Weekly Observation for November 19, 2011 An Incredible, Unbelievable Year for Springfield IL Home Sales
November 19th, 2011Over the past few weeks I have had a number of builders and developers call me to ask what I see going forward in the Springfield housing market. I shared with them for now, what you see is what you got. There are fewer signs for expansion than there are signs for contraction.
A developer said yesterday he concurred and that’s why he won’t develop a thing unless it was a guaranteed slam dunk. A builder said yesterday that last year at this time he was staring eight spec houses, has three remaining in inventory, so they plan on only starting one entering 2012.
With interest rates at record low levels over most of the year this simply ranges between unbelievable and incredible. The same goes for home sales across the board as the local association of Realtors is on pace for a thirteen year low in the number of homes sold.
What are the reasons for such an anemic housing market in Springfield? Some of the answers can be found in the just released home buyer, home seller survey for the past year by the National Association of Realtors.
I have shared with you over the years that no matter the market, sellers or buyers, the most important home buyer is the first time home buyer. Without that first domino falling those up the price ladder won’t fall.
According to the report the number of first time home buyer sales fell from a record high 50% in 2010, mainly as a result of the first time buyer tax credit, to 37% the past year.
Why the slowdown? In my opinion there are three primary reasons, the national association only sites one; tighter credit. The association says banks need to get lending again to credit worthy buyers. True to a degree, however the association neglects that those tighter lending standards come from the Dodd Frank financial reform law.
The other two reasons the association neglects to mention are government regulations, and the stagnate jobs market.
From the report comes some valuable information for home sellers. How do home buyers find the home they purchase? When asked where buyers first learned about the home they purchased, 40% said the Internet, 35% from their agent, 11% from a yard sign or open house, 6% from a friend, neighbor, or relative, 5% home builders, 2% newspaper, 2% directly from the seller, and less than 1% from a homes book or magazine.
This contrasts with how buyers searched for homes. For example although 55% of buyers searched using yard signs and 40% used open houses only 11% purchased a home they found this way. Although 30% reviewed newspaper ads only 2% of buyers purchased a home found in an ad. In the final analysis the Internet and the real estate agent were the primary source for finding the homes purchased.
For sale by owner transactions accounted for 10% of sales, above the record-low 9% in the 2010 study, and many of the for sale by owner properties were not sold on the open market. Factoring out private sales between parties who knew each other in advance, the actual number of homes sold on the open market without professional assistance was 6%.
What will it take to get home sales to increase? If record low interest rates haven’t done the trick, billions of taxpayer dollars invested in tax credits haven’t done the trick, it has to be jobs. You simply can’t buy a house, or keep a house without a job.
We have seen the number of first time applications for unemployment finally fall below 400,000 for two straight weeks and to the lowest since April at 388,000. Economists as reported in the SJR business section Friday said that claims would have to fall below 375,000, and consistently, to signal sustained job gains needed to lower the unemployment rate below 9%.
This is problematic for the nation to say the least, however for Illinois it is beyond problematic. The historic tax increase passed this year has played out just as I predicted, it would kill jobs. That sure doesn’t help the housing market.
Don’t be confused by the report in today’s paper that 65,800 people have been hired for jobs this year, although true, that is not the net number. When compared to the number of jobs eliminated there is a net 100,000 fewer jobs. Just as the unemployment rate increased in October to 10.1% when 30,000 people were hired for jobs. The unemployment rate increased because tens of thousands of workers who had given up looking re-entered the job market.
The legislature in this veto session has proposed a bill that would give back $850 million of tax increases to a couple of companies, The Chicago Mercantile Exchange, and Sears, in order to save thousands of jobs. Both companies have threatened to move as a result of the tax increase. It is questionable whether this bill can pass. Either way it’s not good. Either the state loses tax revenue or the state loses more jobs. Which means the state loses more revenue due to the tax increase, either way. A bad idea playing out before your eyes.
That means the jobs picture is precarious at best for Springfield and Illinois. So the same news I shared with the builders and developers I share with local home sellers, what you see is what you got.
Thanks to the economic downturn exacerbated by state and federal governments means there hasn’t been an economic recovery and there isn’t one on the horizon, only cheerleading from the ostriches. Sure we’ll see little bursts of positive economic news that the cheerleaders in government and media will point to, however there won’t be any significant job growth. Up for the holidays, back down after the New Year.
As John Ransom finance editor for Townhall.com predicts; now through the first quarter of 2012 we will have modest growth, and then in the second quarter the GDP will decline. Somehow I think he’s right. Why? The price of oil is up 30% the past six weeks. At the BuisnessInsider.com they are predicting $4.50 a gallon for gas in 2012. So long disposable income, and you know what that means to consumer spending.
Spring is typically when our housing market is on fire with sales. In 2011 we had a silent spring. With the forecast for 2012 will we have another silent spring? If so then the Springfield housing market will go from an incredible, unbelievable year to a; what you see is what you got year.
We see what we got at The Pfister Success Team, your opportunity to get your home sold. As the number of agents decline in the market because their systems didn’t work in this economy, ours has. We are preparing to have a great year next year, and invite you to join us in the fun. We are looking for families that want to sell or buy a home in 2012. We have openings for up to 40 new listings to begin the year.
We are extremely thankful to the families that hired us to sell or buy a home this year. Now through the end of the year is opportunity time to get together and develop a plan that will help you achieve your goals. Call us at 217-652-7653. Have a Happy Thanksgiving! Call us for a prosperous New Year!
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.
