Fritz Pfister

For a market to rebound it must first hit bottom. The historically stable, and predictable Springfield Illinois housing market has begun another descent similar to the one following the 2008 financial meltdown.

Dr. Lawrence Yun Chief Economist for the National Association of Realtors advised me on my Let’s Talk Real Estate radio program last November to track sales pending December through March as the best indicator for home sales in the spring and summer. If Dr. Yun is correct, local home sellers won’t be happy.

Due to erratic numbers of home sales caused by financial meltdowns, tax credits for home buyers, the end of the sellers market brought on by easy credit (aka subprime) I decided to do the comparison to the five year average in lieu of year over year comparisons. My hope is this would balance out the artificial influences upon the housing market brought on by government malfeasance, and unnecessary interference.

Sit down please, here are the sales pending for December through March compared to the five year average. December down 19 or by 8.6%. January down 63 or by 20.53%. February down by 98 or by 27.99%. March down 80 or by 17.85%. Data is from the Capital Area Association of Realtors MIS as reported by member brokers.

The 239 closed home sales in March which will change slightly by the final reporting deadline next Thursday, is down from 308 last March by 22.4% The second straight month closed sales dipped over 20%. The 583 closed home sales for the first quarter will doubtfully reach 600 by the reporting deadline are the fewest for a first quarter since 1997, the fewest in fourteen years. All this with interest rates below 5% on most mortgage loans.

Although the Springfield housing market has proven to buck national trends, without jobs being created, gas prices nearing $4 a gallon, food prices skyrocketing, and the state’s massive income tax increases being deducted from paychecks, I don’t see significant numbers of home buyers returning to the market.

Those who haven’t purchased a home should. They have the least competition for homes in fourteen years, and the inflation heading our way will probably drive up interest rates not seen for over a decade.

Was February the bottom with March breaking a two month trend for sales pending to decline well in excess of 20%? If I were to average the four months and extend that as the trend for home sales in the spring and summer, home sales would decline about 19%. That’s not good news when in July through August 2010 home sales declined 32% from 2009. If demand falls that sharply, home prices will go along for the ride.

Jobs are the key to replenishing demand for homes. The Obama administration’s Labor Department was giddy this week when the March unemployment rate came in at 8.8%. After averaging 5% through most of the 2000’s that doesn’t seem like anything to celebrate, 14 million are still out of work.

Regardless the 8.8% is a false positive, the Labor Department doesn’t count people who have been unemployed over a year who quit looking for a job. The Gallup organization does count those people and report unemployment at 10% in March. The difference is the methodology between government economists and private sector economists.

The 216,000 jobs created in March is good news, but not all that good. You need nearly 100,000 to meet population growth each month, so when you spread 116,000 across a nation this size I’m guessing the impact to be scant in the housing market. In order to return to a 6% unemployment rate we would have to have 300,000 jobs each month for five consecutive years.

For the housing market to reach bottom, the jobs market has to hit bottom. For now it appears the jobs market is skipping across the bottom.

With consumer confidence falling last month for the first time in four months, due to rising prices in my opinion, consumer spending is likely to be anemic at best driving down demand for products, giving businesses less reason to hire. It appears we are stuck in a precarious cycle that could take the economy, jobs, and home sales either way.

Harry Truman said there’s no such thing as the future only history that hasn’t happened yet. If our recent home sales history from December through March is an accurate indicator, our immediate future for home sales is down.

When will the bottom be reached? When government begins implementing fiscally sound policy. When government lifts regulatory and financial burdens off private sector businesses, especially the energy sector. Then prosperity would follow the release of the potential within this great economy. Looking at that history, boy are we in trouble.

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.

The past week the local housing market cooled down a bit with 72 home listings reported sold pending by member brokers of The Capital Area Association of Realtors MLS. Year to date the number of home listings going under contract are up by 1.7%, however the key is how many actually close. We reported here [...]