Weekly Observation for May 14, 2011 Springfield Housing Market Leveling Off?
May 14th, 2011Is the Springfield housing market leveling off? It can be confusing attempting to determine where the local market is trending due to the practice of comparing year over year activity.
Let’s take a look back over the past couple of decades to see where we are today. The 1980’s experienced the highest interest rates on record with over 20% rates to fight inflation. This caused the housing market to contract and was a solid buyers market. When rates fell in the late ’80s activity picked up dramatically however there were scant few new developments ready to handle growth.
With interest rates returning to single digits in the early ’90’s it became a sellers market for the first time in over a decade. The sellers market lasted until mid 1994 when interest rates rose again and the Springfield market returned to a buyers market until leveling off in 1998, and for the first time the number of home sales surpassed 1993.
Sales increased annually from 1998 through the record year of 2005 when 4182 home sales were reported by local brokers. Sales dipped slightly in 2006 by only 6 to 4176. Although both years were the two highest on record the market was trending more to a level market because of exuberance. The number of new homes being built and homeowners wanting to take advantage of the record number of buyers in the market pushed the inventory of homes for sale to record levels.
Sales slid a modest 152 to 4024 in 2007 down by only 3.6%. Then along came 2008. Gas prices rose to record levels pushing up food prices and all of a sudden consumers stopped spending. This caused a tsunami effect across the economy, demand went down for homes at record high prices. The declining demand caused home prices to fall and triggered the financial meltdown as America learned millions of mortgages that were made were considered junk.
Springfield area home sales plummeted in 2008 to 3488 down by 13.32%. In 2009 sales recovered a bit based upon home buyer tax credits for first time home buyers with a closing deadline of November 30. Sales finished the year up by 6.6% to 3719. Even with the tax credit, 2009 still had the fewest home sales since 2002.
With the Stimulus failing to produce the type of recovery anticipated Congress extended and expanded the home buyer tax credit to include repeat home buyers who had to have a home under contract by April 30, 2010, and closed by June 30.
The newly extended program drove sales up through the first half of the year by 15.7% over 2009. But as soon as the April 30th deadline passed home listings going under contract plummeted and 2010 finished with 3442 closed home sales the fewest since 1999. In spite of two buyer incentives and interest rates falling to record lows not seen since the 1950’s.
That brings us to 2011. Hopes were high for a rebound in sales during the spring. But that’s not the way it turned out. The first four months of the year saw weak demand with closed sales falling along with listings going under contract, not just compared to year over year, but also to the five year average.
Closed home sales are down today to the lowest level since 1997. This is all about to change because going forward we will be comparing activity to the surprising declines following the expiration of the tax credits. The next five months will tell the story for 2011, whether we’ve leveled off, are climbing, or continuing to decline.
This year regrettably has the same influences from the financial meltdown year of 2008. The same $4 a gallon gas and rising food prices have caused concern that consumers will pull back like in 2008. Unemployment remains persistently high over 9%, and although first time applications for unemployment fell last week they remain well above 400,000 at 434,000. This indicates anemic job growth at best. Jobs are the key to any recovery in home sales.
Inflation spiked in April due to rising gas and food prices to an annual rate of 3.2% the highest in 2.5 years. The experts say this is not a concern according to an SJR article today. Because oil prices have begun to retreat, prices for gas and food are expected to decline in the upcoming weeks. My question is if gas falls to an average of $3.60 a gallon experts predict; isn’t that still high? We’ll have to wait and see how that impacts consumer spending especially on the news that wages continue to fall, down 1.5% in April.
Foreclosures were in the news again with reports of April at 40 week lows. What they didn’t say was that there are a backlog of foreclosures because of paper work irregularities. There remains an expected 1.2 million foreclosures in 2011. Lenders have over 750,000 foreclosed homes in receivership not yet released to the market. Realty Trac reports 3.7 million homes are in pre-foreclosure meaning these home owners are 90 days or longer behind on payments.
Home prices fell 3% nationally which translated into 28% of homeowners in America owing more on their homes than they are worth. But Springfield is not in that boat. Year to date our median sale price has recovered from the 4.1% decline in the first quarter and is now up fractionally year to date.
I visited with a couple yesterday, who when they called said; we want to sell our home but don’t know if we can afford to. After visiting with them they had misplaced fears based upon all the national news. They in all likelihood will sell for more than they paid for the home in 2008.
I wonder how many homeowners who would consider selling, but are holding back because they have the same misperception? The inventory is up slightly over last year, however there are buyers in the market who can’t find the home they’re looking for. Now, surprisingly is a good time to go to the market to see if your home meets the requirements of these buyers.
It’s absolutely a great time to be a home buyer and a great time to bring a fresh new home listing to market as a seller. My advice? Go for it. Do you really believe the economy is going to improve so much that it will be better later? Maybe it will, maybe it won’t. Why take a chance when now might be as good as it gets?
Is the Springfield housing market leveling off? Stick with me here over the next few months, and we’ll find out together.
Make it a great week from Fritz and Kristie Pfister and The Pfister Success Team Inc. at RE/MAX Professionals of Springfield. Thinking about selling? Our selling systems have generated nearly 30% more closed home listings than any other agent or team since forming our team in 2000. Up, down, or sideways markets, our systems work. Give us a call at 652-7653, it would be an honor to serve your family.
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.
