Weekly Observation for December 31, 2011: The Springfield Illinois Housing Market Forecast for 2012
December 31st, 2011Before we get to this years predictions for 2012, here are the reasons for my predictions, and a recap of my 2011 predictions.
Quoting from my weekly observations on October 23, 2008 [quote]: If Obama wins, and Democrats control the Senate, and House be prepared for sweeping changes to the left, and an unchecked power to do as they will. The citizens of Springfield, and of Illinois know the economic catastrophe caused in Illinois as a result of Democrats controlling all three branches of state government. It will occur on a much grander scale nationally.
The bottom line is the housing market will be severely impacted. Real estate is, has been, and always will be a supply and demand commodity. Fewer jobs means fewer buyers. More taxes means less money available to be spent on job growth, job retention, goods and services. Looks like we’ll be in a buyers market for an indefinite period of time should Obama win, and implement his campaign promises. [end quote]
Quoting from March 23, 2009 regarding the Stimulus Bill [quote]: The problem is this infusion of new money drives down the value of the dollar as we witnessed the price of oil, gas, and commodities jump in response. Interest rates may be great, however if the cost of living goes up to fill the gas tank, and stock the groceries, it will cause further erosion in consumer confidence. If daily necessities continue to become more expensive, the luster of lower rates loses its shine. [end quote]
Quoting from August 29, 2009 [quote]: It can’t be overstated that going forward toward economic recovery how important jobs are to the housing market. It’s simple, people without jobs, and many concerned about losing their jobs, don’t buy houses. [end quote]
Quoting from January 1, 2011[quote]: These rising prices for necessities is the most immediate risk to momentum in the recovery. Do you remember consumer’s reaction when gas hit $4 a gallon in 2008? They stopped all unnecessary spending, and the downward spiral began. Why would it be any different in 2011? [end quote]
What has changed from the Obama administrations policies that would alter outcomes? Nothing, in fact President Obama has doubled down on his ideological positions. Just as economist Art Laffer stated in 2010; Obama is doing the opposite of what Reagan did, so we can expect the opposite results.
The Stimulus Bill failed to create the jobs promised. Now President Obama insists congress pass his jobs bill which is simply Son of Stimulus at $487 billion, compared to the $787 billion Stimulus bill. As Democrat Senator Joe Mansion said about the bill, why would we try something again that didn’t work?
On taxes President Obama is diverting attention from his record which has produced record unemployment, the most people in history in poverty, on welfare, and food stamps. Obama’s Class Warfare campaign strategy is to say that the wealthy don’t pay their fair share in taxes. That’s not true.
The top 10% of taxpayers already pay 70% of all federal income taxes collected. Obama’s not really talking about millionaires and billionaires, his proposal will raise taxes on singles earning over $200,000 and couples earning over $250,000 which are mostly small business owners we need to create jobs. Even if taxes were raised on this group the amount of new revenue would only cut deficit spending by less than one half of one percent. President Obama would have people believe this would eliminate deficit spending according to his rhetoric. Where will the other 99.5% of the money come from to pay for this profligate spending?
What has changed regarding the price of gas? Nothing, it is even higher. AP reported that Americans annual cost for gas at $4,155 average per household was the highest in 30 years. Food inflation is the highest in 20 years due to fuel prices. Exactly what I was worried about in January, happened. The oil moratoriums in the fall of 2010 resulted in record December prices for gas and did in fact rise above $4 a gallon during the Arab Spring. The economy stagnated as predicted. The same dangers are in play from Obama energy policy for 2012.
What energy policy did the president change this year to help lower gas prices? None, he does the opposite of what is needed done by postponing the Keystone XL pipeline that would have lowered prices, and created jobs. Now Iran threatens to close the Straight of Hormuz which would cause prices to skyrocket, just as did the Arab Spring.
