Weekly Observation for July 24, 2010 Time for a Reality Check
July 24th, 2010How’s the Summer of Recovery’ coming along? The SJR Business section headlines from yesterday; Earnings report offer hope for economy. I may be wrong but that would indicate hope for the stock holders for those companies working hard to make lemonade out of this lemon of an economy.
The sub headline to the story; Tax credit’hangover’ for local home sales; unemployment rises. The story reported the 3.6% increase in closed home sales for June to 407, the midyear 15.7% increase to 1910 closed home sales, the record median sale price for June of $123,500, and then the lemons, sales pending down 33.7%.
Old news to you who tune into Let’s Talk Real Estate on Saturdays at 10:00am on AM970 WMAY. Here’s what wasn’t reported, the up to the minute state of the local housing market. Due to the hangover drop in sales pending in June, closed home sales with one week remaining in July of 146 down 38.65%. The hangover continues with July sales pending down 28.48%, which actually is good news because of the little bump in activity predicted here last month.
Last week I reported the best week for Realtors placing homes under contract with 71, the best in four weeks. This week the uptick continued with 85 sales pending reported. Better but nowhere near last years average of 110 sales pending per week during the summer. With 116 new listings this past week pushing the inventory of homes for sale up to 1758, third highest on record for this date, local home sellers have their work cut out.
For a year and a half I have said our housing market will be directly impacted by jobs. It doesn’t matter if we have record low interest rates if jobs aren’t being created adding to the buyer pool. Springfield unemployment was up to 8.2% in June.
A number of economic reports bears out my blog from this week titled; Positive Thinking and Optimism Can Clash with Reality. This weeks economic reports: First time claims for unemployment insurance jumped by 37,000 the most since February reversing last weeks decline. More evidence there’s lackluster job growth at best.
The Obama administration’s Stimulus since passed 17 months ago predicting unemployment would not rise above 8% and would create 3.5 million jobs must face the reality; 862,000 jobs created at an average cost of $282,000 per public sector job and $747,000 per private sector job; four of five jobs created are in the public sector; unemployment stands at 9.5% after peaking over 10%.
Uncertainty about future expenses and regulations have businesses hording cash, and not hiring. More uncertainty was created this week when three Democrat senators Conrad, Bayh, and Nelson came out in support of extending Bush Tax cuts for up to two years. This will put investors in a position of uncertainty because many had planned to sell before years end to pay the lower capital gains tax rate. Experts say if the tax cuts are extended a year end rally could be expected as investors buy instead of selling. House leader Pelosi and Treasury Secretary Geithner have come out against extending the tax cuts. We’ll have to wait and see.
More economic reports from this week: Single family housing starts declined .7%, however when combined with multi-family starts fell by 21.5%. Builder confidence fell to its lowest level since March of 2009. New home sales fell 33% in May with June sales to be reported next week.
From Bloomberg News; Index of U.S. Leading Economic Indicators Fell 0.2%, the second decline in three months signaling the world’s largest economy will cool. Don’t you have to be hot before you cool? More proof that the Stimulus did not work as forecast.
Existing home sales fell nationally by 5.2%. As usual we run counter to the nation with June sales up over 3%. The problem is we have now joined the nation in slumping sales pending which doesn’t bode well for future closings. The 335 sales pending today are the fewest for our market in a July since 1998. This corresponds closely to a 13 year low for mortgage purchase applications. Proof that interest rates can go as low as you want, but if there aren’t jobs being created it won’t matter.
For all you who join me in maintaining an optimistic outlook, and positive attitude, the clash with the reality from economic reports this week, combined with the ineffective government policies at state and federal levels creating even greater uncertainty, may take us to the medicine cabinet for Excedrin headache number one.
Make this a great week from Fritz and Kristie Pfister and The Pfister Success Team Inc. at RE/MAX Professioanls of Springfield. Having preditced accurately what you can expect in our housing market, don’t forget following this little bump in activity in July, the next bump will follow Labor Day. If you must sell your home and want to take advantage of that last best opportunity for the year call us at 652-7653. About one third of the home sellers currently or coming to the market will sell by year’s end. The rest will have to wait, like the Cubs, until next year.
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.
