Fritz Pfister

Did you hear the news reports about second quarter home sales up 21%, and median sale price up 4.5% in the Springfield housing market this past week? Good news, but old news. In another week or two the official report will be out for July reporting home sales were down 39% and prices 8.2%. Comparing the first two business weeks in August with last year closed sales are down over 31% and prices down 7%.

It would be easy to misinterpret the current trends in the housing market if you only depended upon main stream media outlets. That’s why we’re here on Let’s Talk Real Estate so you can have real time information. The trend lines are down for closed sales, pending sales, and prices as we wrap up summer 2010.

In all fairness last year the market was just getting positive momentum from the initial first time home buyer tax credits. There were some good numbers posted through the November 30th deadline. Also in fairness we have record low interest rates that in any normal or average economy would have houses selling like hot cakes. They’re not. Why? The lack of jobs.

There was significantly bad news on the jobs front this week. The governemnt reported initial claims for unemployment jumped to 484,000 ballooning the four week average to 473,500, both the highest since February.

This presents a major problem for the housing market. Without any meaningful number of jobs being created the demand for homes is diminished. It doesn’t matter how low interest rates go, if you don’t have a job you can’t buy a home, or refinance to save a home from foreclosure. Realty Trac reported foreclosures increased again in July up 6% over last year. These aren’t from sub prime borrowers, these are from people who have lost jobs.

There are two things you must consider when deciding to sell a home in the Springfield housing market. The proof of a weak economy today will make selling your home more challenging. So do you try to sell now heading towards the end of summer and into the fall market, or do you wait and sell in the spring?

Only you can answer that question, each person’s situation is unique. But consider this; the best time to make a move up is in a declining market. Why? Say prices fall 10%. Your $150,000 home may only sell for $135,000, or for $15,000 less. However the $225,000 home you want may only sell now for $202,500,  $22,500 less. You would be realizing a net gain of $7,500. Put that together with the lowest interest rates in decades and that’s a winner. Your challenge is getting sold so you can buy.

The second thing to consider is if you put off selling until the spring, what happens if interest rates go up one, two, or three percent? That will drive down prices and eliminate more home buyers from the market. One of my greatest concerns is that in a normal Springfield housing market people move about once in every five to seven years. With a record number of refinances ongoing at around 4% interest rates, will those families change their moving habits if rates return to the twenty year average of 8%?

In my opinion with the Fed keeping interest rates so low for so long attempting to keep the economy from sliding farther into recession, they are eliminating future demand for homes. Repeat buyers who purchase more for convenience than necessity will not be moving if they have to trade a 4% loan for 6, 7, or 8% mortgage money. That’s down the road a ways. Could be 6 months, could be a couple years. But it’s coming.

As I’ve shared with you frequently over the past year and a half until you’re probably sick of hearing this, jobs are the key to the local housing market. In fact Tim Landis wrote this week in the SJR an article with the headline: Real estate market needs employment situation to improve. Old news Tim.

I say not only does the real estate market need job improvement but so does every sector of the economy, and government. But housing is key to the economy. When new homes are being built, or existing homes are selling, there is no other industry that creates ancillary jobs like housing.

Everything the government has done has been harmful to housing. Over regulation by EPA with erosion control mandates, lead paint rules, and through the failed stimulus new green building standards all of which increase costs dramatically for builders and remodelers. This kills construction jobs along with ancillary jobs.

What about government tax credits, didn’t that help the housing market? I say no. All it did was cause people to change their buying habits. If the tax credit added a lot of buyers to the market, then why are we barely 3% ahead in closed sales year to date? Because people who would normally have purchased homes during the summer purchased in the spring to get the tax credit. However this is proof that if you incentivize something people will take advantage of it.

The biggest challenge I see going forward is a federal government starting with the president, Secretary of Treasury, cabinet, and czars who have little or no private sector experience. Here is a link to an excellent article “A Cabinet From Another World”; http://www.investors.com/NewsAndAnalysis/Article/543650/201008121904/The-Cabinet-From-Another-World.aspx posted at Investors.com.

If you have no experience in the private sector all you can do is theorize what to do. The difference between theory and real world experience is evident in the results. Millions have lost jobs when the stimulus was to have created millions of jobs, at least in theory. This is the most inexperienced White House, and cabinet in history. Don’t believe me, read the article. You will see the resumes of the top decision makers. The good intentions of the theoreticians in control of government today have failed to create jobs. Families can’t be fed or make house payments on good intentions.

Tim Landis is right, the housing market needs the jobs situation to improve. That’s not going to happen with an Obama administration imposing massive new programs creating hundreds more bureaucracies that will require tens of billions of tax dollars a year to operate. Billions that can’t be used for private sector jobs. Bigger government is an anchor upon the private sector. The president wonders why banks aren’t loaning and companies aren’t hiring?  It is because he is regulating and taxing them out of business, or at least into survival mode.

You want less of something? Tax it or regulate it. You want more of something? Incentivize it.

Until government takes its boot off the neck of the private sector unleashing our entrepreneurial potential, you can expect double digit unemployment, higher taxes, and higher costs of living as the norm. As a result I believe the Springfield housing market has entered a new norm. Better than most markets, but significantly smaller. Sales will remain slow but steady at about 75% of the pace of sales that was the old norm. This will not change until the economy improves and jobs are created.

Welcome to the new Springfield housing market. There will be fewer winners than in the past, but there will be winners. Your success will be determined by how you sell, and whom you choose when selling your home. Best wishes.

Make this a great week from Fritz and Kristie Pfister and the Pfister Success Team Inc. at RE/MAX Professionals of Springfield. It would be an honor to show you the way to the winners circle. We’ve been to the closing table 1361 times since 2000. Second to none. Call us at 652-7653.

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.