Weekly Observation for March 3, 2012 In Like a Lion, Springfield Illinios Home Sales
March 3rd, 2012It is said that if March comes in like a lion it will go out like a lamb. As far as the housing market is concerned March is in like a lion, and very well could go out like a lamb.
The Capital Area Association of Realtors member brokers reported the following to the MLS for home sales in February of 2012 compared to 2011. Brokers have until March 7 for final reporting, so these numbers may change slightly. Several factors to consider when analyzing these figures; February 2011 was host to the Groundhog Day blizzard, and this is a leap year.
February over February sales data: new listings 365 up 22%, closed home sales 171 up 3.6%, sales pending 320 up 27.5%, median sale price $107,000 up 15.43%, days on market to contract 127 down 3%.
The number that jumps out at you is the number of listings going under contract, the reason March is in like a lion. Up 27.5% sounds really good and it is, however let’s put that in perspective. Remember we had a whopping 295 listings go under contract in January an impressive sounding 21.9% increase? Yet only 171 closed in February a 3.6% increase. Also the 27.5% increase with 320 sales pending in February is actually 5 down from the five year average for February 2007 through 2011. Things are not always as they appear.
Realtors and everyone are excited and gleeful to have the best start to a year since 2007 and are praying this burst in sales activity continues on through the spring, however in my opinion March may go out like a lamb. What’s the evidence? A new record high gas price for any March was established yesterday.
What preceded the financial meltdown that followed falling home prices in 2008? Gas at $4.11 per gallon. Why did economic growth come in at 50% of the increase projected in 2011? The highest average cost per gallon of gas for any year in our history.
Why would people react differently to this spike in gas prices in 2012? They won’t and many because they have no choice. By the time a family gets finished paying their rent or mortgage, buys groceries which also go up with increased fuel prices, their utilities, insurance, and 67% state income tax increase they simply don’t have anything left to spend. Those who are fortunate enough to have money left over will cut back out of fear of even higher gas and food prices.
At a congressional hearing this week, Rep. Alan Nunnelee, R-Miss., specifically asked Secretary of Energy Steven Chu if “the overall goal” of the administration is to “get our price down.” Chu’s answer was no. Chu went on to say this was an opportunity to invest more into the green economy.
At the same time another Stimulus funded green company laid off 70% of their employees. Why? The green economy, although well intended is not market viable. Even with the government bribing consumers with $7,500 taxpayer gifts to buy a Chevy Volt, which Obama has asked to be increased to $10,000 this year, sales are so weak Chevy announced yesterday it was closing the Volt plant for several weeks due to a lack of demand and oversupply of built vehicles.
To add to the nonsense, even if electric cars became popular, and there was demand, where would the electricity come from to charge the batteries? Isn’t CWLP in a mess and raising rates? Isn’t part of the financial burden CWLP faces due to the new EPA mercury emission mandates? Just yesterday Edison announced the closure of five coal powered plants due to increased emission regulations, making it a total of ten closures announced nationwide.
This is all unnecessary. The Obama administration has limited the supply of domestic drilling, and could have had the Keystone XL Pipeline delivering up to a million barrels of oil a day from a reliable friendly neighbor. The administration claims this has nothing to do with the rising price of gas because there is nothing any president can do that will impact the price of oil. Really? Then why is the administration considering releasing oil, again, from our strategic reserves to boost supplies?
In 2008 when gas hit $4.11 a gallon and oil $147 a barrel president Bush lifted drilling bans, and raised the cost to speculators to purchase oil futures. Oil dropped $9 that day, kept falling to the point gas was $1.79 a gallon when Obama took office. Yes the sharp drop in demand helped lower the price following the financial meltdown at the end of 2008.
Another reason Obama’s argument holds no water is that we have 2.1 million fewer jobs in America driving demand for oil to it’s lowest level since 2007. If as the administration claims it was a crashing economy that drove down gas prices in 2008, and there’s less demand than in ‘08, why are oil and gas prices rising? You can’t have it both ways. Falling demand causes prices to fall in ‘08 but not in ‘12? Absurd.
It’s obvious what the problem is, the current energy policy is driven by environmental extremism over the good of the nation. The poor and elderly are the most tragically impacted by high food and gas prices. Consumers will be forced to pull back spending which was flat in January. Factory orders fell for the first time in six months in January. It looks like a radical environmental policy forcing up gas prices will probably lead to another slowdown.
The meager job creation over the past six months, hailed as a success was barely enough to meet the demands of new entrants into the jobs market. If gas and food prices continue going up those job increases will disappear or falter at best.
Without jobs being created we won’t add any new buyers to the housing market, and when this burst of activity in home sales to start the year fueled by pent up demand is satisfied, home sales will slow down again. How many buyers make up this pent up demand of frustrated folks tired of waiting for a recovery, who are finally taking action? Just like the spring market that wasn’t in 2011 due to gas prices, and a lack of jobs, this March could go out like a lamb.
The good news was the initial claims for unemployment were at 351,000 and the four week average was at 354,000 this week. In normal economic conditions this would signify strong job creation somewhere in the order of 300,000 to 500,000 new jobs being added monthly. But these are not normal economic times with our current energy policy. Just as we are looking to climb out of the hole, the green economy fairy tale may push us back in.
Sad that we have people running this country that put a non-market viable, not yet available alternative energy, environmental ideology over jobs, people, and the nations economic health. But that’s the way it is, we’ll just have to deal with it. Hopefully only until January 2013 after the voters decide on November 6, 2012 whether they want four more years of this, or if they want a legitimate recovery to put America back to work. I know a housing industry that would appreciate a recovery.
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.
