Fritz Pfister

August home sales bounced up a little compared to July while sales pending took a little dip. The result appears to be what I have termed a newly evolved local housing market. In other words the Springfield area housing market is no longer in a market cycle, we are in a new market, and starting over.

There is one more business day remaining for brokers to report August sales activity to The Capital Area Association of Realtors MLS so the following numbers may change slightly. I don’t expect the meter will be moved much after final reporting. Regardless here are the numbers for the local housing market. This is the place where you get this information first.

August beat the slowest July on record by a bakers dozen with 246 closed home sales compared to 233. The fewest home sales for an August on record. The 333 sales pending were down 8 from 341 in July. Now August of 2010 compared to August of 2009. Closed home sales down 33.51% from 370 to 246. Sales pending down 25.16% to 333 from 445. This means September closings will be down, and the third quarter appears on track for the fewest home sales on record.

To place ’on record’ in perspective the local Realtor association converted their record keeping system in 2000 to an internet based system. At that time the decision was made to retain records back through 1997. So when I report the fewest or most on record that record dates back only to 1997. To complicate the issue Taylorville and Christian county joined the MLS in 2000, and Jacksonville and Morgan county joined in 2005. To compare apples to apples I have maintained records separating these additional territories.

For example August closed sales in 1997 numbered 246, the same as this August. However when you back out the territories not counted in 1997, there were 210 closed sales. In other words this August finished 14.6% below 1997 in closed home sales.

What could have caused such a dramatic drop in the number of home sales? We expected that sales would lag following the expiration of the tax credits to buy a home, but we’re four months removed from that expiration. This indicates that there is very little pent up demand building, and the reason for that is the lack of jobs being created combined with the changing spending habits of consumers with consumer confidence extremely low.

The Bureau of Labor Statistics reported:

In the week ending Aug. 28, the advance figure for seasonally adjusted initial claims was 472,000, a decrease of 6,000 from the previous week’s revised figure of 478,000. The 4-week moving average was 485,500, a decrease of 2,500 from the previous week’s revised average of 488,000. Economists say the weekly claims must fall below 400,000 a week to signal job growth.

August unemployment rose slightly to 9.6%. The Springfield area unemployment rate was 8.5% in July. There was a loss of 54,000 jobs in August due to the end of temporary Census jobs. The private sector added 67,000 new jobs which is good news that it was a positive number but well below the 100,000 needed to account for natural demographic growth in the labor force. That’s why the unemployment rate went up. This comes from the U3 report where only those seeking full time employment are counted.

The U6 report counts those who have given up, and those working part time seeking full time is up to 16.7%. Here’s the break down as reported in The Christian Science Monitor; 15 million officially unemployed; 2.4 million have given up; and 9 million working part time seeking full time. Go to the Christian Science Monitor online to see the unemployment graph dating back to 1997. This is a real eye opener for you who are interested.

Yes this is a new market and we are starting over. There are several factors that will determine the activity in our housing market. The first is interest rates hovering at record lows, but how long will they remain available? Next is Jobs. You have to add jobs to add buyers to the market.

For the next year or so that doesn’t appear it will change much. The consensus among roughly fifty forecasters surveyed by Blue Chip Economic Indicators is that the jobless rate will be at 9.5% during the final quarter of 2010, and recede to 8.8% by the final quarter of 2011, as reported in the Christian Science Monitor.

The final factor is consumer confidence which went up in the latest reading more than expected to 53.5, 2.5 points better than expected. People are grasping at straws for good news in the economy to tout consumer confidence higher than expected. I think CNNMoney.com got it right, consumers go from ’severely depressed’ to just ‘depressed’. It would be like your teacher telling you your child got an ‘F’, but it’s a higher ‘F’ than expected.

In my opinion consumer confidence and jobs are inextricably connected. Until the economy starts adding jobs in a meaningful way, confidence will remain depressed, and so will the housing market. What’s standing in the way of job growth? In a word; government. The uncertainty regarding regulations and taxation have businesses frozen in place.

Until the impact of regulations and costs arising from the labyrinth of bureaucracies being constructed to implement Obamacare, and FinReg becomes clear, and a decision is made on the Bush tax cuts, don’t look for any improvement in hiring. Not to mention the resolution of Cap and Trade legislation which has the potential to add significant costs to businesses. Together these legislative initiatives have created massive uncertainty for businesses.

Welcome to the new Springfield Illinois housing market, brought to you compliments of government intervention into the private sector. Stay tuned there’s more to come!

Make this a great week from Fritz and Kristie Pfister and The Pfister Success Team Inc. at RE/MAX Professionals of Springfield. You can help us by allowing us to help you. Once again our time honored and proven selling systems have our inventory of homes for sale at annual lows. We keep getting home sold, so we are looking for a few good families to help this week that want to sell their homes. Call us at 652-7653. It would be an honor to serve your family.

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.