Fritz Pfister

The local real estate market heated up during the coolest July on record. The Capital Area Association of Realtors member brokers have reported 358 closed home sales for July. That’s only twelve shy of last July, however brokers have several days to finish reporting. In my opinion we have a great chance July will finish up for the second monthly increase in a row.

If member brokers can close out their pending sales in August we can have a three month run of increased sales. The challenge for brokers to get to the closing table has increased this year. The primary challenges are changed financial regulations, and appraisals. Speaking with various lenders, they say short appraisals are increasing. Then there’s the perennial challenge for successfully negotiating following a home inspection.

The number of homes being listed for sale is down compared to last year, however the rate of decline slowed in July, only down by 8.96%. The 1649 homes listed with Realtors today are the fewest for this date since there were1574 in 2005.

Since closed home sales increased in both June and July, the first seven months is down by only 5.73% to 2009 from 2131 last year. The fewest closed sales on this date since 2001, however sales pending are up 25% over last year on this date.

Why the increased activity? Low interest rates and first time home buyers taking advantage of the $8,000 tax credit, with time running out.

Hopefully someone in the government is noticing how markets respond when consumers have financial incentives to spend. The cash for clunkers, and the first time home buyer credit is proof positive financial incentives work.

Good news was reported when the GDP only shrank by 1% in the second quarter, with hopes that the third quarter will show some growth. By most estimates the recession will end by the end of this year, unfortunately most economists predict a jobless recovery, as the nation continues to experience 400,000 job losses monthly. Unemployment is expected to increase to 9.7% in July, and exceed 10% by the end of the year.

Meanwhile Governor Quinn laid out the budget cuts yesterday, slashing over a billion dollars, delaying payments to vendors, and repeating that 2600 state employees would be laid off. We don’t know how many jobs will be affected in our community, however we’ll know soon. Unemployment will rise in Illinois for the foreseeable future, and already had surpassed 10% in June.

Jobs and consumer confidence remain the keys to the housing market. The consumer confidence index fell in July, and unemployment is rising. All considered, it is amazing we have had the number of home sales we’ve had. The power of the tax credit should not be underestimated.

In other reporting this week, for the first time in history the national debt has surpassed the GDP. In fact our debt stands at 110% of GDP. This spells trouble down the road. The CBO predicts that the current deficit spending will cause the economy to contract as the federal annual interest payment on debt will approach one trillion dollars by 2019.

In my opinion an economic recovery is questionable at best, with the current congress and president wanting to raise the cost of living for every man, woman, and child with the proposed Cap and Trade legislation, wanting to raise taxes to pay for health care reform that has a price tag of over a trillion dollars, adding to historically high deficits. That’s why this will be a jobless recovery, less money in the pockets of consumers, and little to be confident about.

What if government takes over health care, it costs more, and it doesn’t work? What if I have a hard time paying for all the price increases from Cap and Trade, and it does nothing to improve our climate? Questions millions of Americans have asked themselves and should ask their senators and congressmen over the August break, before it’s too late, and they vote these programs into law.

Look at what happens when there are financial incentives such as cash for clunkers and first time buyer credits. But no, the vicious cycle of rising unemployment, driving down government tax receipts have Quinn, and Obama asking for tax increases. Just the opposite of what should be done. If you want less of something just tax it.

At the federal level I would propose a moratorium for three years on capital gains taxes. Money would flood back into the private markets. Cut corporate taxes by 50% so companies can have the money to expand and begin hiring people back. Freeze personal income taxes to boost consumer confidence.

The progressives in power call these ideas the failed policies of the past. No that’s a lie, they are proven revenue generating policies. The failed policy of the past, is government spending more than it takes in, during both good and bad economic times. Both Democrats and Republicans are guilty as charged. If you want more of something, in this case more revenue for the government, lower taxes. It has worked every time it has been implemented, as directed by Coolidge, Kennedy, Reagan, and Bush (II).

Illinois increased spending by 33% the past six years to create new programs with no source of funding. Eliminate those programs. The Obama administration through their alliances in congress are burying us in debt that future generations will have to repay. Stop the deficit spending, stop the borrowing now, or we’ll be a nation working ourselves to death just to make the interest payment.

If you picture a family that earns $50,000 a year running up $55,000 in credit card bills; then you’ll have a good picture of what government is doing to your family today.

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