Weekly Observation for January 21, 2012: Hate to Say It, I Warned You About the Impact of the (Democrats) Tax Increase On Housing
January 21st, 2012So far so good the first three weeks of 2012 for home sales. Member brokers of the Capital Area Association of Realtors reported to the MLS compared to the same time in 2011, 91 closed home sales down by only 2, and 186 listings going under contract up by 18. The median sale price is up, but so are the days on the market to contract for those that sell. All in all, good news.
New home construction in the nation continues to be in a depression due to competing foreclosed and short sale properties. Housing starts in December were expected to increase due to mild weather, however dipped 4.1%, while building permits were unchanged.
From Bloomberg News [quote]: Builders began work on fewer houses than forecast in December, capping the worst year on record for single family home construction and signaling recovery in the industry will take time. [end quote]
The 103 single family permits in Springfield will be reported down by 3, however when you exclude the 28 permits for government housing, the 75 permits were the fewest since 1982.
To get an idea of the stagnate economy’s impact in Sangamon County, compare building permits from 2006 at the height of the market to 2011: New Berlin down 50%, Sherman down 50%, Springfield down 53%, Chatham down 74%, and Rochester down 85%.
Housing can’t recover until the jobs market recovers, and foreclosed and short sale properties are absorbed by the market. Now that most legal challenges have been settled there could be 900,000 foreclosures released by banks, another one million foreclosed, and Realty Trac reports another 2 million homeowners are 60 days or longer delinquent in their house payments.
Once again that reflects the abysmal jobs market. The state of Illinois released their unemployment figures for December which fell for the second straight month ending the year at 9.8%. Full disclosure, I don’t trust the reporting methodology. But we will take it at face value when the state says the year finished with 5.68 million jobs an increase of 52,600 from 2010. The reason my trust meter is going off is due to the Illinois Policy Institute showing about the opposite. Either way it’s not good.
One year has passed since the passage of the Democrats income tax increase of 67% on individuals, and 46% on corporations. Unemployment is reported to be down 1% for the year. My question is, are those who are no longer being counted, or those who have departed Illinois the reason? Who knows, however from my weekly observations one year ago following the tax increase [quote]:
The article headlining the Business section; “Higher taxes impact on real estate uncertain.” Say what? Dr. Hewings of The U of I said raising individual and corporate taxes could be stabilizing state finances, or it could hurt if long term budget problems still go unresolved.
Dr. Hewings, and the association’s of Realtors may say the impact of higher taxes is uncertain, but allow me to be so bold as saying without spending cuts, the impact is certain. This plan will fail. [end quote]
Seems Dr. Hewings was right. Comptroller Topinka reported this week that the state has a backlog of over $8 billion in unpaid bills, with $4.5 billion in unpaid bills dating back to September. Doesn’t seem anything was resolved. The state association of Realtors hasn’t released the final home sale numbers for 2011. I’m betting they’re down, but we do know the local association finished the year with the fewest home sales since 1998. Now tell me again how the tax increase impact upon housing was uncertain?
From my weekly observations on January 29, 2011 [quote]:
The state has projected the tax hike will raise $6.8 billion in new revenues. I don’t believe that will be the case, and here’s why. The $6.8 billion will no longer be available to families and businesses to spend on goods and services. This means business not only will have their taxes increase 46% but they will see their sales decline by $6.8 billion driving down profits and sales tax revenues. The economy is not static, and the unintended consequences of higher taxes will provide less revenue than projected. [end quote]
Not to be found in the SJR, but in this weeks Chatham Clarion comes this article titled: Little difference marks anniversary of tax increase. I won’t bore you with the whole article, but this is the paragraph of relevance [quote]: According to the Commission on Government Forecasting and Accountability, the largest tax increase measure in Illinois history was expected to bring in $7.078 billion/year in net general revenues. Further analysis of CGFA shows that the tax increase HAS NOT met January 2011 expectations and has experienced a SHORTFALL of $1.086 billion. [end quote].
Sad to say I was right again. Tax increases never raise the money expected and are down because they hurt the economy more than they help. The flawed logic of raising taxes to increase revenue is proven again for the umpteenth time. When will these people learn?
The same will be true on the national level with President Obama’s continued call for tax increases upon the rich. Disregarding the fact that the projected revenues would only generate an estimated $70 to $80 billion to put toward $1.3 trillion in annual deficit spending, or .005 percent of that deficit, that still will be $70 to $80 billion less to be spent in the private sector, meaning once again the flawed premise that raising taxes will increase revenues will fail again.
However the most recent action of President Obama showed his true colors; green. Obama proved that donations and votes are more important to him than the unemployed, those in poverty, and the struggling middle class by denying the Keystone XL pipeline.
An estimated 20,000 temporary jobs, and 250,000 to 500,000 permanent jobs were sacrificed so Obama could appease the radical environmental wing of the Democratic Party to obtain donations and votes. This is not to mention the impact this pipeline could have had to lower gas and food prices benefiting all American families. Seems the most studied pipeline in history, over three years by the EPA, wasn’t enough time time to determine the environmental impact according to Obama. This was a purely partisan political calculation chosen over a prudent economic decision that would have helped people.
Now is the time to get that home sold before the state or federal governments cause more harm to the economy. This Thursday at 6:00pm at the Springfield Hilton Garden Inn plan to attend my free no obligation home seller seminar. Interest rates have fallen to the lowest since Adam asked Eve on a date. Learn how to get sold in the new economy, now is probably as good as it will get. Call 217-391-1811 to reserve your seat.
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.