Over the past two years Obamacare, Dodd Frank, and EPA regulations have increased the cost to do business by $50 billion a year. Obamacare’s unknown costs prohibits employers from hiring. Dodd Frank makes it more difficult to obtain a home loan, and for homes to appraise, while eliminating up to 3.6 million jobs the next three years according to Bankers Associations. EPA mandates from unelected bureaucrats has finally hit Springfield with new mercury emission standards. Springfield ratepayers will pay millions for compliance.
But what really revealed President Obama’s true beliefs, he stated in his speech at Osawatomie Kansas. President Obama denies the American idea, that limited government with individuals pursuing their own happiness in a free market economy didn’t create the greatest nation on earth and the highest standard of living in world history. Obama said: “Limited government and free market economies don’t work, and never have.” Channeling Chavez more so than Roosevelt opined Charles Krauthammer. A speech you would expect to hear in Caracas wrote Henniger of the Wall Street Journal.
What can we expect in 2012 that will help the economy? Nothing, but more of the same. More spending, more debt, more regulations, more unemployment, bigger government, causing economic stagnation.
For the past two years I have been criticized for publicly stating my views, however those views have been vindicated by the resulting economy. Some fellow agents criticized me for predicting for 2010 that home sales would decline from 3719 to between 3500 and 3600. That I should be more optimistic when speaking to the public. Well, I was too optimistic because home sales fell further than I predicted to 3441.
The same criticism was leveled when I predicted that home sales would decline again in 2011 by 3% to 5% to between 3,300 and 3,400. Currently member brokers are reporting to the MLS 3,209 closed home sales down over 6%. Looks as if I was too optimistic again.
There has been some positive news lately regarding unemployment at 8.6%, although understated because of 6 million people no longer counted, declining initial claims for unemployment, a bump in consumer confidence, housing starts, pending home sales, and manufacturing. These upward trends are overstated, conditions still aren’t good.
Without any evidence of change in economic policy which is depressing the private sector, I believe the market will continue to contract, and home sales will decline in 2012 by 2% to 4% to between 3090 and 3185 home sales. There just won’t be enough jobs created to have a measurable impact on demand.
I predicted the inventory of homes for sale would hold between 1500 and 1800 homes, and that less than half of the listings would sell. The inventory was lower than I projected. Around 51% of the listings sold, not due to increased sales, but due to people holding their homes off the market. With record refinancing, especially if interest rates increase, fewer homes will be listed in 2012. Although this means fewer home sellers it also means fewer home sellers who will become home buyers. Less than 50% of listings will sell in 2012.
The median sale price I predicted to finish between $107,000 and $109,000 was off a little. It looks to finish at around $110,000 after final reporting. The lowest interest rates ever supported prices, but not sales due to a lack of jobs. I predict we will see a decline in the median sale price in 2012 to $107,000 to $108,000.
New construction is in a recession locally. I predicted between 90 and 100 single family permits would be issued in 2011 by the City of Springfield. Through November 103 had been issued but when you deduct the 28 permits for (SHA) government housing the total is only 75. We’ll have to wait until the city reports December permits for final numbers. My prediction for 2012 is that the city will issue 80 to 90 single family permits.
There you have it. Although 2011 will have the fewest home sales in our MLS since 1998, with the lowest interest rates ever recorded, I am not being pessimistic, rather realistic. The definition of insanity is doing the same thing over and over and expecting different results. Obama has stated his policy and it is more of the same, so what can change? No jobs, no increase in home sales.
If there is an improvement in the economy it will be in spite of government not due to government. How much help can we expect from the State of Illinois? Following the income tax increase Illinois leads the nation in job losses, and out migration of people. Illinois was chosen 49th of the 50 states as best place to do business from a survey of CEO’s this summer. It makes sense the anti-business policies in DC today came from Illinois, the home of anti-business big government tax and spend politicians. Just as predicted in October of 2008.
If there is economic recovery it will be due to the true grit of the American worker, business owner, and entrepreneur overcoming the most anti-business, deficit spending, over-regulating, big government in our nations history.
The one prediction I know for sure is on November 6, 2012 Americans will choose between the tyranny of the big government central planner, or choose individual liberty and prosperity that can only be achieved with limited government as America was founded.
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.
