Fritz Pfister

The State Journal Register front page story Friday July 9, 2010 headline; “How’s the Economy? Subhead; Few expect second recession despite ‘painfully slow’ recovery. U. of I. economist J. Fred Giertz said; “Clearly, the recovery is much slower than people expected, but I don’t think we’re going to do a double dip.” This contrasts with national economist Arthur Laffer who predicts a double dip in 2011. We’ll have to wait and see who is correct.

The SJR quoted economic numbers comparing 2010 to 2009 in the jobless rate, retail sales, housing, and auto sales.

Let’s examine the jobless rate first. Local May 2010 7.12%, May 2009 6.5% The state May 2010 10.8%, May 2009 10%. National May 2010 9.7%, May 2009 6.5%. All three up over 2009 doesn’t indicate a recovery, at least in the number of people working.

The Department of Labor reported initial claims for unemployment ending the week of July 3 was 454,000 a decrease of 21,000 from the previous week’s revised figure of 475,000. The moving 4 week average was 466,000 a decrease of 1250 from the previous week’s revised average of 467,250. The roller coaster of up and down numbers for initial claims continues and indicates there is no consistent job growth in the economy.

The SJR quoted  the Illinois Department of Labor market economist Ron Payne as saying; “One of the job market quirks: Springfield-area unemployment fell to 7.1% in May from a high of more than 10% at the start of the year, even though total employment was down 1900 jobs from May of 2009. Based upon Mr. Payne’s report, it looks like we are experiencing the same phenomenon as the nation, the unemployment rate dropping not due to job increases, but due to people who have fallen off the rolls and quit looking for jobs. The jobs picture doesn’t point to a recovery, but it’s hard to tell if it is pointing to a double dip.

Now let’s look at what the SJR reported on housing. Single family home sales May: 417 up 29.1%. January through May 1503 up 19.5%. Median sale price. May: $113,900 up 6.4%. January through May $107,500 up 2.1%. That was it from the SJR on housing. No commentary from any local Realtors. Hey Tim, I’m available anytime.

For the audience at Let’s Talk Real Estate on Saturday morning’s at 10am on AM970 WMAY this was old news reported four weeks ago. For the local consumers that count on the newspaper for their information it would be easy to misinterpret the state of the local housing market when just seeing prices up, and sales up over 29%. The audience of Let’s Talk Real Estate is better informed with the whole picture of the housing market reported weekly.

As Paul Harvey used to say, now here’s the rest of the story.

Home sales June of 2010 compared to June 2009: 407 up 14 sales or by only 3.56%. Median sale price $123,500 up 2.91%. Sale pending 287 down 146 or by 33.71%. This doesn’t bode well for July closings.

The second quarter 2010 compared to the second quarter 2009. Closed home sales 1217 up 215 or by 21.45%. Median sale price $115,000 up 4.54%. Sale pending 1225 down 78 by 5.98%. The sale pending number indicates the slowing trend following the expiration of the tax credit on April 30th. The 639 sales pending in April were not just a record but were 53 more than May and June combined.

Springfield’s housing market’s Cash for Clunkers hangover continues. Through the first nine days of July closed sales are down 31%, and sales pending down 34%. Now nine weeks removed from the tax credit expiration we would normally see a bump in activity due to pent up demand building. Whether activity picks up or not will be determined by jobs. With 1900 fewer jobs in the Springfield area the ‘normal’ rebound may not materialize.

The first half of 2010 compared to the first half of 2009. Closed home sales of 1910 up 259 by 15.68%. The median sale price $110,900 up 1.74%. Sales pending 2366 up 43 by 1.85%. All in all a great first half for the Springfield area housing market.

The truth is the trends as we enter the second half of the year are not good. The number of homes going under contract are down significantly in May, June, and so far in July. About 50% fewer homes are going under contract compared to March, and April and are running 33% below the same time in 2009. The challenge to get a home sold just went up.

Although there were some great increases in the median sale price during the second quarter and some individual months, prices are trending down finishing the first half of the year up by only 1.74%. This is highly unusual during a time of record low interest rates.

Looking back at my economic and housing forecast made on December 27 there are areas I have been right and some  I’ve been wrong. The area’s I have been right was that the majority of home sales for the year would occur in the first half. That interest rates and the tax credits would be the driving forces in the market. That consumer confidence and jobs would be a drag on the market, and that job growth would be flat to down. That the market would weaken the second half of the year due to a lack of job creation and interest rates beginning to creep slowly up.

Where I was wrong. That unemployment would not go above 10% in Springfield, it did. That we would start the year with 1400 homes listed for sale. We started with fewer at 1338. That the inventory of homes for sale would fluctuate between 1400 and 1700 throughout the year. The inventory surpassed 1700 this week and we now have more homes listed than last year on this date. These were all area’s I didn’t want to be wrong in my forecast. Higher unemployment and a rising number of homes for sale aren’t a good combination.

I appreciate the SJR’s article about the economy. I think it’s safe to say nobody knows if we are headed for a double dip recession with certainty. Some economists say yes, some say no. If I were a betting man, I would bet on a double dip. Why? The uncertainty in the private sector regarding tax increases, deficit spending, and massive new regulations impacting everyone.

This reminds me of what Ronald Reagan said were the scariest words in the English language; Hello I’m from the federal government and I’m here to help.

My advice is to protect yourself in the event a double dip or worse happens in the economy. Interest rates are the lowest since 1952. If you have a mortgage with an interest rate 1% or more above the going rates refinance immediately. If you are renting and are credit worthy, buy a home as soon as possible to know for certain what your housing costs will be going forward. If inflation does hit and interest rates go up so will rents. Buying a home is the only way you can lock in your housing costs.

What’s the worst that can happen if the economy actually does begin to recover and there isn’t a double dip recession? You have secured a low and affordable house payment. That doesn’t sound too bad. If the double dip or worse happens you can light a candle at church and say a prayer of thanksgiving for your low house payment.

Make this a great week from Fritz & Kristie Pfister and The Pfister Success Team Inc. of RE/MAX Professionals Springfield. Please allow us to help you so you can help us. We need good listings for the buyers that remain in the market. We just had our second best June in 24 years and have room for more home listings. We can help each other if you call us at 652-7653. It would be an honor to serve you.

The opinions expressed here are solely those of Fritz Pfister, or identified sources,  and not those of RE/MAX Professionals of Springfield, or RE/MAX International.