Fritz Pfister

In twelve days we will have 2008 in our rear view mirror. To say 2008 was a calamitous year would be an understatement. We began the year with a slowing real estate market locally, due primarily to normal market cycles, and a flat economy.

Then came the record rise in the price of oil catapulting the price of gas past four dollars a gallon. The increased price of fuel drove up the price of groceries, and together drove consumer confidence to record lows.

Simultaneously came the crash of the sub prime mortgage market putting a national housing market that was in a tail spin into a dive. Banks failed, mortgage companies failed, and the monster quasi government mortgage giants Fannie Mae, and Freddie Mac were taken over through bailout by the federal government to the tune of hundreds of billions of dollars. The reckless loans promoted by the government in the name of providing affordable housing to low income families added to an avalanche of foreclosures, and added billions of dollars of debt to the taxpayers as an unintended consequence of a well intentioned program.

Then came the bailout of the AIG insurance company to the tune of over one hundred billion dollars, because the Fed said it was too big to fail. This followed by Lehman Brothers failure, a government orchestrated sale of Goldman Sachs, and Wall Street was teetering.

Then in September the government announced the most serious financial crisis since the 1980’s stating the credit markets were about to freeze, and the government passed a seven hundred billion dollar bailout plan with the purpose of injecting liquidity into the financial markets. The stock market plummeted, losing 40% to 50% of its value. Everyone’s stock portfolios, 401K’s, and IRA’s for retirement were nearly cut in half. This resulted in further erosion of consumer confidence, and declining consumer spending.

The recessionary cycle was now firmly in place. With consumers holding back on spending car sales evaporated placing the Big 3 auto makers at risk of failure and the loss of millions of jobs. This week the government once again performs its bailout magic to the tune of over seventeen billion dollars. This while the incoming administration announces a nearly one trillion dollar stimulus plan to save the reeling economy. If this new stimulus package is implemented, which it probably will, added to the bailout trillions, we the voters will have allowed a dysfunctional, out of control intrusive government to mortgage the future of our children and grandchildren.

All the above combined to send the world economy into recession. Then the silver linings started to appear. The demand for oil plummeted driving the price of oil from the record $147 a barrel down to today’s $35 price. Gas went from $4 a gallon to $1.60 a gallon. We’re still waiting for the food prices to follow. Retailers are slashing prices to coax consumers into spending.

Now the Fed attempting to stimulate the economy has lowered the cost of funds rate to an all time record low quarter percent. The bond markets followed suit and as a result thirty year mortgages fell to five percent and below for the first time since 2003, and only the second time since the 1960’s. This has resulted in a refinance boom, and increased home buying activity. A silver lining for sure.

Oh my we can’t forget about our illustrious state government this year. Unable to pass a balanced budget the legislature left it up to the governor to balance the budget. Of course this was reckless to the n’th degree considering who our governor is. Front line human services jobs cut, parks closed, and historic sites closed. This following the failed attempt to pass recall, and the governors political retribution by announcing the transfer of the Department of Public Safety and an estimated 150 jobs out of Springfield. Governor Blagojevich was committing economic terrorism upon his political adversaries. The silver lining in my opinion is that this blatantly corrupt governor has been arrested by the Feds, and now the damage he can continue to perpetuate upon Illinois is limited. A most satisfying silver lining.

During all this economic turmoil, and political upheaval the local housing market slowed with home sales falling by 13% to the fewest since 2001. This too is a silver lining, we are blessed that the decline was only 13%! We are once again proving to be insulated from the huge declines experienced in other locals, due to our employment base being primarily white collar. Government, medical, and major insurance companies provide us the insulation. A silver lining we should not take for granted.

Next week I will post my predictions for our housing market in 2009. Make this a Great week, and Merry Christmas from Fritz and Kristie Pfister and The Pfister Success Team of RE/MAX Professionals Springfield. It would be an honor to serve you, reach us at 652-7653. Best wishes for a better year in 2009 for everyone.