Weekly Observation for June 26, 2010 Springfield Illinois Housing Market
June 26th, 2010Now in my 15th season of broadcasting Let’s Talk Real Estate I have shared with you over the years that the Springfield Illinois housing market usually runs opposite the nation. Thank goodness.
The National Association of Realtors reported this week that existing home sales fell in May by 2.2%. To me this is shocking when considering these are closed sales from March and April pending sales that occurred when the tax credit was in effect and interest rates were at near record lows. This is a sure fired indicator the economy across the nation is down significantly.
How did the Springfield market perform while the nation was down 2.2% in May? Up 29.5%! But that’s not the whole story, pending sales fell 32.95% in May. Thank you to The Capital Area Association of Realtor’s president Linda Nelson for reporting that in the SJR this week.
Member brokers reporting to the association’s MLS through the end of business on Friday have closed sales in June up by 12.9%, however pending sales continue to fall down by 29.39%. This means our 13 consecutive month run of increasing closed home sales will end in July. In fact pending sales, the indicator of future closed sales activity, have fallen 47.89% compared to the same number of days before and after the tax credit expired on April 30.
The driving force for home sales today are interest rates. The chief economist from Wells Fargo said this week quote; “interest rates have fallen to the lowest level in our lifetime.” No wonder the SJR reported this week that a new round of mortgage refinancing has hit.
If anyone has a mortgage that is 1% higher than today’s rates they should be refinancing. If anyone hasn’t purchased a home, now may be their once in a lifetime chance to secure home financing at this low a rate.
The question is how many people remain in the market that are qualified to buy under the new tighter financing rules? How many prospective buyers are entering the market? Hopefully that number will be increasing as it was reported that Springfield’s unemployment rate fell in May to 7.1% How many of those jobs are census takers, and how many are no longer being counted after giving up looking for a job?
Home sellers better look at all offers seriously with the Springfield market running at 70% of the sales rate from last year at this time, while the inventory of homes for sale is relatively unchanged with 1668 homes listed with Realtors, down by only 11 from last year on this date.
A couple other points I have shared with you over the past year in addition to Springfield running the opposite of the nation. Jobs will be critical for home sales. Where else will the buyers come from to replenish demand for homes following a near record spring?
Better news but not good news this week on initial unemployment claims. The Bureau of Labor Statistics reported initial claims fell by 19,000 which is better, however came in at 457,000 which is not good. Economists say that when initial claims fall to below 300,000 that is an indicator of job growth.
In other disturbing economic news this week the U.S. Department of Commerce reported sales of new single family houses in May 2010 were at a seasonally adjusted annual rate of 300,000. This is 32.7% below the revised April rate of 446,000 and is 18.3% below May of 2009.
This is really bad news for home builders across the nation. This is the fewest number of new home sales since records have been kept. This following last weeks report that new home construction fell by 10% to a seasonally adjusted annual rate of 593,000, the largest monthly drop since 1991. If we are on pace to sell 300,000 new homes this year, and builders are building at a pace of 593,000 that means twice as many homes are being built as there is demand. Expect those building numbers to fall further as a result.
Another point that I have shared with you is that the markets, and businesses don’t like uncertainty. That businesses won’t begin to hire until they are certain about what government will be doing to them. This weekend businesses will be reading the new 2000 page financial reform bill to determine its impact upon their business.
There continues to be uncertainty about businesses cost for energy as president Obama continues to push Cap and Trade legislation that will drive up everyone’s costs. There is uncertainty regarding the moratorium on offshore drilling in the Gulf which accounts for 6% of our GDP. A continued moratorium will drive down the GDP which the government just announced was at 2.7% in the first quarter revised down from 3.2%. A 5.5% growth in GDP is required to create jobs and recovery.
The costs of Obamacare are becoming clearer. While selling the bill the president said your insurance premiums would go down $2000 a year, they have increased 20%. We were told you could keep your insurance. It is now estimated that up to 32 million workers could lose their employer paid insurance because the fine is cheaper than the insurance. The cost we were told would be under one trillion dollars, the CBO now says it will exceed that number. This before the $300 billion doctor fix is addressed. This bill is a disaster. No wonder 58% of Americans favor the repeal of the bill.
The one thing that is certain for small business owners, 72% of them will have their taxes increased in 2011. That probably won’t get them to hiring.
Let’s face it, the economy is in a mess, and deficit spending continues to soar. It’s so bad congress is refusing to pass a budget until after the deficit reduction commission reports after the elections in December. Any bets on hefty tax increases being recommended? Any bets on consumer spending falling as a result of this threat on disposable income?
This week Admiral Mike Mullen Chairman of the Joint Chiefs of Staff said the most dangerous threat to our security is our debt. The comptroller reported by 2012 the interest on our debt will exceed spending on defense. Renowned economist Robert Wiedemer PhD predicts an inflation rate of 10% or higher within two to three years. If that happens the economy is sunk. Hope he is wrong. In another report 56% of economists now predict home prices will fall the remainder of the year.
This week at the G20 meeting president Obama was encouraging European countries to continue to stimulus & deficit spend, which they are refusing. Britain, France, Germany, and Spain have begun massive spending cuts. Both the president and secretary of treasury Geithner said this week that the world can no longer count on America to be an economic powerhouse that will buy their products.
I say they are right, due to the presidents economic policies America is becoming a second rate economy, and faces a future where double digit unemployment, increased welfare, and higher taxes will be the norm. All due to a wealth redistribution policy to pay for an attempt at legislating equality. Something the European nations are running from because it has failed them. President Obama has us firmly on course to repeat their failures.
So if jobs, and certainty are needed for a recovery that will provide our housing market with new prospective home buyers, we won’t get them. I believe this slower pace of home sales will become the norm. In fact I believe in a couple of years we’ll be looking back to the good old days of 2010 if we continue down the path our government has us on.
Make this a great week from Fritz and Kristie Pfister of The PfisterSuccess Team Inc. at RE/MAX Professionals of Springfield. If you want to sell your home in these challenging times call us at 652-7653. Our marketing systems are proven successful, and our experience from over 2100 career sales can be counted upon for providing you with proper advice.
The opinions expressed here are solely those of Fritz Pfister, or identified sources, and not those of RE/MAX Professionals of Springfield, or RE/MAX International.
