Fritz Pfister

Let’s face it folks this is a tough economy. The economic news this week was simply not good. From an unexpected jump in weekly unemployment claims to the highest since November, rising foreclosures, a sliding stock market, a failing foreclosure relief program, home builder confidence falling to its lowest since March of 2009, to a slowing growth in the GDP, Springfield is weathering the storm.

Although sales pending in August are down by 18.7% from last August that is an improvement. The 91 home listings that went pending this week is only the second week since May that 90 has been reached. We can thank the falling interest rates for this momentum.

Closed home sales are a different matter, down 32% with 7 business days remaining in the month. This was to be expected following a serious slowdown following the expiration of the tax credits, with sales pending slipping 32% from the pace set in January through April and down 27.8% from the same time in 2009. This provides evidence that the tax credit did not add buyers to the market in any measurable amount, it only caused buyers to change their timeline for purchasing a home. Year to date closed home sales are eking out only a 2.1% gain over 2009.

It’s all about jobs. The Bureau of Labor Statistics reported in the week ending August 14, the advance figure for seasonally adjusted claims was 500,000, an increase of 12,000 from the previous weeks revised figure of 488,000. The four week average increased 8,000 to 482,500. After falling to a yearly low of 425,000 in July unemployment claims have reversed course and are climbing. This is bad news.

The latest numbers for the Springfield area were for June with a reported 1400 fewer jobs from June of 2009. Economist from the NAR predict another 1400 jobs will be lost in the Springfield area in the next 12 months. This is not good news for the housing market.

At the current pace of sales about 1200 to 1300 more home sales should close by years end. With the number of homes for sale growing to 1788 today, combined with an estimated additional 1500 to 1600 homes yet to be listed by years end, the market will have about 3300 to 3400 home sellers vying for 1200 to 1300 home buyers. Year to date 2273 home listings with Realtors have sold and closed from 5081 listings, less than 45%.

Without jobs being created the housing market is short in supply of the most important ingredient, first time home buyers. Without these buyers purchasing the market has an oversupply of move up buyers that can’t purchase until they sell their home. Many are desperately wanting to move so they can take advantage of record low interest rates. This will probably be a once in a lifetime opportunity to buy a home with rates this low.

We have our challenges in the Springfield area housing market. The evidence of the weak economy can be found right here in the heartland. Although there were tax credits available this year for first time and repeat home buyers, in spite of record low interest rates, closed home sales today of 2273 continue to lag behind 2008 the year of the financial meltdown.

The Washington Post reported that J.P. Morgan Chase cut their forecast for growth in the GDP for the remainder of the year by one percentage point in each quarter. That translates into a 1.5% growth in the third quarter, and a 2% growth rate in the fourth quarter. Why do we care about the growth rate? History shows us that jobs are not created unless the economy is growing by at least 3% a year. This is the slowest pace of recovery for any recession since WWII.

Businesses continue to refuse to hire due to uncertainty created by the government. A proposed jobs bill the president has asked congress to act upon in September is not the right answer according to even the most liberal economists. It is an attempt to provide $30 billion to community banks for small business loans. Small businesses aren’t asking for loans, they are asking for customers.

The uncertainty faced by small businesses is overwhelming. The health care reform is driving up taxes by $562 billion over the next ten years, new regulations for reporting will add $19 billion in costs according to the NFIB. The proposed expiration of the Bush tax cuts on the top two tax brackets, and increase in capital gains taxes will impact over 70% of small business owners.

On the consumer front confidence and spending are nearing record lows. Although retail spending bumped up in July it was a meager .7% percent. Included in the proposed expiration of tax cuts millions of middle class families will see their taxes increase due to the alternative minimum tax, and marriage penalty. The death tax going from zero this year to 55% next year will adversely impact both families and small businesses.

Everything government has done has not worked as predicted, and in most cases has had the opposite impact. How much longer can America wait before realizing the plans in place will not lead to recovery and job creation? Too many economists are now saying the odds of a double dip recession have increased to 40%, and if the Bush tax cuts are allowed to expire odds go even higher.

We will have to wait and see what action the congress takes on taxes. Unfortunately so will families who won’t spend, and so will small businesses who won’t hire until this issue is settled.

Meanwhile back in good old Springfield Illinois, one of the most stable and predictable housing markets in the nation, we keep plugging along, defying the odds, and weathering an economic storm brought on by our very own government(s).

Make this a great week from Fritz and Kristie Pfister and the Pfister Success Team Inc. at RE/MAX Professionals of Springfield. If you need to sell your home this year give us a call at 652-7653, 75% of our team listings have sold compared to 44.7% for the market, we average 47 days on the market to sale compared to 79, and we put more money in our sellers pockets by averaging over 97% of the asking price compared to the markets 95.8%. This ain’t our first rodeo. 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.