Weekly Observation for April 16, 2011 The Skunk Is Out of the Box
April 16th, 2011We got skunked is a sporting phrase that applies to this weeks sales report for the local housing market. A friend asks how did you do in your ball game and the friend answers we got skunked one to nothing. As a fisherman the worst thing you can say after a day on the lake is you got skunked, meaning you didn’t catch any keepers. The fish box was empty. Zero, zip, nadda.
This week the skunk is out of the box for sales pending. Last week I shared with you that one hundred or more sales pending a week during the spring in our market is as common as birds singing in the morning. The 108 homes that went under contract this week was the first time in 2011, and the first time since the week ending May 8, 2010.
Forty nine weeks is a long drought. The fact that we didn’t eclipse a hundred sales until this week isn’t as remarkable as we didn’t have any during the summer of 2010. Here’s to hoping this is finally the beginning of good things to come and a return to more normal spring sales activity. We’ll see in the coming weeks.
In my forecast for the year I predicted that the first half of the year would seem worse than it was, and the second half would seem better than it was. This is due to the home buyer tax credits that concentrated buyer activity into the spring market.
Last April an all time record 639 homes went under contract because buyers had an April 30 deadline to qualify for the free $8,000 Stimulus gift for first time buyers, and the free $6,500 for repeat buyers. Both had to close by June 30. The hyper activity from April carried over into the first week of May which proved to be the last time over one hundred listings went under contract until this past week.
The reason the market will appear worse the first half of this year is because we will be contrasting to the free money market of last year. The second half will appear better because of the crash following the end of the free money market.
The July through September quarter is usually the second most active of the year and on occasion the most active. Last year sales plummeted 32%. Against that big of a decline, if we have anywhere near normal sales activity, we should easily eclipse last years third quarter sales. If we don’t, we’ve got serious problems because housing is a key component to the local economy.
Coming off a first quarter where the Springfield market experienced the fewest home sales since 1997, the lagging sales pending in the second quarter both with interest rates below 5% points squarely to weakness in the jobs market causing a drop in demand.
When speaking with a key member of the MLS committee at the association of Realtors they asked me the question, how do you report these kind of numbers without causing people not to enter the market. I told them not to worry about it I’ve already reported the bad news on Let’s Talk Real Estate. Consumer’s are adults, we need to tell them the truth, and the savvy home buyers will see the opportunity the current market offers them.
Back to the home buyer tax credit, what a boondoggle. It was reported this week that nearly a half a billion dollars in fraudulent claims were paid by the government to people who didn’t qualify for the credit. People like prison inmates, and people who didn’t even buy a home. I was concerned when watchdog Joe Biden said he was going to oversee the spending in the Stimulus to make sure every penny was spent appropriately. Joe that’s a lot of pennies misspent.
Not surprising when you consider that the Stimulus was sold to us as money for shovel ready jobs that would rebuild our bridges, roads, and infrastructure that would put America back to work. The truth is only $4 billion of the $865 billion went to infrastructure and instead of creating the 3.5 million jobs we were promised 2.3 million were lost.
Back to the weakness in the jobs market, we didn’t have good news this week as initial claims for unemployment jumped 27,000 to 412,000. That is above the 400,000 benchmark that indicates job growth. The four week average still remains below the 400,000 but not by much at 395,750.
This week President Obama countered the Republican budget proposal of Paul Ryan’s. Stating that his plan would reduce the deficit by $4 trillion dollars in twelve years. Based upon past predictions for which none came true, I don’t believe bigger government and more spending will lower the deficit. The plan put forward lacked details except one, raise taxes on the wealthy.
I beg your pardon but this is a plan that will continue to depress job creation. The president talked about millionaires and billionaires but wants to raise the top rate on anybody earning over $250,000 a year. These aren’t exactly billionaires, these are primarily small business owners who account for over 70% of all new job creation in a year.
Putting that aside just the mere fact when you do the math, you could tax 100% of everyone’s income, in other words have the government confiscate everything they earn over $250,000 and you would only have enough money to run the government for 141 days according to Dr. Walter Williams. He asks what are we going to do about the other 224 days?
With all the political posturing on both sides of the aisle people are confused and scared. That has to be negatively impacting consumer confidence. You add the rising cost for gas, food, and taxes it’s no wonder home sales are sluggish.
On that note if I read one more headline that rising gas and food prices threaten the recovery I’m going to scream. First there is no recovery except for Wall Street and the Big Banks who were bailed out with taxpayer money, and second if we would lift the drilling bans and moratoriums and put Americans back to work producing our own oil the prices would fall.
That gives us three major items to track the coming weeks to see if there’s any help headed for the economy and the local housing market. Will we maintain one hundred or more sales a week? Will claims on unemployment continue over 400,000? Will the price of gas and food continue to rise? Those are the keys to what we can expect in home sales over the summer.
Whether I’m fishing or selling houses I don’t want to see any skunks in the box this summer.
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.
