Fritz Pfister

The member brokers of the Capital Area Association of Realtors MLS have finally reported 1000 closed home sales in 2011. At the end of business Friday there were 1056 closed home sales compared to 1331 last year, and compared to 1564 five years ago. In 2011 home sales are running at the same pace we were in 1999.

The recession, and headed in the right direction recovery, have home sales running on only 6 of 8 cylinders. This in spite of record low interest rates and affordable prices. This once again points to jobs as the culprit to weak demand for homes.

It’s not just Springfield. Looking down the road at St. Louis, reported at STLtoday.com this week, the NAR reported a decline in existing home sales in April of 12.9% nationally, and down 25.3% in St. Louis. Our market was down 29.77%. To be fair, they point out as I have, this is a comparison to when the tax credits were driving the market.

Quoting Dr. Lawrence Yun Chief economist for NAR in the article: “Given the great affordability conditions, job creation, and pent up demand, home sales should be stronger. Although existing home sales are expected to trend unevenly up through next year, unnecessarily tight credit is continuing to restrain the market, along with a steady level of low appraisals that result in contract cancellations.”

New construction continues in a depression across the country with the Wall Street Journal reporting a decline in April of 10.6% from a month earlier and a decline of 23.9% from last April for new home and apartment starts. The number of starts is 50% below what economists consider a healthy market.

Just as a side note, jumping back to St. Louis. Through April St.Louis and the seven counties in the metro area reported a total of 231 single family permits being issued, the fewest since 1970 according to the local home builder association.

What does all this mean to Springfield homeowners and to the local housing market? Where might we be headed this year? As I stated in my annual predictions on January 1 the first half of the year would seem worse than it was, and the second half of the year would appear better that it actually was. Well we’re going to find out.

May closed home sales are down 13.63% with six business days remaining in the month. However, as predicted sales pending are up 19.72% so far in May. Last May the number of closings were up due to the strength from sales pending in April as buyers rushed to meet the deadline to get the tax credit. That’s when the demand dropped like a rock and sales pending finished down in May by 33%.

The decline of 13% in closed sales appears worse than what it is, and the increase in sales pending of 19% sounds better than what it is. After all we’re comparing sales pending to a month that was in the tank.

I agree with Dr. Yun that sales growth will grow unevenly through next year, however compared to a down market. We will see sales pending continuing to exceed monthly totals at least through September. If not we’re in real trouble. Sales pending were down 32% through last summer, if we can’t meet or beat those sales the economy may be worse than we think.

Where I disagree with Dr. Yun, what do PHD’s know anyway, is his comment about job creation. I don’t believe it is as strong as he thinks. Last week we had good news that initial claims for unemployment fell to 409,000, but bad news the four week moving average increased to 439,000. Claims at 400,000 or below indicate job creation.

Illinois reported that unemployment fell again in April this time to 8.7%. They seemed to be happy about that in the media. There’s still over 900,000 Illinoisans unemployed, and in my opinion the rate dropped due to people who are no longer counted and not as the result of new jobs.

In today’s SJR there is a great story about tax incentives the state has had to give companies to keep them from moving out of state. The state has promised $230 million in tax incentives and is growing to keep jobs here. If you’re struggling to keep jobs here you aren’t attracting jobs here. At a cost of $17,000 per employee just to stay, isn’t the state paying back certain companies the 48% corporate tax increase? Is this fair to other companies? Isn’t this the state picking winners and losers and not the market?

This reminds me of the 1300 waivers that HHS has granted corporations and unions from Obamacare. Then just yesterday HHS granted AARP waivers from oversight for premium increases. AARP an ardent supporter of Obamacare is the nations #1 provider of GAP insurance that millions more seniors will need when Obamacare cuts $500 billion from Medicare. Picking winners and losers again. Guess we’re seeing Chicago politics on the national level too. However I digress.

What would have happened if the state would have cut tax rates? Would these companies even be thinking about leaving and wouldn’t more companies think about moving to Illinois? We’ll have to wait and see by years end the harm the tax increases have caused the state in jobs and revenues.

Where is this market headed the rest of the year? If my predictions hold true, and honestly I may have been way too optimistic predicting an annual decline of only 3% to 5%, when we’re down 19% year to date. We will need a steady climb in sales throughout the year to get to being down by only 5%. It will be all about jobs, because as Dr. Yun said we already have low prices, and low interest rates. Without significant job creation, we won’t see much of an increase in demand for homes.

For two years the president has told us we’re headed in the right direction, but we haven’t gone anywhere. If you’re headed toward town and want to get there, you’re going to have to remove the roadblocks that government has placed in your path first. Stay tuned here to find out how the year unfolds in the local housing market. Whether up, down, or the same, you’ll hear it first on Let’s Talk Real Estate.

Make this a Great week from Fritz and Kristie Pfister and The Pfister Success Team Inc. at RE/MAX Professionals of Springfield. With weak demand, and record contract cancellations as reported here and now by Dr.Yun, meaning it is not only difficult to get a contract, it’s even more difficult to close the sale. Who you choose to represent you in the sale of your home will be critical to your success. This isn’t my first rodeo having served the Springfield area as a full time Realtor since 1987. It would be an honor to serve your family. Give us a call at 652-7653.

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.

This past Tuesday was meet the staff at my daughters school. I wish I had a dollar for every person that asked what was going on in the real estate market. That was the day that the SJR published the front page story; “Housing Woes Return”, reporting the 39% drop in home sales locally, and [...]