier. The gauge was projected to rise to 68.9, according to the median estimate in a Bloomberg News survey.
The 46 member economists in the National Association of Business Economics reported this week that growth will slow to 2.6% in 2011 and unemployment will not go below 9.2%.
The government continues to borrow 37 percent of its spending reporting the deficit in 2010 at $1.3 trillion.
The most disconcerting news this week came from Fed Chair Bernanke as reported in today’s SJR with headlines; Fed economic plan has risks. Here’s the truth, the Fed is almost out of bullets. After increasing the money supply by 300%, the Fed will now pour gasoline onto the fire by printing more money to buy more U.S. bonds to drive down interest rates.
Note to Bernanke, we already have the lowest interest rates since the early 1950’s, what makes you think another quarter percent reduction in consumer rates for borrowing will start a fire of consumer spending, business borrowing, and hiring? Folks Ben Bernanke just took a position for America at the craps table.
If you read Time magazines “25 people to blame for the financial crisis” you will find Alan Greenspan at number three. Why? In addition to his lack of oversight and regulation was Greenspan’s quote “super low” interest rates. Bernanke just doubled down Greenspan’s bet.
What are the risks? Hyper inflation. The economists that I have been following the past year are predicting 10% interest rates at minimum when the economy begins to recover. Part of a healthy housing market are folks that move on average every seven years. How many of these folks will trade a 3% mortgage for a 10% mortgage to make a move? What will that do for home sales down the road?
There’s lots more to support the economists predictions for next year but I want to touch on one more; foreclosures. Due to the record one million foreclosures being processed this year it was discovered that banks were rubber stamping documents without reading them. Folks this is a technicality that attorneys general don’t and won’t put up with and are investigating. This does not mean that the foreclosure action is illegitimate.
The temporary moratorium by AG’s will harm the housing market, although necessary. The call by Democrats in tough re-election battles backed by Pelosi and Reid calling for a national freeze on foreclosures would set off an atomic bomb within the housing market. That’s why the Obama administration is against a freeze.
But I digress. Until the country can work through these massive numbers of foreclosures, repossessing, and then selling them, the housing market will not be able to fully recover.
The economy will not recover until the housing market recovers. This is going to take time. No wonder the economists predictions.
Hello? Is anybody out there? Why yes there’s the Obama administration that gambled with an $865 billion Stimulus plan that jobs would be created. Having sold Americans on the idea the Stimulus was for improving our infrastructure while putting contractors back to work, only dedicated 8% of the stimulus money to construction. One reason why the Stimulus hurt more than helped.
The president gambled and lost. Over 2 million jobs lost. Now his plan is to repeat the same mistake going to congress for more deficit spending to, you guessed it, rebuild our infrastructure and put contractors to work. Is this Groundhog Day?
Hello? Is anybody out there” Yes there’s a Fed Chairman, down to his last bullet, gambling with inflation, that he will hit the mark and spark recovery.
Hello? Is anybody out there? There’s plenty of home sellers, but not many home buyers. Looks like that’s the way it’s going to be for a long time. How far away is spring? That’s our next chance for a bump in home sales, until then; slow but steady.
Hello? Is anybody out there? Hopefully enough voters to put the brakes on the wealth redistribution, tax, and spenders running our state and federal governments. Two weeks from Tuesday will tell the tale.
Make this a great week from Fritz and Kristie Pfister and The Pfister Success Team Inc. at RE/MAX Professionals of Springfield. With these economic conditions can you afford not to hire the best Realtor available? It would be an honor to serve your family. Call us at 652-7653.
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.
