Fritz Pfister

What started out as a potentially bad year for home sales has turned out to be a pretty good year in 2009. The 3616 closed home sales reported by member brokers to the CAAR has already surpassed the 2008 total of 3488 with two weeks to go.

This means home sales headed back in the right direction this year for Springfield area home sellers, however will finish about 10% or about 500 home sales below the highs. Not boom times, but good times.

The jury is still out on December closings, however will probably finish up. The concern is that home listings going under contract this December have fallen behind last year, and the 227 home listings reported under contract today stand 9% below last year on this date. That will probably mean another down January for home closings.

Next week I will announce my forecast for the local housing market. Last December 28th, I predicted home sales for 2009 would decline by 11%, that the median sale price would fall 1% to 3%, that the number of new listings would decline to around 5200, and we would start the year with about 1650 homes listed for sale.

The sales prediction was on target with closed sales down 10.1% through the first five months of the year, the median sale price was up marginally by 1.2%, and we started the year with 1618 homes for sale. Then interest rates fell, and first time home buyers rushed the market to take advantage of the $8,000 tax credit. Closed home sales with two weeks to go in 2009 are up 5.9% as a result.

If you ever needed any evidence that when interest rates go down home prices go up, and when demand goes up while the supply goes down, prices go up; all you need do is look at 2009. With interest rates falling below 5%, and the inventory of homes for sale falling back to 2004 levels, the median sale price is up to a new record high of $109,500, a 5.28% increase.

Nothing makes me happier to have been wrong on the number of home sales, and prices. That is good news for local consumers, for the real estate business, and for the local economy.

As for my prediction that the number of new listings would fall to around 5200 in 2009, there have been 5167 with two weeks remaining in the year.

In spite of the country being in the grips of uncertainty heading into 2009, with all the numerous economic variables, I believe it will be more difficult to predict 2010. My forecast would certainly have been different had anyone bothered to inform me that the government would pay people to buy homes and that interest rates were going to fall to 40 year lows. Such are the hazards in the predictions game. Now I know how Gus Gordon and Joe Crain feel!

The most difficult variables to predict will be jobs and interest rates. Fed Chairman Bernanke has said he will be keeping interest rates on the cost of funds to member banks near zero for as long as necessary. Inflation would be the motivation for a change in that policy. Wholesale prices rose 3.5% last month, but we don’t know if that is an omen or not.

The number of jobs locally will be determined by numerous outside influences. The Wall Street Journal reported that small businesses are reluctant to hire until the outcomes of the Health Care Reform and Cap and Trade bills are known. Either of these bills passing would increase expenses to small businesses causing more job losses according to the Wall Street Journal.

The city of Springfield is projecting an $8.5 to $12 million dollar deficit with the mayor indicating jobs will need to be cut to balance the budget. The county, especially in the sheriff’s office, will also be looking at job cuts. The state with an $11 billion deficit, at best guess because nobody knows, may be looking at eliminating jobs in 2010.

Last week the SJR ran a special on the SIU Physicians Group. With the state not paying their Medicaid bills in a timely fashion, the physicians group has been posting millions in losses the past couple of years. The proposed federal Health Care Reform bill will shift billions more of the costs of Medicaid to the states. This is causing concern that the local economy may be looking at a loss of jobs in the medical community.

With all these unknown variables affecting the number of jobs locally, it will be difficult to predict home sales, if, and that’s a big if, interest rates remain low. More jobs equals more buyers. Low interest rates means more buyers.

The other wild card is the expiration of the tax credits for buying a home set for April 30. Congress stated they would not extend the credit again out of fear for increasing the deficit. Will the congress hold to that position? They probably will, which means the potential for a slowdown. If people move up their plans to buy a home to get the tax credit, that steals demand for homes after April 30th.

Not to worry, my predictions will be made next week regardless the vast economic uncertainty we find ourselves experiencing today. So tune into Let’s Talk Real Estate next Saturday at ten to hear these fearless predictions.

Merry Christmas from Fritz & Kristie Pfister, Denny Pryor, Keith Haynes, and Amy Mason of The Pfister Success Team Inc. of RE/MAX Professionals Springfield. If you are contemplating selling your home give us a call at 652-7653, our inventory is nearly sold out as our selling systems have proven effective again with over 80% selling. In fact the 777 home sellers we helped get sold since 2000, represents 31% more than anyone else in the MLS. Our systems are your solution. Call 652-7653 if you want your home sold.

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